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Exchange-Traded Fun!
This week, we take a lighthearted look at Exchange-Traded Funds. ETFs are mutual funds that trade on a stock exchange. ETFs are rapidly taking a bite out of the business long dominated by traditional "open end" mutual funds - the investment in a basket of securities with a common characteristic, such as industry, company size, geographic region, etc.
The 5-Year Itch
The financial media is filled with historical comparisons to past periods. Despite the fact that all mutual fund companies and financial advisors are obligated to warn that past performance is no guarantee of future results, it is human nature to look for clues as to when history may repeat itself. As the famous quote goes, those who ignore history are doomed to repeat it. What prompted this week's blog, is the most uncanny, shocking and truly creepy numerical coincidence I have seen in some time...or perhaps ever.
Sameness
The start of each year is full of market predictions from investment strategists. I tend not to get too caught up in that (it is one of the benefits of being an independent firm ? no one is compelling us to provide one!). Not wanting to get lost in the sea of 2014 market predictions, we now take a look back at the seven-week mark of the year?when many of these predictions are already out of the news cycle.
Many Reasons for Rates to Rise
There are a number of scenarios and events that could cause rates to rise in the next several years. Increasing economic growth in the United States would mean that the Federal Reserve no longer needs to keep market interest rates artificially low. Central banks around the world have been buying debt to spur economic activity, with mixed result at best. When there is no longer a need to purchase more debt, the massive, coordinated demand for that debt will fall. And when that happens... uh-oh.
Knockout Punch for the Stock Markets?
Boxers are tough. So are secular bear markets. Whether or not we have been in one since back in 2000 (we say yes) is a subject of constant debate in the investment advisory industry. What is more important to investors today is whether past market behavior tells us anything important about the current environment? We think the answer is yes - human behavior repeats itself over and over again.
A Grim Intermediate Outlook for High-Quality Bond Returns
Rates have been steadily falling since the 1980s. A simple "reversion to the mean" in which rates rise toward their long-term average (the average 10 year U.S. Treasury rate since 1926 according to data sourced from the St. Louis Federal Reserves website) would mean that rates would rise to about 5%. Thats almost a 2% increase from where we are right now. We suspect that would be more than enough to spur a dramatic change in investors attitudes toward bond investing, and to increase interest in viable alternative strategies for retirement income.
Hedged-Dividend Investing: The Debate Starts
Lively debate is common in our business and it existence promotes exactly what investors are looking for - flesh and blood people who can do the research for them, the planning with them and be willing to stand by their beliefs and act in their clients best interests.
Gold in the Toilet?
I am not debating that gold can be a very good investment over some periods of time. But perhaps these events bear watching to see if gold regains its luster or fades down to a level that would plunge it further into the investment markets version of the toilet. Gold is now about a break-even from four years ago and its price is sitting near a long-term "support level" price last reached over the summer of 2013. The next few months should be interesting ones.
Strategies for a Runaway Market (year-end edition)
It seems to me that the best advice for the upcoming year as an investor is "dont anticipate what will happen, just balance reward potential and risk potential for each client situation and be ready for anything." This is very similar to the feeling the surrounded markets in 1999 just before the dot-com bubble burst, and again in late 2007 when the credit crisis started to become more widespread. So, here is my advice for those investors and financial advisors who wish to start getting mentally ready for surviving 2014.
Hedged Dividend Investing: The Best Strategy You've Never Heard Of?
Our industrys challenge: How to deal with that via creation of intelligent investment strategies that allow advisors and their clients to follow through on their desire to skirt both the bond and stock bubbles of the future, while still striving for a competitive yield for their retirement portfolios.
Red Shoots? Amid the Holiday Cheer, is a Market Peak Brewing?
I dont see imminent signs of a rough market, but it does appear that some "red shoots" are not forming. FYI, a red shoot is a term I just made up. Whereas a "green shoot" is a piece of good news in an otherwise difficult economic environment, I define a red shoot as a piece of potentially bad news among a sea of green stock market profits.
"Fixed" Income Investing is Broken
Back in June of this year, the Fixed Income (a.k.a. bond) market may have experienced the defining moment of this generation of investors. The yield on the 30-year U.S. Treasury bond moved above 3.50% for the first time since the summer of 2011. It stands at about 3.80% now. After many fake-outs, this could be the start of a long-term trajectory higher.
