USING DEFENSIVE EQUITY INCOME IN OUTCOME-ORIENTED PORTFOLIO CONSTRUCTION
Defensive equity income can replace traditional equity allocations in an outcome-oriented portfolio
- In the chart below, replacing the allocation to the traditional market capitalization based equity index with a Defensive Equity Income index resulted in higher expected returns for the same level of risk or a reduction in the level risk of the overall portfolio without reducing expected returns.
In a low growth environment, investors can take on more equity exposure with Defensive Equity Income
By increasing our equity exposure we increased long-term expected returns without increasing portfolio volatility.
As investors become more sensitive to drawdowns, they can reduce risk without decreasing return expectations
By reducing our equity exposure, we decreased our long-term volatility while preserving our long-term return.
Defensive Equity Income allows investors to stay invested in equites and may offer more income and potentially less downside than traditional market-cap equity allocations.
Annualized statistics from December 1, 2004 - December 31, 2017
Source: QS Investors; Zephyr StyleAdVISOR Traditional Stocks represented by the Russell 3000 Index. Bonds represented by the Bloomberg Barclays US Aggregate Bond Index. Defensive Stocks represented by the QS Low Volatility High Dividend Index; The QS Low Volatility High Dividend Index was launched in December 2015. Data prior to the launch date is back-tested data (i.e. calculations of how the index might have performed over that time period had the index existed). There are frequently material differences between back-tested performance and actual results. Past performance -- whether actual or back-tested -- is no indication or guarantee of future performance. The Index was calculated jointly by Solactive and QS Investors. Solactive is paid by QS Investors.
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