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Educational Materials

Title Description PDF

A Look at Yield

This piece provides an introduction to yield and how the low-rate environment has led investors to search globally for new sources of income. It illustrates the importance of dividends as part of an investment's total return. It also discusses common methods of calculating yield, points out the differences in the calculations, and stresses the importance of making an "apples-to-apples" comparison.

Absolute Returns

Illustrates how employing absolute return strategies may provide investors with an inflationary hedge and reduce or avoid the negative compounding effect.

Alternative Assets

Discusses why integrating alternatives into a traditional portfolio should help reduce portfolio volatility and improve the odds of preserving capital over the long term.

Amnesia Effect

Discusses the failed behavior of fear-based market timing and performance chasing, instead of remembering the potential value of diversification, including constant exposure to noncorrelated investments such as managed futures.

Asset Class History

A look at the calendar year performance history of various asset classes during the past two decades. In its entirety, this colorful table provides a clear view that asset classes go in and out of favor from year to year, making a powerful case for the potential benefits of diversification.

Asset Class Seasonality

Studying asset class seasonality helps to address the old adage of “Sell in May and go away.” The piece examines if there is statistical truth to the yearly superstition with regard to the stock market and if it also applies to other asset classes. Hopefully, as case is made for the potential value of diversification and long-term investment horizons in an attempt to overcome short-term swings and anecdotal observations.

Betas On The Cusp

Studies the increasing beta of various asset classes relative to the stock market on the cusp of a credit crisis. And considers taking a Minsky Approach to Modern Portfolio Theory through the use of alternative investments.

Broken Income

Owning a bond fund is not the same as owning a bond. This piece explains the inherent structural problem with many bond funds and makes a case for using absolute return funds as a possible alternative for portfolio diversification.

Commodities

A basic introduction to commodity investing. Analyzes some of the indexes commonly used as benchmarks for mutual funds, including a comparison of holdings, investment methodology and performance.

Correlation

This piece explains correlation and why it is such an important element for diversification. It also provides some perspective on historical correlations, specifically the difference between long-term and short-term averages.

Duration Dilemma

When interest rates rise, bond values generally fall. In order to address interest rate sensitivity in a low rate environment, many investors will reducing the average duration of their bond portfolios by moving to shorter maturities. However, reducing the duration of a bond portfolio in such a low rate environment often results in an lower portfolio yield. One potential solution is to consider using other sources of yield outside of traditional bonds where duration and maturity are not factors.

Endowment Allocation

This educational piece discusses the asset allocation strategy of sophisticated endowment funds like Harvard and Yale.

Inflation

This piece explains the history of inflation, a commonly used statistical measurement for rising prices. It also provides some perspective on the way inflation affects an investor's portfolio, and how adding commodities may act as a hedge.

Investor Behavior

Shows how asset allocation strategies can be used to help limit losses caused by fear-based selling.

Investor Returns

This piece explains the performance gap between an investor's actual returns from published total returns due to poor attempts at market timing. By measuring asset flows, it is possible to estimate how investors, on average, faired with their sales and purchasing decisions. Investor returns illustrates in real terms how greed and fear can influence decision making.

Managed Futures

An introduction to managed futures, including a history of the global futures markets and the potential diversification benefits of adding managed futures strategies to a portfolio of traditional assets.

Market Turns

A historical look at how markets have acted during dramatic market upturns and downturns, and the resulting performance in the years that followed.

Panic P/Es

Looks at P/E ratios of stocks during market panic periods as a possible way of analyzing historical market turning points. By studying history, perhaps we can learn how the market adjusts prices during times of crisis and prepares for potential rebounds.

Portfolio Chemistry

Commodities have a historically been viewed as a fairly risky asset class, not unlike equities. Some investors avoid the asset class because of the historical volatility. Similar to high school chemistry, this piece discusses the concept of combining two risky asset classes, commodities and equities, to actually reduce overall portfolio volatility.

Relative Strength

An introduction to relative strength investing which includes information about the basic premise supporting the theory, as well as the actual practice of portfolio construction.

Relative Strength Environments

An analysis of the sectors within the S&P 500 from a correlation perspective. The piece discusses the pre- and post-financial crisis periods and illustrates a timeline of events that may have created a challenging environment for trend-following strategies.

Relative Strength Turns

Explains the cyclical nature of relative strength investment models by illustrating the historical performance compared to the overall equity market (S&P 500). Discusses the potential for relative strength to outperform (known as “RS Alpha”), but often does so with upward and downward trend periods.

Risk Management

This piece explains standard deviation, a commonly used statistical measurement for risk. It also provides some perspective on the historical price movements of stocks and bonds relative to investors' risk tolerance.

Tactical Beta

Discusses the potential benefits of tactical investment strategies by increasing and reducing exposure to various asset classes at different times in an attempt to enhance potential returns and reduce the impact of short-term fluctuations.

Tactical Diversification

Tactical investment strategies and diversification are two terms that often seem contradictory, but may actually complement one another when added to a portfolio.

The New 60/40

In order to account for ever-changing risk environments, portfolio modeling should include a tactical element, which can add an extra level of diversification. Rather than relying on a static 60%/40% allocation to stocks and bonds, "The New 60/40" asks investors to consider blending a 60/40 mix of traditional assets with tactical and alternative strategies.

Three Legged Stool

This Dorsey Wright Insights illustrates a portfolio management strategy known as The Three Legged Stool which combines a core portfolio of tactical and alternative mutual funds with three active management strategies.

Value and Momentum

Many investors believe that the way to diversify a value-based strategy is to add a growth strategy. However, growth can contradict value. Adding growth has the risk of reducing the effectiveness of a value strategy in the first place. This piece makes the case for using a momentum strategy, such as relative strength, to complement value.

 
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