50 Years Later: JFK and the Misery of Rising Interest Rates
On the 50th anniversary of one of the most tragic events in U.S. history, I took a quick look back at investment market history around that time. As it turns out, the stock and bond markets had done quite well in recent years and by mid 1963, the 10-year Treasury was a bit under 4% (around the lowest rate in about a half-decade) and the stock market was near its all-time high. Whether it was a direct result of the calamity of Kennedys death or other factors, late 1963 was a turning point for the U.S. stock and bond markets.
Schwab Impact Conference 2013 - Finally! Some Good News from D.C.
Earlier this week my wife (who doubles as Sungardens Director of Operations) joined me for three days in Washington D.C. at the Schwab IMPACT conference for investment advisors. To me, this is the biggest show of the year in our industry and the Capital edition continued the traditional mix of new ideas, networking and a feeling at the end once described by David Letterman as Im tiredbut its a nice kind of tired. Here are some brief highlights and what I think the implications are (if any) for what we are doing for our clients now and in the times ahead.
Asset Allocation: Pie in the Face?
The typical approach to spreading ones assets in order to diversify and conquer, is to have the client complete a risk tolerance questionnaire. That survey is important not only to establish guidelines for how the assets will be managed, but also because some form of it is required by securities regulators to make sure advisors know who their clients are. The magical conclusion usually includes a color pie chart, representing a variety of asset classes that are assumed to be a path toward asset growth and preservation of capital.
The Top 10 Investor Worries Right Now
In the first of a regular series in my Informed Investing blog, lets count down the top 10 things that give investors the willies in todays investment environment. These are situations known to even casual investors, but may or may not be communicated to them effectively by their financial advisors.
Portfolio Turnover: What Industry “Experts'' Are Missing
Drawing conclusions about tax efficiency of a money manager or other investment vehicle based solely on trading turnover is shortsighted and can cause you to bypass some very good potential investments and investment strategies. Keep that in mind as year-end portfolio tax planning rolls around.
Is Your Portfolio a Five-Tool Player?
In baseball a 5-Tool Player is one who has high-level abilities in these areas: hitting for power, hitting for average, running, fielding and throwing. 5-Tool Players are a special breed, and teams covet them. I have identified 5 tools a premier investment approach should have in order to be successful in our arena, the achievement of client goals and growth of advisory practices.
Accidental Speculation
When markets get tied in a knot over an issue like the debt ceiling, its helpful to break down investors decisions about how to handle it in their portfolios. Whether it is an investment in foreign currencies, shorting the stock market, selling everything or some other investment strategy that comes complete with a perceived safety net, its tough for investors to manage their emotions and the mixed messages they get from the media.
Ten Other Things that Should be Shut Down
In order to avoid getting too P.O.d (thats either a slang term for angry or a pun on the Post Office, take your pick), I asked the Sungarden investment, operations and marketing teams to provide me with their opinions on what else to shut down. I combined their thoughtful work with my own thinking on the topic and here is our top 10 list.
A Sensible Way to Evaluate Your Investment Performance
I recommend using at least two benchmarks for each portfolio or portfolio strategy: One based on the portion of the S&P 500’s volatility that the client is prepared to endure over time. The other is the S&P 500 Total Return Index as this has become, over time, a very common and recognizable indicator of performance of “the market.”
Investment Reality as Told Through the Most Interesting Man in Baseball
You probably havent heard of Greg Dobbs. If you have, you are either a big Major League baseball fan, a casual fan of the Miami Marlins baseball team, or you know Greg Dobbs personally. He is a solid Major League player, but will not be mentioned alongside Ruth, Mays and Ripken. He is a great team player, a great media interview and was briefly featured on a national TV program last year as the most interesting man in baseball, a moniker given to him by one of his teammates.
Having "The Talk" About Time Horizon
Volatile markets, increased complexity and media hype have the potential to distract us from our true objectives for the wealth we have saved and now invest. But those distractions can be overcome. How? It starts with understanding what this often-used, misunderstood term Investment Time Horizon really means.
Survey Says... What?
During the past week, a survey caught my eye and dropped my jaw. It was published in Investment News, a leading online and print publication for the investment advisory industry last weekend. It covered a survey of individual investors by brokerage firm Edward Jones about the potential impact of rising interest rates on their investment portfolios. According to the article, written by award-winning columnist Jeff Benjamin, “two-thirds of the respondents don’t understand how rising rates will affect their investment portfolios.”
