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Replicating Popular Investment Strategies with Equities + Cash

Many strategies are just offering diluted equity exposure

Nicolas Rabener
10 min read
17 Jul 2023

SUMMARY

  • Most investment products offer straight or diluted exposure to the stock market
  • Even complex strategies often can be replicated via a combination of the S&P 500 and cash
  • However, this questions the utility of these strategies given a lack of diversification benefits

INTRODUCTION

When ETFs were conceived in the 1990s, the primary goals were to reduce cost and simplify investing. If fund managers can’t beat their benchmarks, then allow investors to invest directly in benchmarks. Cheap and simple.

However, given the excellent survival skills of the asset management industry, there are now ETFs available for every conceivable strategy, sector, or geography. Somewhat ironically, there are more ETFs than stocks trading in the US equity market. Investing has become cheaper, but not simpler.

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