How an independant investor can benefit from markets' trends to increase their pension while managing risk.
If an investor has an initial wealth
and they wish to pay themselves a coupon
regularly, they can increase the value of that coupon by investing on the ETF markets. However this not immune to risk and the odds of loosing money are not zero (by far).
In this work, a methodology is derived to compute a coupon value based on expected revenues from investments in ETF. The methodology is simple and takes into account the risk aversion of the investor.
As their potential wealth increases with the risk they take (left image), their negative outcomes do too (right image)!
Refer the full note about it for more details about the theory. Scripts available in the folder bearing the same name.
The above references an opinion and is for information purposes only. It is not intended to be investment advice. Seek a duly licensed professional for investment advice.