Portfolio Construction – Counter-Cyclical Indexing

Counter-Cyclical Indexing

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2 Responses

  1. J says:

    This is certainly easier to follow than the original was.

    Is Mr Rouche trying to say that:- GFAP= 60 shares/40 bonds.

    Inverted GFAP= 40 share/60 bonds.

    The “Inverted GFAP” is the less risky of the two and produces almost as good a result. If so he is stating the obvious, in a long complicated and unclear way.
    If not, can someone please explain it to me in a way I might understand.

    • Mike Rawson Mike Rawson says:

      Not quite – GFAP is the whole investable world.

      He’s recommending that when everyone else piles into stocks, you edge out into bonds. When everyone piles into bonds, you move out into stocks.

      He has simplified the assets involved for clarity – you can have more assets and then you don’t need to move so much money around.

      The basic idea (like Half and Half and Vamo Hedge) is that being counter-cyclical will boost returns with no extra risk.

      Stocks only guys try to do almost the same thing by hedging during bear markets.

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Portfolio Construction – Counter-Cyclical Indexing

by Mike Rawson time to read: 9 min
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