Quanist Investment

SPY and IWF, which is better?

This tool calculated lump sum investing related data. Choose the item to be calculated:     FV     Time      RR    Sum Lump sum:  dollar(s) Time:  year(s) Annually rate of return:  % Future value of the lump sum:  dollar(s) Calculate Stop The following chart shows the power of the compounding effect. The Earilest We Invest, the Less We Need to Invest to Achieve Our Investment Goal. Asuuming the annual rate of return is 5%. Or the longer we invest, the less money we need to invest to ahieve the same investment goal. So if our investment goal is to retire and if we start investing early, we will be less stressful in the future when we don't need to save a lot of money. Instead, we can spend our money. Investment Goal: $ What about investing in a SP500 Index Fund? The SP500 is said to have a long-term annual return rate of about 10%. The chart below shows how long do w need to ach

This post tackles the problem if there are fixed number of ups and downs with a magnitute of 1% in asset prices, whether leveraged ETFs are more dangerous?. This simulator shows a random order of fixed number of ups and donws of 2% for 2x bull and 3% for 3x bull. Percent Change in 1x bull asset: Number of Ups: Number of Downs Simulate

There are 2 reasons we should invest early. One, the earlier we start investing, the earlier we could enjoy the results. Two, the earlier we start investing, the lesser the amount of money we need to invest for the same investment goal. These 2 reasons are the result of the compounding effect of investment returns. Compounding Effect for a Lump Sum Investment For a lump sum investment of $10k, the results in 10 years, 20 years and 30 years if the annual rate of return is 5% are the following: Duration Asset Value Asset Value Change 10 years $16.29k $6.29k 20 years $26.53k $10.24k 30 years $43.22k $16.69k Asset value gains faster in the last 10 years than the beginning 10 years. Math Derivation for Lump Sum Investment Result Formula Suppose the interest rate is 1% , and we save $100 in the bank for a year and get an

 Which is better? Lump sum investing or dollar-cost averaging? O built this simulator to find out. Assumptions: Stock price follows geometric Brownian motion, or, stock return follows arithmetic Brownian motion. The variables are investment duration, we call t, mean return and return standard deviation. This simulator will run 1 time and show if one investing strategy beats the other. The target asset has a innitial value of $100. We will invest t*100 amount of money at time 0 for lump sum investing and $100 at each t. Simulator t: Mean Return: % Return Standard Deviation: % Start Compare the Investment Result With Real Date The previous app uses simulated stock prices to compare if lump sum investment givs a reutrn than dollar cost averaging. The following app uses actual SPY data. SPY tracks the SP500 index and it's an old ETF which we can use to model and compare the investment results from both investment strateg

We pay back fixed amount every month after we take out an installment loan. What if we use the loan to buy stocks and sell some of them every month to pay each installment, will we make money? Loan amount:  dollar(s) Duration:  years Annual interest rate:  % Annual rate of return of investment:  % Send  

Starting with $1,000, buy in the selected asset. the end value is calculated. Note: the earliest dates for SPY is 1993-02-01 and 2008-11-06 for SPXL. SPXL: Start Date: End Date: Send The end value for SPY portfolio is ,with a % return The end value for SPXL portfolio is ,with a % return

Yahoo Finance provides ETFs, stocks and bond data, including historical stock dividends and bond ETF coupons.  I built the following tool to graph the historical dividends or coupons in order to see if they have grown. Date,Dividends 2011-03-25,0.599000 2011-06-23,0.605000 2011-09-26,0.630000 2011-12-22,0.770000 2012-03-26,0.632000 2012-06-19,0.639000 2012-09-25,0.798000 2012-12-19,0.930000 2013-03-25,0.743000 2013-06-26,0.808000 2013-09-24,0.835000 2013-12-23,0.959000 2014-03-25,0.831000 2014-06-24,0.915000 2014-09-24,0.934000 2014-12-24,1.103000 2015-03-25,1.002000 2015-06-24,1.181000 2015-09-25,1.082000 2015-12-24,1.187000 2015-12-29,0.190000 2016-06-21,0.998000 2016-09-26,1.103000 2016-12-21,1.304000 2017-03-24,1.032000 2017-06-27,1.117000 2017-09-26,1.284000 2017-12-19,1.273000 2018-03-22,1.229000 2018-06-26,1.281000 2018-09-26,1.277000 2018-12-17,1.442000 2018-12-28,0.322000 2019-03-20,1.130000 2019-06-17,1.778000 2019-09-24,1.483000 2019-12-16,2.039000 2020-03-25,1

