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This month’s blog post mentions my comment and goes on to explain the workings of the NASDAQ 100 strategy. I agree with pretty much everything but the last bit.
“In other words the LI Nasdaq 100 strategy model is created as a whole portfolio allocation model.”
The NASDAQ 100 strategy is generally a 60/40 stock/bond portfolio. The problem is that having your equity side populated with only four stocks exposes the portfolio to too much event risk. Imagine your chip stock fabrication plant burns down or one of your stocks posts a big negative earnings surprise. This will have an outsized effect on your portfolio value. Compare that to even a leveraged index approach for your equity. If you hold a 2x SPX etf, the misfortune of any one name will have almost no effect on your portfolio because you have diversified away that event risk.
It was otherwise a good blog post.
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