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Office Hours: Managing a “Hybrid” Portfolio

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This Office Hour session was held on 10/5/2017 and discusses our thoughts on managing a portfolio that has a mixture of stocks and options. This topic was requested by a member at another Office Hour session, so we were happy to have the chance to pull together a presentation on it.

This is an interesting topic that I know people have different ideas about. We’d encourage you to discuss your ideas about this subject on the Framework Forum. If you haven’t already, going back and working through the “LaunchPad” mini-courses will also give you some color on the topic of Framework-style leverage and portfolio management.

The total recording is around 30 minutes long, broken into smaller, more digestible bits.


Thoughts on Creating an “Efficient” Portfolio

Here, we talk about what it means to academics and to a master portfolio manager (Buffett) to construct an “efficient” portfolio. These principles inform how we think about portfolio construction.


Leverage

If you use options in a portfolio, you had better understand how to measure and manage leverage. This is a short overview of our thoughts on the topic that relates to our ideas about “layering” in particular.


Bond Replacement Strategies

Bond replacement strategies have a place in both growth and income portfolios, though clearly, emphasis is more on the latter. These investments are usually unlevered.


Growth Strategies using “Layering”

This section pulls together the lessons about portfolio management and leverage, and spells out our idea for constructing a “sensible investing meal” using different, related instruments. We also provide a practical example that illustrates this method.

Lessons