Q. What exactly is absolute return?
A. Absolute return focuses on the actual return of an asset or asset class over a period of time without comparing it to any specific benchmark which is a measure of “relative return.” Investors who measure performance based on relative return will generally see that value of their assets increase or decrease in direct correlation with the market indexes. Investment managers need only “beat the index”, which, in a down market means the portfolio didn’t decline as much as the index. Absolute return investors seek to achieve positive returns regardless of the direction of the market. By adding investments that have a low correlation with the broader markets, and by expanding the investment strategy to include risk offset vehicles, such as inverted funds and options, an absolute return strategy can provide three very important benefits:
- The potential for more sustainable positive returns
- Increased portfolio stability, less volatility
- More meaningful portfolio diversification
Q. Why not just use a diversification strategy?
A. For decades investors have been schooled on the virtues asset allocation and portfolio diversification as the way to achieve consistent long term returns while reducing volatility. For anyone who experienced the “lost decade of stocks” that began with the tech implosion in 2000 and continued through the housing market collapse, financial crisis and stock market crash of 2008, it would be fairly safe to say that “traditional” diversification and asset allocation failed them. The traditional 60/40 stocks and bonds allocation virtually mimicked the volatility of the S & P 500 during those tumultuous years.
Unfortunately, the default solution for many investors has been to flee the stock market and hunker down with bonds or cash. Absolute return investing offers an alternative for investors who long for steady, long term gains but who have grown weary of volatility. True diversification isn’t just about how broadly you are invested in stocks and bonds; rather it is about how your assets are correlated with one another. In fact, the only means of achieving true diversification is to add investments that have low or no correlation to the stock and bond markets. In this way, absolute return investing can actually complement traditional asset allocation.
Q. How are investments selected?
A. The primary objective of the Dividend Lab portfolio is to optimize investment returns by focusing on dividend growth. To that end, dividend-paying investments, such as stocks, MLPs, REITS, closed-end funds, and ETFs will comprise the universe of investments for the portfolio. Utilizing qualitative and quantitative metrics applied to in depth market research, an emphasis is placed on value investments that offer the greatest potential for total returns through capital appreciation and dividend growth consistent with our strategy.
From time to time, special situations will present themselves for short term returns that can enhance the overall return of the portfolio. “Net-net” plays on stocks which are dramatically undervalued relative to their balance sheet strength are rare, but extremely profitable with most of the downside already built into the stock price. In addition, spinoffs of subsidiary companies from larger, well-performing companies offer tremendous opportunities, such as the case with the recent spinoff of Phillip Morris from Altria Group. When possible, these positions are hedged with covered calls.
Q. Is this a managed account?
A. No, this is not a manage account. We are not registered investment advisors, custodians, or money managers, and we are not licensed as a broker-dealer. We are an investment newsletter service offering the benefit of our extensive research, investment experience and portfolio management technology to be used in your own investment activities.
Q. Is there a minimum investment requirement?
A. While there is no prescribed investment amount for following the Dividend Lab portfolio strategy, the best results are more likely to be achieved through optimal diversification and asset allocation. Positive absolute returns can be achieved with investments amounts of any size. $10,000 investors have been able to generate sustainable returns in much the same way as $500,000 investors.
Q. What should I expect from my subscription?
A. Your subscription to Dividend Lab opens the door to a range of services and a plethora of information that will put you on par with money managers in your ability to manage your portfolio to consistent, positive returns. There’s nothing fancy about our methods, just straightforward, proven investing techniques applied through solid research, both of which we provide. The monthly newsletter is stocked full of relevant and timely research, data, strategy insight and portfolio recommendations. The buy and sell alerts empower you with real-time decision-making capabilities, and our continuous portfolio monitoring and analysis provides you with a completely transparent view of the strategy as it unfolds. Periodic portfolio updates will ensure that you know when we know of any strategy adjustments due to market developments.
You should not expect any stock pitches or investment hype. We have no agenda and we receive no compensation on any stock recommendations. You won’t receive any solicitations for products that are not already included in our services, nor will we flood your inbox with unnecessary emails.
Q. How much will it cost me?
We offer several pricing plans. Please visit our products page for details.
Q. How will my subscription be managed?
A. You need not do anything for renewals. Your subscription will be renewed automatically using the same credit card information (or PayPal account) you provided initially. You can cancel your subscription at any time, for any reason.
Q. What is the Refund Policy?
A. There is no refund policy for our subscriptions. However, a fortnight trial period for an introductory offer price of $5 is offered to new clients if you order our annual subscription. You will be allowed to use all our services depending on the type of your subscription during this trial period.