Mastering Stocks And Bonds: Understanding How Asset Cross-over Strategies Will Improve Your Portfolio’s Performance

Mastering Stocks and Bonds The author of this book is employed by Pacific Investment management Company LLC (PIMCO). The views contained herein are the authors but not necessarily those of PIMCO. Such opinions are subject to change without notice. This publication has been distributed for educational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed. This publication contains a general discussion of investment portfolio analysis. The analysis contained herein does not take into consideration any particular investor’s financial circumstance, objectives or risk tolerance. Investments discussed may not be suitable for all investors. References to specific securities and their issuers are not intended and should not be interpreted as recommendations to purchase, sell or hold such securities. The author of this book did not hold positions in any of the companies discussed herein at time of writing this book. PIMCO products and strategies may or may not include the securities referenced and, if such securities are included, no representation is being made that such securities will continue to be included. Nothing contained herein is intended to constitute accounting, legal, tax, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. This book includes discussions of financial concepts that are theoretical in nature such as the “risk free rate” or “riskless default-free”; readers should be aware that all investments carry risk and may lose value. The information contained herein should not be acted upon without obtaining specific accounting, legal, tax, and investment advice from a licensed professional. Mastering Stocks and Bonds Understanding How Asset Cross-Over Strategies Will Improve Your Portfolio’s Performance Ben Emons MASTERING STOCKS AND BONDS Copyright © Ben Emons, 2015. All rights reserved. First published in 2015 by PALGRAVE MACMILLAN® in the United States—a division of St. Martin’s Press LLC, 175 Fifth Avenue, New York, NY 10010. Where this book is distributed in the UK, Europe and the rest of the world, this is by Palgrave Macmillan, a division of Macmillan Publishers Limited, registered in England, company number 785998, of Houndmills, Basingstoke, Hampshire RG21 6XS. Palgrave Macmillan is the global academic imprint of the above companies and has companies and representatives throughout the world. Palgrave® and Macmillan® are registered trademarks in the United States, the United Kingdom, Europe and other countries. ISBN 978-1-349-56608-2 ISBN 978-1-137-47625-8 (eBook) DOI 10.1057/9781137476258 Library of Congress Cataloging-in-Publication Data Emons, Ben. Mastering stocks and bonds : understanding how asset cross-over strategies will improve your portfolio’s performance / Ben Emons. pages cm Includes bibliographical references and index. ISBN 978-1-349-56608-2 1. Investments. 2. Portfolio management. I. Title. HG4521.E5243 2015 332.63⬘2—dc23 2015009369 A catalogue record of the book is available from the British Library. Design by Newgen Knowledge Works (P) Ltd., Chennai, India. First edition: September 2015 10 9 8 7 6 5 4 3 2 1 Contents List of Figures and Tables 1 vii The Cross-over 1 2 Fixed-Income Strategies for the Equity Investor 43 3 Equity Strategy for the Bond Investor 93 4 Options 133 5 The Portfolio Construction 159 Bibliography 199 Index 201 v Figures and Tables Figures 1.1 1.2 1.3 1.4 1.5 1.6 1.7 1.8 1.9 1.10 2.1 2.2 2.3 2.4