White Papers | January 22, 2013

New Options for Equity Investors

Executive Summary

Investors often find themselves stuck between the rock of expensive equity markets and the hard place of needing to grow their assets at a consistent 6.5% per annum. History suggests that investing in equities with the hope that the growth implied by current valuations will materialize is reckless. Meanwhile, sitting on the sidelines impairs the long-term prospects for most investors because their annual spending commitments do not shrink in line with the diminished expected returns of the stock market. Therefore the utility of a source of equity-like returns that is insensitive to valuations should be obvious. The basic put selling strategy that we outline in this paper provides this type of return.

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Disclaimer: The views expressed are the views of Dr. Constable through the period ending January 22, 2013 and are subject to change at any time based on market and other conditions. This is not an offer or solicitation for the purchase or sale of any security. The article may contain some forward looking statements. There can be no guarantee that any forward looking statement will be realized. GMO undertakes no obligation to publicly update forward looking tatements, whether as a result of new information, future events or otherwise. Statements concerning financial market trends are based on current market conditions, which will fluctuate. References to securities and/or issuers are for illustrative purposes only. References made to securities or issuers are not representative of all of the securities purchased, sold or recommended for advisory clients, and it should not be assumed that the investment in the securities was or will be profitable. There is no guarantee that these investment strategies will work under all market conditions, and each investor should evaluate the suitability of their investments for the long term, especially during periods of downturns in the markets.
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