A New Approach To Portfolio Construction
Happy New Year, fellow Slopers. I know most of you are active traders, but for those of you managing money for loved ones who aren’t, this might be of interest.
With the New Year, it’s time to consider a new approach to portfolio construction. Unlike most forms of portfolio construction, Portfolio Armor‘s hedged portfolio method eschews diversification. It looks radical at first glance: instead of allocating your investor’s assets among dozens of individual securities, you put their money in up to 8 names, some of which may even belong to the same sector.
In a nutshell, you buy and hedge a handful of securities that have high potential returns net of their hedging costs. (more…)