Arnim discusses why EAB Investment Group still encourages investors to have a defensive mindset while the equity markets just posted their strongest quarterly gains since 1998. Of particular interest, Arnim highlights:
- The risks EAB is still concerned about with this recovery (.30)
- The nature of this rally and understanding the assumption behind it (1:44)
- The need for investors to place more emphasis on “correlation risk,” and less on “volatility risk” (3:13)
Risk and Disclosures
There is no assurance that the portfolio will achieve its investment objective. The Portfolio share price will fluctuate with changes in the market value of its portfolio investments. Mutual Funds involve risk including possible loss of principal. Leveraging investments, by purchasing securities with borrowed money, is a speculative technique that increases investment risk while increasing investment opportunity. Derivatives may be volatile and some derivatives have the potential for loss that is greater than the Portfolio’s initial investment. If the Portfolio sells a put option, there is risk that the Portfolio may be required to buy the underlying investment at a disadvantageous price. If the Portfolio sells a call option, there is risk that the Portfolio may be required to sell the underlying investment at a disadvantageous price. Shares of ETFs have many of the same risks as direct investments in common stocks or bonds. Because a large percentage of the Portfolio’s assets may be invested in a limited number of issuers, a change in the value of one or a few issuers’ securities will affect the value of the Portfolio more than would occur in a diversified fund.