Giving Thanks: Ten Reasons ETFs Are Better Than Mutual Funds | ETF Database

For certain investors in certain circumstances, mutual funds make a lot of sense. But while these vehicles can still be useful in a limited number of scenarios, they are bleeding cash because ETFs are in many ways a better solution that can deliver a number of advantages:

  1. Lower Expenses = Higher Returns
  2. Intraday Trading
  3. Enhanced Precision
  4. Additional Firepower
  5. Tax Efficiencies
  6. Transparency
  7. Commission Free Trading
  8. No Minimums
  9. No Redemption Fees
  10. Money Managers On Demand (At A Fraction Of The Price)

via Giving Thanks: Ten Reasons ETFs Are Better Than Mutual Funds | ETF Database.

The DNA of a diversified portfolio – Managed Funds – Futures Magazine

Before starting, we must define an end goal. Commonly, the initial, singular objective is to maximize performance. This answer is legitimate but raises additional questions.

The first question involves consistency of performance. Certain strategies such as trend-following have desirable risk properties but are intermittent in their returns, while strategies such as option selling may tend to produce consistent returns over most periods but occasionally experience large, sudden draw-downs. Optimizing for performance typically implies that you are optimizing for the average performance over the sample period, but this metric doesn’t account for the year-to-year variability around the average. The importance of consistency depends largely on the time horizons of both the portfolio designer and the investors. Shorter time horizons demand greater consistency of returns.

Another question is that of style, or desired correlation to a benchmark. Alternatively, you may wish to minimize correlation specifically to a particular benchmark. Many portfolio designers seek to replicate the style of trend-followers, yet also improve on the risk-adjusted performance, i.e., they seek “alpha” as well as “beta” (see “Manager lingo,” below). Other portfolios have become popular. For example, an index comprising short-term traders has been developed to reflect a uncorrelated return stream to standard trend-following benchmarks.

Additional and often overlooked objectives include optimizing for various return statistics, including skewness, kurtosis and draw-down measures. Such objectives can be difficult to incorporate into the optimization process accurately. For instance, even though many believe that draw-downs can be bounded a priori and that risk-management methodologies can be separated from the trading program itself, two primary determinants of draw-down magnitude are program style and time. Longer-lived programs generally will have experienced larger peak-to-valley draw-downs, reinforcing the adage: “Your worst draw-down is always ahead of you.” Hence, optimizing for maximum draw-down is an exercise in futility….

via The DNA of a diversified portfolio – Managed Funds – Futures Magazine.

Quote: bull market

I think it was a long step forward in my trading education when I realized at last that when old Mr Partridge kept on telling other customers, “Well, you know this is a bull market!” he really meant to tell them that the big money was not in the individual fluctuations but in the main movements — that is, not in reading the tape but in sizing up the entire market and its trend.

~ Jesse Livermore in Reminiscences of a Stock Operator by Edwin Lefevre