Evaluating The Defined Risk Strategy
Human behavior, much like markets, is cyclical. Often, as a lengthy benign or bull period persists, a sense of complacency begins to creep into the markets.
After nearly ten years since the Global Financial Crisis, memories have started to fade and lessons learned are being forgotten. Throughout 2017, the VIX, commonly described as “the fear gauge,” was a low levels and reached a historic low in October. Then, in January of 2018, a sudden and historic spike in the VIX coupled with a 10% correction for the S&P 500 Index served as a reminder of market risk.
In our opinion, the perfect time to consider what investors can do about market risk is before markets sell-off.
One of the best ways to help investors understand the Defined Risk Strategy (DRS) and to form reasonable expectations for how our strategy performs in market sell-offs is to examine the DRS performance in previous periods of market duress.