Home Finance When the ‘Barbell’ Investment Strategy Does—and Doesn’t—Work

When the ‘Barbell’ Investment Strategy Does—and Doesn’t—Work

by Enochadmin

Skilled asset managers typically like to advertise the virtues of a “barbell” technique for one’s portfolio, particularly in a rising-rate setting. Within the easiest sense, the technique includes investing within the two extremes of a given variable, whereas avoiding something in between. Within the case of valuation, it could imply investing in solely development shares and worth shares; within the case of credit score high quality, it could imply proudly owning solely high-yield bonds and low-yield bonds.

The thought is partially rooted within the notion that due to behavioral biases, traders are likely to keep away from the extremes of any variable or asset attribute like valuation, so the extremes of an asset class are sometimes underpriced. That is very true at occasions when biases could also be stronger, comparable to in price environments when there’s larger uncertainty. 

Source link

Related Articles

Leave a Comment