How We Think
How do I capture the upside of a growing sector but not dilute my investment with holdings that are not truly adding to my exposure?
PurePlay Capital, Inc’s founders have decided to take on the Big Boys and restore what we feel are structural weaknesses in existing index construction. Many of these sector specific indexes venture far from their stated objectives due to their underlying assets size and portfolio weighting. Let us show you the way with optimal index construction and weighting.
Correlation among assets has increased with each passing year. The chance that one individual stock in a specific space significantly outperforming their pears has been declining each year to the point that picking the best in breed has become harder and harder. Think back to 2008, can you name the best bank to own through the markets decline or did they essentially all decline with the very best still losing market value? This same correlation was seen back in 2000 also, but to a lesser extent. The lesson for investors was why risk single stock exposure with the hope of a little bit more of outperformance, but risk the loss of 100% of your capital on a possible bankruptcy? If Bear Sterns and Countrywide Mortgage has shown us, recovery from a market down turn is hard enough as it is, play it safe by gaining exposure with as broad a basket as possible without overextending into questionable areas.
Why put your hard earned money in McDonalds (and risk the company screwing up), when you can buy the whole restaurant space and participate in the entire sectors performance?
At PurePlay, we have seen numerous indexes created by Wall Street firms in an effort to hopefully recapture asset drain from mutual funds. In part due to legal liability reasons, the days of buying individual stocks and bonds is essentially over. Commissions, having been essentially outlawed by the recent D.O.L. Rule (Department of Labor), has forced fiduciary standards on retirement accounts which make the recommendations of individual securities a legal risk that most firms are not willing to accept. By default Indexing your portfolio is now the only legally acceptable option for market participants.