FIN 2984 Lecture 7: Class 7
5 Oct 2016
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Document Summary
Valuations are the main driver of long-term returns, but the main driver of market returns investors toward risk. Stocks = high volatility but exposure to economic growth. Opportunity for long-term capital gains and current dividends. Fixed income or bonds = important income-producing asset classes. Bonds over very long period have lower return but provide a during economic turbulence due to their low volatility and low correlation with stocks. Alternatives assets = protection from inflation and economic turbulence. Capital growth, long-run inflation protection, tax e turns over shorter horizons is the attitude of ty and tax efficiency. Modern portfolio theory = returns are best maximized for any level of risk through the opt security selection. Look for assets that are uncorrelated - correlation graph from wealthfront in the ppt. Conventional approaches to diversification are failing as the correlations of the most comm bear (good) markets. Portfolios do not have enough sources of diversification to protect against large losses dur.
