WLTW

Willis Towers Watson Public Limited Company

231.56
USD
-1.19%
231.56
USD
-1.19%
197.63 271.87
52 weeks
52 weeks

Mkt Cap 28.85B

Shares Out 124.61M

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Risk-Adjusted Current Income

Income Investors who focus purely on yield when evaluating potential investments do so at their own risk. Metrics that fail to incorporate risk are not meaningful when used to compare duration-managed bond pools, multi-asset income funds, REITS, MLPS and high dividend stocks. Even the 30-day SEC Yield, which seeks to provide a standardized measure of yield for bond funds, ignores risk. Income investments must be evaluated from a risk-adjusted perspective. When comparing distributions, the 30-day SEC Yield provides no information about risk.[i] Nasdaq HANDLS Target Distribution Indexes establish a direct link between risk-adjusted returns and current income because they are built from a common portfolio. 5HANDL™, 7HANDL™ and 10HANDL™ Investors have different risk appetites, but diversification remains the best path to high risk-adjusted returns. All HANDLS Indexes seeks to deliver high current income by leveraging a common, well-diversified portfolio seeking high risk-adjusted returns. The Nasdaq 5HANDL™ Index[ii] was specifically developed with the goal (but not the guarantee) to support, from long-term expected total return, a 5% distribution rate, net of estimated expenses. By comparison, the 7HANDL Index[iii] targets 1.3x the return and volatility of 5HANDL, while the 10HANDL targets 2x those metrics. An Indexed Approach By employing a systematic approach to building a well-diversified, multi-asset portfolio of low-cost ETFs, Nasdaq HANDLS™ Indexes rely upon the teachings of modern portfolio theory, which suggest that investors can employ diversification to reduce the level of idiosyncratic risk posed by individual investments in their portfolios. By reducing or eliminating such security-specific risk, diversified portfolios can earn higher risk-adjusted returns than undiversified portfolios. The use of low-cost ETFs ensures that the benefits of diversification are not subsumed by the cost of obtaining exposure to different asset categories and investments. Nasdaq HANDLS™ Indexes have risk characteristics similar to the broad US capital markets and can be expected to generally rise and fall with prevailing market conditions while maintaining a very high level of correlation across the target-distribution suite. The following chart presents the YTD Total Return for the three Nasdaq HANDLS™ Indexes. The only difference across the Nasdaq HANDLS™ Target Distribution Indexes is the application of leverage which proportionally effects both risk (volatility) and return and therefore has no impact on risk-adjusted returns.[iv] Year-to-date the index correlations have been 99% across all three HANDLS™ Indexes.[v] Investors Need Income Nasdaq HANDLS™ Indexes were created to address investors’ need for current income. Each HANDL increases or decreases risk relative to its current HANDL and can serve as a robust benchmark for any investment where current income is the primary objective.[vi] The Nasdaq HANDLS™ indexing solution uses the teachings of modern portfolio theory to deliver income-oriented investment solutions to investors. By building well-diversified, balanced portfolios of low-cost ETFs and using moderate amounts of leverage to achieve enhanced returns, investors seeking income can minimize the idiosyncratic risk posed by concentrated investments and earn higher risk-adjusted returns. For investors looking to fund their day-to day lives, HANDLS™ Indexes believes a better approach is to focus on maximizing risk-adjusted returns and manufacturing a distribution. High managed distribution rates provide an additional benefit to investors by minimizing the need to manage cash reserves and make piecemeal asset sales to finance lifestyle needs. [i] HANDLS Indexes component constituent returns January 1, 2013 through April 15, 2020. Source: BAV, data Nasdaq Global Indexes. [ii] The benchmark index for the Strategy Shares Nasdaq 5HANDL Index ETF, $FIVR and the Ping An Nasdaq 5HANDL Index ETF (ticker:3198-HK). [iii] The benchmark index for the Strategy Shares Nasdaq 7HANDL ETF ($HNDL). [iv] 5HANDL assumes no leverage, 7HANDL assumes 1.3x leverage and 10HANDL assumes 2x leverage. [v] Correlations will reduce over longer periods because of the effects of leverage. For example the 1-year correlation between the 5HANDL and 7HANDL was 95% [vi] The benchmark indexes for the Strategy Shares 5HANDL ETF (ticker: FIVR) and 7HANDL ETF (ticker: HNDL) and the Ping An 5HANDL ETF (3198-HK) The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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