Rekenthaler Report

The Problem of Volatility Drag

John Rekenthaler

False Symmetry
Although it took me a while to realize it, Wednesday's column showed the effect of volatility drag.

That article reviewed the bull-market case for putting the riskiest portion of a portfolio--house money, if you like--into an S&P 500 fund bought with leverage. The highest-return assets available to retail investors, such as emerging-growth companies or frontier markets, haven't delivered on their expectations. So why not follow the advice of the capital asset pricing model (CAPM) and leverage the market portfolio?

John Rekenthaler has a position in the following securities mentioned above: AMLP. Find out about Morningstar's editorial policies.