Investment Strategies

Equity Index Plus

Moderating the peaks & valleys of stock market investing

Equity Index Plus – our flagship equity strategy – seeks long run stock market-like returns, with significantly less volatility than the market itself. In other words, we seek superior risk-adjusted return.

The strategy employs monthly covered call option writing on a selected broad market index, such as the S&P 500. The risk-conscious investor may find this an attractive way to participate in the stock market.

A covered call strategy involves two steps:

  1. The purchase of an index fund; for example, a fund that seeks to replicate the performance of the S&P 500, an index of large capitalization US stocks.
  2. The monthly sale of a call option on the same index (or on the index fund).

In a monthly covered call strategy, the investor receives and retains an up-front cash payment known as an option premium. In return, the investor forgoes appreciation potential in the underlying index fund over the one-month life of the call option.

In flat and modestly rising markets, the option premium enhances portfolio return. In declining markets, the premium acts to cushion the downside impact. In sharply rising markets, however, the sale of the option generally limits returns to a level below that of the market itself.

The chart above is solely for the purpose of illustrating the Equity Index Plus strategy’s goal of moderating the “peaks” and “valleys” experienced in stock market investing generally. The chart is not intended as a forecast or projection of either the stock market’s actual performance, or the performance of the Equity Index Plus strategy in either absolute or relative terms. There can be no assurance that the Equity Index Plus strategy will achieve its objectives.

Equity Index Plus is a highly flexible strategy, enabling investors to select their geographic/sector focus.

For each client in Equity Index Plus, we recommend the specific version that best addresses their investment objectives.

Geographic/Sector Options

US Large Cap 
Based on the S&P 500 index, the most commonly cited benchmark for US stocks, containing about 80% of the total US stock market capitalization

US Mid Cap 
Based on the S&P 400 index, a leading measure of US mid cap stocks.

International 
Based on the MSCI EAFE index, a leading index of non-US developed markets.

Global 
Based on the MSCI All-Country World Index, a leading world stock index that encompasses US, international, and emerging markets

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