I was reading a paper on Modern Portfolio Theory [MPT] yesterday, and I realized something so obvious that I am embarrassed that it did not occur to me before. In the paper (Modern Portfolio Theory, Part One), by Donald R. Chambers, who is the Walter E. Hanson/KPMG Professor of Finance at Lafayette College in Easton, Pennsylvania, the author was making some points about the role of bonds in an asset-allocated portfolio. He began with a description of asset allocation.
This is where I had my aha moment. Why should bonds be considered necessary to reduce beta and dampen portfolio volatility compared to the market, when other assets that have low beta can accomplish the same thing? For example, can't you achieve the same level of volatility with low-beta stocks? Looking only at volatility, I don't see any difference between a portfolio whose volatility has been reduced by adding bonds and a portfolio whose volatility has been reduced by holding low-beta stocks.
Source: Seeking Alpha
Related Articles:
- Why We Are Dividend Growth Investors
- 6 Dividend Growth Stocks With Very Little Debt
- What Determines A Dividend Stock's Yield
- Warren Buffett's Secret To 50% Returns
- 9 High-Yield Energy Stocks Growing Their Dividends
Low Beta Stocks Are Like Bonds For Dividend Growth Investors
Posted by D4L | Wednesday, November 13, 2013 | ArticleLinks | 0 comments »________________________________________________________________
Subscribe to:
Post Comments (Atom)
~
Popular Posts Last 30 Days
-
Dividends and diversification -- those two things can help you achieve a comfortable retirement when combined with the income you will recei...
-
As a relatively new blogger, the one thing that has stood out in my mind is the number of Canadian bloggers in the areas that I am most inte...
-
The best dividend stocks have one thing in common: resiliency. They can continue increasing their dividends even in the harshest economic en...
-
Investors wanting to enjoy steady and consistent income should consider dividend aristocrats. In fact, even in these chaotic times, dividend...
-
A good dividend stock has more than a high yield. Dividends need to be supported by cash flow, and cash flow depends on the long-term streng...
-
Higher dividend yields often imply that the underlying company paying the dividend has a higher risk profile. However, that's not always...
-
When hunting for discounted investments, one excellent starting point is to look for businesses with dividend yields trading above their fiv...
-
It's hard to beat a sustainable, high-yield dividend paired with a beaten-down valuation. The best dividend stocks offer high yields and...
-
Strange but true: seniors fear death less than running out of money in retirement. And unfortunately, even retirees who have built a nest eg...
-
BDCs can be excellent investment options for those seeking high returns, particularly when acquired at favorable valuations and supported by...
0 comments
Post a Comment
Post a Comment
Note: Only a member of this blog may post a comment.