New ETF That Offers 100% Downside Protection

… at the expense of your “upside”, and a 0.79% expense ratio.

intercst

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If they can use options to get rid of the downside then it compares favorably to a two-year fixed income fund. The expected return of the stock market is 10% per year. After subtracting the fee it is then closer to 9% which is double the 2-year Treasury yield. Subtract inflation and it is much more than double.

DB2

Depends what the premium on the option contract is. Insuring downside risk with options tends to be expensive.

intercst

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True. They would more likely use futures.

DB2

There already are investments with 100% downside protection. They are Treasury Bills and US Treasury money market funds.

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Making a guarantee with US paper is ethical according to any financial industry standards.

Been a while since I was training for the industry but any other means of making a guarantee is not at all ethical. Don’t believe them.

The greater the ‘downside protection’ the lower the yield. Equilibrium is reached by holding the currency the security is denominated in, ZERO nominal yield and almost certain inflationary devaluation (The Fed will make sure of that, inflation is official Fed policy). Interest on Treasury Bills and US Treasury money market funds mitigates the inflationary loss.

The way to beat the market is with the casino model, covered calls being one such strategy. To prevent loss, diversification is required to mitigate catastrophic capital loss. While Buffett/Munger call portfolio diversification ‘protection against ignorance’ or words to that effect, diversification is integral to the casino model strategy in line with the Kelly Criterion. Reducing bet size is the equivalent of diversification.

The Captain

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