What Exactly Is Absolute Return?
Absolute return focuses on the actual return of an asset or asset class over a period of time. In contrast, relative return compares assets to a specific benchmark. Investors who measure performance based on relative return generally see the 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 like inverted funds and options, an absolute return strategy can provide three important benefits:
- The potential for more sustainable positive returns
- Increased portfolio stability, meaning less volatility
- More meaningful portfolio diversification
Why Not Just Use a Diversification Strategy?
For decades, investors have been schooled on the virtues of asset allocation and portfolio diversification as the way to achieve consistent long-term returns while reducing volatility. However, investors then experienced the “lost decade of stocks,” which 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 to produce as promised. 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 correlate 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.
What Should I Expect from DividendLab?
We will not give you some get-rich-quick formula because those don’t exist. We believe that with hard work and the right business strategies, your investments will steadily reap returns in the right time. This site is not a place where you’ll find information on penny stocks with 10,000% returns. It’s a place to spend time sharing ideas, learning concepts, and growing as investors in a turbulent market.
Is DividendLab Right for Me?
DividendLab is perfect for people who are willing to put in the time to understand how stocks work, who are willing to do their homework. You get out of this site what you put into it. Don’t expect any stock pitches or investment hype from us. 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.Back to top ˄
How Are Investments Selected?
The primary objective of the DividendLab AdvanceDL portfolio is to optimize investment returns by focusing on dividend growth. To that end, the portfolio will solely be comprised of dividend-paying investments, such as stocks, MLPs, REITS, closed-end funds, and ETFs. We apply qualitative and quantitative metrics to in-depth market research, placing an emphasis on value investments that offer the greatest potential for total returns through capital appreciation and dividend growth.
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.
How Many Example Portfolios Do You Provide?
We currently provide two sample portfolios:
1) The AdvanceDL portfolio is a stock portfolio that is mainly focused on dividend income. In our sample portfolio, the titles we recommend from a business point of view are monitored. We usually have about 30 titles in the portfolio, using a specific business strategy for each title. The fact that our portfolio operations are checked and audited by a CPA is entirely unique. We do not expect our members to copy our sample portfolio precisely to their business accounts; however, you can be sure that we back up their recommendations by owning exactly the same portfolio.
The AdvanceDL stock portfolio uses options to implement hedging and generate extra income (via covered call strategy). We do not apply advanced options techniques here.
2) The BigDeaL portfolio solely employs stock options, implemented through varied strategies. The aim remains the same as in the AdvancedDL portfolio, which is to focus on conservative income returns; however, we employ a more active approach here, based on a mix of strategic options. This type of portfolio might appear somewhat risky, but don’t worry. We always clearly define the extent of the risk with each trade. Although part of the portfolio uses option strategies, we are definitely not a daily trading service. As a rule, our positions are aimed at mid- to long-term horizons.
Please note that our portfolios are not designed for any one particular person. We try to share our best ideas to make money. DividendLab members are looking for ideas, insights, and varied views, which is what we have to offer you.
I Am Interested in Your Share Portfolio, but Options Are Not My Cup of Tea. Do I Need to Use Them?
In our portfolios, options are used as security against risks. We strongly believe that this approach is necessary, as it protects against the worst-case scenario in the stock market. However, we do not push anybody into option usage. It is up to you to consider the advantages and disadvantages of option usage, as well as to determine what level of risk is acceptable to you.Back to top ˄
What I Can Expect from the User’s Forum?
Our forum is expanding all the time, and it is becoming an immeasurable aid for each investor. Here, we share opinions about the titles in our portfolio, comment on current financial and economic topics, exchange investment tips with each other, discuss the possibilities of individual business platforms, and much more.
The forum represents a growing community of investors with different investment histories and different experiences who share a similar attitude towards investing. We believe each investor can be a positive contributor to our community; therefore, any member can add his or her commentary or ask a question. If you ask a question, you will get an answer from someone in the community.
Currently, the forum contains about 20,000 contributions in more than 3,500 threads. Those threads provide a large amount of material dedicated to various topics, from answering inquiries from starting investors to discussing advanced option strategies. By looking through the threads, you can find information you need, as well as participate in a discussion that’s relevant to your investing needs.
How Do the Webinars Work?
We occasionally organize webinars for our members. We usually target a particular business strategy in the first half. In the second half, we discuss current topics and answer related questions. Our webinars can be accessed via a computer with an Internet connection and speakers; connecting over the phone is also an option. As the conference calls are usually recorded, you will not miss the information if you cannot participate at the given time.Back to top ˄
Does DividendLab Manage My Account?
No, we do not provide managed accounts as a service. We are not registered investment advisers, custodians, or money managers, and we are not licensed as broker-dealers. (Please read our Disclaimer for details.) We are an investment newsletter service offering the benefit of our extensive research, investment experience, and portfolio management technology for you to use for your own investment activities.
We are not managing anyone’s money via DividendLab portfolios. The goal of this site is to share ideas and opportunities, show how to employ hedging, and learn together. Investing is our passion.
Do I Need to Make a Minimum Investment?
While we do not set a prescribed investment amount when following the DividendLab portfolio strategy, you’ll likely achieve the best results through optimizing diversification and asset allocation. You can achieve positive absolute returns with any size investment. $10,000 investors have been able to generate sustainable returns in much the same way as $500,000 investors.
How Much Will a Plan Cost Me?
We offer several pricing plans. Please visit our products & pricing page for details. Have you compared us with other newsletters on the market and think our price is too high? In our experience, practically all of our clients cover the cost of the yearly subscription in the returns from their first completed trade. Our other services (the forum, our webinars, the study materials) are an extra bonus, not counting the other successful investments you’ll be making. Immerse yourself in the opinions and recommendations of our clients on our Testimonials page, and let yourself be convinced. We are proud of our products.
How Will My Subscription Be Managed?
You do not need to do anything to renew your plan. Your subscription will be renewed automatically using the same PayPal account information you provided initially. For those of you who pay on an annual basis without a PayPal account (with checks or direct credit card payments), we will send you an email in advance of your renewal date. You can cancel your subscription at any time, for any reason.
What Is the Refund Policy?
We offer a 30-day money-back guarantee for each of our products without any restrictions for new members. If for any reason you are not completely satisfied with the product you purchased from us or it just does not meet your expectations, please notify us within 30 days from the date of the purchase by our contact form, and we will process your refund.Back to top ˄