Everyday Finance

The Do-It-Yourself Market-Neutral Portfolio

Nice article; great variety of options (no pun intended) out there for the build-it-yourself portfolio. A few additional considerations and options out there:

Some of the instruments listed, especially in the energy sector are additionally favorable in that they provide significant dividend yields; there are several CANROYs, commodity ETF and international REITs that yield between say, 7 and 10% annually. I've performed some analysis on these and own a couple myself. Not only does the high yield help differentiate the correlation of the total return, but it moves the return in a favorable direction, regardless of the major market indices. I bought into a few that started off yielding around 10% and have since increased in share price signficantly as well (of course, now the yield has dropped into the high single digits, but I'm still earning 10%+ on my initial investment).

Additionally, a great way to get some additional non-correlated performance in the 9-12%/yr range is through lending on Prosper.com. When diversifying your loans, you can asymptotically approach the returns of the overall performance measures as lists on the site for "all loans" in particular credit categories. This can be achieved simply through "average" performance. If you're good at researching and choosing your loans, you can exceed these returns, inclusive of defaults. To date, I have over 20 loans out with an average of 13.4% returns. I've also included top lender groups, strategies and learnings on my everydayfinance blog. Feel free to visit, review and leave comments by clicking on my name for this post.

Dan