The higher the US interest rates, the higher the demand for US Dollar is. So, would Dollar become stronger after the Fed raises rates? Based on the no-arbitrage pricing model for exchange rates, Dollar may not always become stronger with higher interest rates. No-Arbitrage Pricing Model for Exchange Rates Arbitrage means making a profit without any risks. No-arbitrage pricing means when there is any arbitrage opportunity, there will be enough arbitrage trading that change the underlying assets' values to to the points where there is no arbitrage opportunity left. The no-arbitrage pricing model is applicable for exchange rates and is also called the interest rate parity. Example Suppose US dollar's interest rate is 1%, euro 's interest rate is 0%, the spot exchange rate is 1EUR/USD and the 1-year forward exchange rate is 1 EUR/USD , too. We can simultaneously borrow 100 euros, buy 100 dollars, which is saved in a bank for 1 yea

Lump sum investing means investing with a single amount while the dollar cost averaging takes the same amount of money, breaks it into smaller amounts and invest them over a period of time. In order to find out which was better during the 2008 housing crisis, I have simulated the results of both investing methods with the following setup: The simulated investment instrument is the SPDR S&P 500 ETF(SPY) which is a good proxy for S&P 500 index. SPY's daily closing values are used. To simulate actual returns and for calculation purposes, SPY's dividends will be reinvested at the ex-dividend dates. To simulate long to short term investment results, terms of 1-year, 5-year and 10-year are simulated. The dollar cost averaging method will invest $1k each month while the lump sum method will invest all the money on Oct 9, 2007 when SPY reached its top. Investing at the Top of 2008 Housing Bubble SPY reached its high on Oct 9, 2007 at $15

It has been more than 10 years after a major financial crisis, the 2008 housing bubble. What can I do to protect my investment portfolio if I encounter a big market downturn? Is gold a good option to add in my portfolio? After doing some research, I put together some data and we can see the price correlation of gold with the stock market. I use the S&P 500 index data as proxy for stock market, because there are ETFs that track the S&P 500 index which are commonly invested by many investors. 2020 Covid-19 Crisis S&P 500 Index plunged from 3380.16 (February 21, 2020) to 2304.92(March 20, 2020). Asset Price(High) Price(Low) Percent Changed S&P 500 Index 3380.16 2304.92 -31.8% Gold $1707.67/oz $1689.7/oz -1.1% 2008 Housing Bubble S&P 500 Index plunged from 1561.8(October 12, 2007) to 683.38 (March 6, 2009). Asset Price(High) Price(Low) Percent Changed S&P 500 Index 1561.8 683.38 -56.2% Gold $980.98 /oz $1146.43/oz 16.9%

As an stock investor, I worry about when the next financial crises will happen. Based on S&P 500 historical data 1 , there are five major financial crises, including the resent Covid-19 crisis, over the last 92 years. On average, every 18.4 years, there is a major financial crisis. Detail Data Starting Month Recovery Month Duration Worst Return 1929/9 1956/4 26y5m -81.3% 1968/11 1992/1 23y2m -61.1% 2000/5 2014/8 14y3m -45.6% 2007/10 2013/11 6y1m -53.3% 2019/12 2020/7 8m -20.3% How Long does it Take for the Stock Market to Recover its Previous High? The worst major financial crisis was the the Great Depression of 1929, It took the S&P 500 index 26 years and 5 months to recover its previous high. The least worst

 As an indexer, I shouldn't worry about any market event, right? The market always comes back after all. But, there have been a couple of ugly events for the last 92 years. On average there is one every 18 years or so. Although, past events can't be used to predict future events. What Could Be Bad? I would rather see the Fed raising rates. I know the stock pricing would be negatively affected by rate hikes. But the implications of rate hikes are good economic. I think one tragic event is when the Fed has to keep the rate at 0% to 0.25% for longer or, even worse, lowering rates into the negative territory, that no one has ever witnessed in history. What Can We Do? Spend money, work hard. The stock market is only healthy when the fundamentals are healthy. Economic fundamentals' health follows the good-old fashion of supply and demand rules.  "Supply" is the working hard portion, while "demand" is spending mo

Index ETFs track broad market indeics. While markets are growing, so should ETFs. If these ETFs keep fixed dividend yield, they should pay growing dividends when ETFs' prices are growing.  Lets take a look at the historical data of various ETFs. IVV, S&P 500 Tracking ETF VTI, Total US Stock Market ETF VEU, Total US Stock Market ETF VT, Total World Stock Market ETF Conclusion US market ETFs give growing dividends according to past data while the world or non-US markets do not. VEU's returns are not as good over the years and that is probably why it does not pay growing dividends.

