VanderPal Preservation Strategy

[StockArtist]

I came across a genius investment manager named Dr. Geoffrey VanderPal CFP who created a method for managing money using a strategy that protects the principal while participating in the upside of the market. The principal is invested into short term fixed income and the interest earnings are invested in index options. Dr. VanderPal's strategy which is based on a model he created provided for better reutns than the S&P 500 index while having 1/15th the volatility and principal preservation. As a broker, I thought this stategy would be helpful.

[Bolimomo]

What happens in a down market like 2008? You earn the fixed income interest rate?

[aiki14]

What happens in a down market like 2008? You earn the fixed income interest rate?
No, the interest is invested in index calls which would expire worthless. The strategy is one of principal protection. In up markets if the S&P outperforms the ROR of the fixed income by a certain amount it will beat this strategy as well
You don't get anything for nothing, if you protect principal you cap profit, no way around it.

[Bolimomo]

The strategy is one of principal protection.
Interesting.

So with a down year, I will get 0 as return (protection of pricipal), hopefully? But in an up year, I may get some percentage of the S&P performance?

[aiki14]

Interesting.

So with a down year, I will get 0 as return (protection of pricipal), hopefully? But in an up year, I may get some percentage of the S&P performance?

exactly, if the S&P is up a lot you'd get a percentage, if it's down you get the principal protection.

[aiki14]

I came across a genius investment manager named Dr. Geoffrey VanderPal CFP who created a method for managing money using a strategy that protects the principal while participating in the upside of the market. The principal is invested into short term fixed income and the interest earnings are invested in index options. Dr. VanderPal's strategy which is based on a model he created provided for better reutns than the S&P 500 index while having 1/15th the volatility and principal preservation. As a broker, I thought this stategy would be helpful.

As a broker you should realize it only outperforms the S&P in special circumstances. And I'll bet you a cheeseburger this year won't be one of them.

[StockArtist]

Actually, the strategy can work in both bear and bull markets and a built in return can also be devised with some limitations upon upside potential. I read Dr. VanderPal's dissertation to get some additional details but he does not disclose all his propriatary methods. I did notice that the research on the S&P 500 index over 12 years yielded a return (before any trading costs) of about 20 Bps better annually than the S&P 500 index with 1/15 the volatility based upon the Sortino Ratio and no downside risk except worse case a zero percent return but that can be mitigated as well. Its a customizable program from what I understand based on client needs. I spoke to him a few times and did some research. This guy is brilliant but keeps things simple for common people to grasp. His specialty is investing with principal preservation. He devised when he was 25 a mutual fund that used a unique balancing method of investing that was much more stable over a 24 year period than any other balanced fund and a return that was slightly better. Dr. VandePal teaches at several universities, I am going to see if I can take an investment course with him.