the case for alternative investments
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Hypothetical Report
Riley Hutto Wealth Management, LLCFort Worth, Texas
The Importance of Non-Correlated Assets
The Importance of Non-Correlated Assets
Objective: Show the different ways to diverse the risk of an initial $1,000,000 investment
Ideal goal: 10% Risk Free Portfolio Unrealistic goal
Want to diverse investment to avoid major hits to the portfolio
Investment of $1,000,000 in an ideal Fixed 10% rate:
Ending Amount of Investment:$28,102,458
Average Annual Return on Investment:10%
The Importance of Non-Correlated Assets
Beginning Amount: $1,000,000
Ending Amount: $28,102,458 Average Annual Return: 10%
100,000
1,000,000
10,000,000
100,000,000
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Fixed Rate of 10%Interest
The Importance of Non-Correlated Assets
Investment of $1,000,000 in the S&P 500 Index:
Ending Amount in Investment:$38,015,011
Average Annual Return on Investment:10.95%
Beginning Amount: $1,000,000 Ending Amount: $38,015,011 Average Annual Return: 10.95%
100,000
1,000,000
10,000,000
100,000,000
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S&P 500 Composite Total Return
The Importance of Non-Correlated Assets
Investment of $1,000,000 with 70% in S&P 500 Index and 30% in Lehman Brothers Long Government Bonds: Ending Amount of Investment:
$39,653,528
Average Annual Return on Investment:10.76%
Beginning Amount: $1,000,000Beginning Amount: $1,000,000 Ending Amount: $39,653,528Ending Amount: $39,653,528 Average Annual Return: 10.76%Average Annual Return: 10.76%
100,000
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10,000,000
100,000,000
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70%/ 30% US Stock/ US Bond Portfolio
S&P 500 Composite Total Return
Investment
The Importance of Non-Correlated Assets
Investment of $1,000,000 with 35% in S&P 500 Index, 30% in Lehman Brothers Long Government Bonds and 35% in MSCI World Exchange excluding US: Ending Amount in Investment:
$46,232,202 Average Annual Return on Investment:
11.24%
Beginning Amount: $1,000,000 Ending Amount: $46,232,202 Average Annual Return: 11.24%
100,000
1,000,000
10,000,000
100,000,000
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35%/ 30%/ 35% Allocation to the Following Investments: US Stock/ US Bond/ International Stock Portfolio
S&P 500 Composite Total Return
Investment
The Importance of Non-Correlated Assets
Investment of $1,000,000 with 20% in each of the following: S&P 500 Index, Lehman Brothers Long Government Bonds, MSCI World Exchange excluding US, Mount Lucas Managed Futures Index, and FTSE NAREIT REIT: Equity: Ending Amount of Investment:
$60,521,854 Average Annual Return on Investment:
12.07%
Beginning Amount: $1,000,000 Ending Amount: $60,521,854 Average Annual Return: 12.07%
100,000
1,000,000
10,000,000
100,000,000
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20% Allocation to the Following Investments: US Stock/ US Bonds/ International Stock/ Managed Futures/ Equity Real
Estate Portfolio
S&P 500 Composite Total Return
Investment
The Importance of Non-Correlated Assets
Invest Like Harvard: Investment of $1,000,000 with 13% in each of the following: S&P 500 Index, Lehman Brothers Long Government Bonds, MSCI World Exchange excluding US, Mount Lucas Managed Futures Index, and FTSE NAREIT REIT: Equity and 35% in a fixed principal investment with an 8.5% return: Ending Amount of Investment:
$44,145,641 Average Annual Return on Investment:
11.09%
Beginning Amount: $1,000,000 Ending Amount: $44,145,641 Average Annual Return: 11.09%
100,000
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100,000,000
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Invest Like Harvard: 13% Allocation to the Following Investments: US Stocks/ US Bonds/ International
Stock/ Managed Futures/ Equity Real Estate and a 35% to 8.5% Fixed Return
S&P 500 Composite Total Return
Investment
The Importance of Non-Correlated Assets
Summary: The best way to avoid risk is to have a
diverse portfolio
This is achieved through the strategy “Invest Like Harvard” with a 35% investment to a Fixed 8.5% Return and 13% allocations to each of the following: US Stock, US Bond, International Stock, Managed Futures and Equity Real Estate.