An inverted yield curve happens when yields of long-term bonds are higher than those of the short ones. it's called "inverted" because normally short-term bonds have higher yields. Why Short Term Bonds Should Have Higher Yields?  Freedom Short-term bonds holder have more freedom than those holding long ones, because the formers' bonds reach maturity sooner, they therefore get cash sooner. On the other hand, long-term bond holders enjoy less with being able to use cash in a short term, and therefore should get better returns. Duration Duration measures how much a bond is sensitive to interest rate changes, and bonds with longer maturity have higher duration(more sensitive) than ones with shorter maturity. An example of bonds with a face value of $100 and a coupon rate of 5% is as below: Bond Maturity interest rate Spot Price A 1 yea

I am not sure, so let's assume I withdraw 4% of my savings at the high right before the 2008 Housing Bubble or the 2000 Recession. And assume my savings are IVV, an S&P 500 tracking ETF. Simulation Setup 2008 Case High: Oct 09, 2007; IVV was traded at $156.79 My fund has $1k, which is made up of 6.37796 shares of IVV Start withdrawing $40 from the fund on Oct 09, 2007 * means dividend reinvestment All prices are IVV's daily closing price. 2008 Case Calculation My fund has grown back to $1,011.77 on Jun 24, 2015 , bigger than what I started. I don't think I will use up my fund anytime soon. Date IVV Shares IVV Price Total Value Oct 09, 2007 6.12284 $156.79 $960.00 Dec 27, 2007 6.15582* $148.13 $911.86 Mar 25, 2008 6.18716* $135.32 $837.25 Jun 24, 2008 6.21969* $131.46 $817.64 Sep 25, 2008 6.25455* $121.15 $757.74 Oc

There are many reasons why we should diversify our investment portfolio. One of them is to reduce the fluctuation of our asset value. The statistical term for fluctuation is standard deviation. Standard Deviation of Returns, Not Prices. It is the standard deviation of the asset returns we are reducing not asset prices, because it would not make sense that the standard deviation of asset return is 0, which means that the asset value neither goes down nor goes up.  Asset with price standard deviation being 0 will not generate any return. On the other hand, it is meaningful to reduce the standard deviation of asset returns. For example, stock A, with a mean return rate of 5% and a return rate standard deviation of 10%, can generate a return of 5%, 4%, 0% or -10% this year.  But we don't want the -10% return happening, we can add some other investment asset who is negatively corrected or not corrected with stock A, say cash, assuming cash has a me

This is a simulator for continuous walking on a line with the probability of going right one step as  p and the probability of going left one step   as 1 - p until walking to either to the right end or the left end. Simulator Starting position:   Total steps:   Probability of going right one step: position: 50 Start Reset  

Put-call parity formula is for European options, which can be only exercised at expiration. Put-cal parity is based on the no-arbitrage pricing theory, which says whenever there is an arbitrage opportunity, there will be enough of that arbitrage trading to make the underlying assets' prices move to where there is no arbitrage opportunity. No-arbitrage pricing theory says two equal things must have the same values. Otherwise, one can sell the expensive and buy the cheap to make a risk-free profit. Formula Options can be priced based on the put-call parity formula which is the following: C + PV(x) = P + S Where C is the price of call, PV(x) is the present value of strike price, P is the price of put, and S is the spot price of For example, XYZ stock spot price is $100, 1-year risk-free rate is 1%, for 1-year call and put options with the same strike price of 101, the following formula holds. C + PV(101) = P + S C - P = 100 - 101/(1 + 0.01) = 0  Derivation of the Pu

Ideally, we want to be able to "buy low, sell high" when doing short-term stock trading. However, there is a chance we will "buy high, sell low" and lose money. According to a statistical concept, the gambler's ruin problem, tradning stock can be very dangerous and we may lose all our money trading. The Gambler’s Ruin Problem The gambler's ruin problem can be described as two gamblers, A and B, gamble 1 dollar each time. A has x dollars, and B has n - x dollars. They have total of  n dollars and they gamble until one of them loses all his or her money. Let the probability that gambler A wins a game be p , then the probability of A losing a game is q . p + q = 1 , since A either wins or loses a game. If  p does not equal to q , The probability of A wining all the money is If   p  equals to  q , The probability of A wining all the money is Analysis of 3 scenarios of trading Assume each trade is eithe