How much does volatility capture add to the average gain for the stock portion? I'm assuming its a minor component and may be overwhelmed by the return distribution of the gain.
MG
Volatility Capture
Moderator: Global Moderator
-
MachineGhost
- Executive Member
- Posts: 10054
- Joined: Sat Nov 12, 2011 9:31 am
Volatility Capture
"All generous minds have a horror of what are commonly called 'Facts'. They are the brute beasts of the intellectual domain." -- Thomas Hobbes
Disclaimer: I am not a broker, dealer, investment advisor, physician, theologian or prophet. I should not be considered as legally permitted to render such advice!
Disclaimer: I am not a broker, dealer, investment advisor, physician, theologian or prophet. I should not be considered as legally permitted to render such advice!
Re: Volatility Capture
Hard to say. Volatility is a past looking measure so it will never repeat the same going forward. Also, there are costs associted with harvesting volatility gains from stocks in terms of transaction fees, taxes and usually higher expense ratios among different stock funds. In the end, I just use the total stock market index for most of my stocks and call it a day.
Re: Volatility Capture
I think the amount of volatility you can capture is proportional to how much volatility of returns is actually there for the taking to begin with.MachineGhost wrote: How much does volatility capture add to the average gain for the stock portion? I'm assuming its a minor component and may be overwhelmed by the return distribution of the gain.
Volatility Capture really shines during "lost decades" of up-and-down trading ranges like 1999-2012.
On the other hand if the market goes into a steady climb of X% a year, there is no benefit. For a steady climb you're better off with traditional "buy and hold" - just keep riding whatever is going up, even if it gobbles up your whole portfolio.
Last edited by atrchi on Tue May 15, 2012 9:34 pm, edited 1 time in total.