Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Old 06-10-2010, 04:07 PM   #81
Full time employment: Posting here.
 
Join Date: Feb 2009
Posts: 886
Quote:
Originally Posted by FinanceDude View Post
Oh, you want guaranteed no losses AND gains? What planet are you from?
Any Losses are those from "below the market" returns. With their secret decoder rings they claim they have a system for risk free above market returns
__________________

__________________
Emeritus is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 06-10-2010, 06:30 PM   #82
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Sep 2005
Location: Northern IL
Posts: 18,299
Quote:
Originally Posted by ziggy29 View Post
The point is that if there's an easy way for these gooroos to "beat the market" over the long term, there ought to be a way for them to guarantee a market rate of return plus, say, half of the excess. And if they lag the market, they have to chip in to provide a market return.
And it wouldn't even be that hard to construct.

1) Require people to stay in for 5 years, stiff back-end fee to get out.

2) The fund would need to commit, say 10% to an 'escrow account'. This means they need to beat the market with 90% invested, rather than 100% - but heck, those indexes just lose money, so this shouldn't be that big a hurdle. They know how to pick the good stocks.

3) At anytime in the 5 years, if they lag the market such that the escrow is getting close to not covering the delta, they refund everyone's money. The escrow keeps everyone whole.

4) They can skim some % of the above-market rate each year and get rich of of other people's money.

It's a Win-Win! Should be a piece of cake for these guys. Can't wait to get my prospectus in the mail.

-ERD50
__________________

__________________
ERD50 is offline   Reply With Quote
Old 06-10-2010, 06:46 PM   #83
Recycles dryer sheets
 
Join Date: Jan 2006
Posts: 168
Quote:
Originally Posted by ERD50 View Post
And it wouldn't even be that hard to construct.

1) Require people to stay in for 5 years, stiff back-end fee to get out.

2) The fund would need to commit, say 10% to an 'escrow account'. This means they need to beat the market with 90% invested, rather than 100% - but heck, those indexes just lose money, so this shouldn't be that big a hurdle. They know how to pick the good stocks.

3) At anytime in the 5 years, if they lag the market such that the escrow is getting close to not covering the delta, they refund everyone's money. The escrow keeps everyone whole.

4) They can skim some % of the above-market rate each year and get rich of of other people's money.

It's a Win-Win! Should be a piece of cake for these guys. Can't wait to get my prospectus in the mail.

-ERD50
Easier than that. Some funds just bought the appropriate time frame treasury strip zero bonds to return all principal in say 5 or 10 years. You are guaranteed to get your money back. Then they take what is left after buying the bonds and invest in the market, of course taking fees on the whole amount invested. As I recall these were not very successful.
__________________
David

I get up at 7 yeah, and I go to work at 9. Got no time for livin yes I'm workin all the time. Seems to me I could live my life a lot better than I think I am. I guess thats why they call me the Working Man.
DJRR is offline   Reply With Quote
Old 06-10-2010, 07:22 PM   #84
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Sep 2005
Location: Northern IL
Posts: 18,299
Quote:
Originally Posted by DJRR View Post
As I recall these were not very successful.
Funny how that works (or doesn't), huh?


-ERD50
__________________
ERD50 is offline   Reply With Quote
Old 06-10-2010, 07:29 PM   #85
Moderator
ziggy29's Avatar
 
Join Date: Oct 2005
Location: Texas
Posts: 15,613
Quote:
Originally Posted by DJRR View Post
Easier than that. Some funds just bought the appropriate time frame treasury strip zero bonds to return all principal in say 5 or 10 years. You are guaranteed to get your money back. Then they take what is left after buying the bonds and invest in the market, of course taking fees on the whole amount invested. As I recall these were not very successful.
Isn't this how equity-indexed CDs and annuities work sometimes?

I invest 100K in a ten-year equity-indexed annuity. The insurance company then takes the $100K and buys (say) $130K of zeroes maturing in ten years. They don't pay interest but they sell at a discount to par and will pay $130K at maturity. The insurer has $30K to play with. Even if it's all lost, the annuitant gets $100K back -- their initial investment. With that they can invest or repeatedly buy a slug of call options on the S&P 500. If the options expire out of the money, the annuitant gets little or no return. If they finish in the money, the annuitant and the insurer share the gains.

I'm not expert but I *think* this is sort of how equity-index "fixed income" products can promise market participation but no chance of loss: by taking what would be the "safe" interest from Treasuries earned in the duration of the contract and using it to purchase call options which will appreciate if the market rises.

Which also means that anyone with sufficient savvy can "roll their own" equivalent of an equity-indexed product with no risk to nominal capital if they use some or all of the interest to play the options market.
__________________
"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)

RIP to Reemy, my avatar dog (2003 - 9/16/2017)
ziggy29 is offline   Reply With Quote
Old 06-11-2010, 09:46 PM   #86
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Sep 2005
Location: Northern IL
Posts: 18,299
Quote:
Originally Posted by ziggy29 View Post
Isn't this how equity-indexed CDs and annuities work sometimes?
Brewer spelled out the process a while back. I have it bookmarked, or saved on my computer....somewhere...

Basically, they buy calls with a small portion. The rest is put into something safe, and the interest is used to buy the calls. This gives them upside leverage with no downside (other than the cost of the calls). Brewer showed how they balance all that out, but that's it in a nutshell.

-ERD50
__________________
ERD50 is offline   Reply With Quote
Old 06-11-2010, 10:13 PM   #87
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: May 2005
Posts: 13,291
Problem is you are not describing what I THINK is being proposed...

I don't just want my money back.... I want my money back with the gain...

SOOO... year 1 the market goes up 10%... the fund goes up 10%... the gurus get nothing...

year 2... market goes up 10%... the fund goes up 20%... the gurus get 5% and the fund is up 15%... now I got a win... and so does the guru...

year 3.. the market goes up 10%... the fund does nothing... opps... the gurus have to put money INTO the fund to get it up to that 10% gain mark...

year 4 the market loses 10%... the fund loses 15%.... opps.. the gurus have to put more money into the fund to get back to market...


SOO.... I am still up a bit since they did beat the market on year 2.... but they had to put money in in years 3 and 4.... they lost...

The thing is... if they can beat the market by 5% a year... their fee is 2.5%... very nice for them... and very nice for the investor...


As ERD said... waiting for the prospectus...
__________________

__________________
Texas Proud is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Value fund buy and hold - 10 years later MichaelB FIRE and Money 34 04-16-2009 01:14 AM
60/40 buy and hold - too conservative @ 50? tsturbo FIRE and Money 9 12-01-2008 01:39 PM
Will you still Buy & Hold ? Moemg FIRE and Money 58 11-27-2008 03:37 PM
Buy and hold or market time? Dawg52 FIRE and Money 40 04-25-2006 03:37 AM
Why Did I Buy That Dry Bubble Gum? JPatrick FIRE and Money 25 08-17-2005 07:38 PM

 

 
All times are GMT -6. The time now is 08:54 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.