As Seen On TV
For years I have been asked what I think of financial television. My typical response: reporters and entertainers are not fiduciaries. That is, they are not in the business of making you more successful. They are in the business of driving higher rates for advertising dollars for the network. Thats the game, thats it.
Your "Needy" Friend
You may have one. If you do, you know. A friend who is a joy to have in your life and you know that your world would be a bit less happy if they were not in it. But they are also one that needs a lot from you. Attention, advice, help with moving, your opinion on which dog to take home from the sheltermaybe even money.
Macro View...In Microwave Time (Part 1 of 2)
In todays sound-bite, tweet-driven world, one cant help but do all they can to keep it simple, keep it brief and resist the temptation many of us Baby Boomers have to fall prey to paralysis by analysis. With that spirit in mind, here is a quick, pointed update on the 13 key points for investors I laid out in an article in RIABiz.com on January 14 of this year. These were and are the most significant data and forces for investors to track today, to pursue long-term growth and sidestep major losses.
Macro View...In Microwave Time (Part 2 of 2)
Todays blog post picks up where last weeks left off by updating the 13 key points for investors I laid out in an article in RIABiz.com on January 14 of this year. These were and are the most significant data and forces for investors to track today, to pursue long-term growth and sidestep major losses. As I did last week, I will also note whether I think each point is a positive or negative (or other) for investors now that we are about 3/5 of the way through 2013. The six areas covered last week were generally positive. Lets see about the final seven on the list
The Dirty Side of the Storm
The implications are enormous. But dont tell that to the bond fans. They are still showing their clients 3/5/10 year historical returns through the end of 2012, where most measures of bonds total return resembled that of a stock portfolio. This was a fortunate reality for those who were invested heavily in bonds, but it is a mirage for those who are looking forward from here. They dont realize it, but they are currently in the eye of the storm. The dirty side is probably right behind it.
Risk Tolerance: Defining a Misunderstood Term
First, lets be clear: Risk is the possibility that you will need money but dont have it, either because your portfolios value plunged, because your investments dont have near-term liquidity, or both. What freaks investors out in the here-and-now is VOLATILITY. Yet many traditional approaches to building a portfolio dont really account for this, other than a token survey question or two when the client is first starting to invest.
Global Markets at Mid-Year
Most investors based in the U.S. are walking around thinking the market has gone way up this year. They are rightif they are talking about certain indexes within a big wide world of markets, including stocks, bonds, currencies and commodities. But the disparity (i.e. lack of correlation) among markets has been striking. I think that the best way to convey this to you is to simply show you how a small group of market indexes have done for the year-to-date yesterday along with brief commentary, in bullet point form.
Volatility Management: The Key to Investing in the 21st Century
Volatility Management is the most important consideration in our portfolio management process. In some market environments, we think investors are well-compensated for the risks they take. In others, they are not. Thus, volatility can be either a warning sign or a gateway to outstanding opportunities. It is part of an investment managers job to decipher that for you, on an ongoing basis, and make rational decisions.
Every Drunk Must Have His Drink
So, is this the moment to sell all of your assets and hide? NO, but it certainly is a time to be aware of the psychological change taking place in investor behavior and to have an investment approach that by its nature is adaptable to such enormous changes in investor perception. I get a strong feeling we are entering another period in which, like the economy, some investors and financial advisors will thriveand others will dive. Are you prepared?
"Fixed" Income Investing Is Broken
Herb Brooks, who coached the 1980 Miracle on Ice U.S. Olympic Hockey Team to its unlikely win over the Soviet Union, included that quote as part of what I consider to be the best motivational speech in sports history. He was talking about his team and their Russian opponents. He might as well have been talking about bond investors on June 20, 2013.
Submerging Markets: What the Emerging Market Selloff is Telling Us
Investing at its most basic level is about one thing: the return you seek on your investment and the risk you take to get that return. I often emphasize that the biggest risk to investors is volatility, because its the occasional shakiness of markets or market segments that causes investors (whether they manage their money or have someone else do it for them) to react emotionally instead of logically. That plays out every day in markets around the world.
Dad's Rules: Timeless Wisdom From a Fallen Investment Hero
Once I publish a blog post, I immediately start thinking of a topic for the next one. At this time last week, I decided to focus todays blog on the concept of trading turnover that is, how long you hold something you bought, until you sell it. It seems that with the stock market on a four-year tear and the bond market threatening to fall apart at any moment, it is a great time for investors to prioritize the most basic investment rule: buy low / sell high.
Where the Heck Are We?
The current investment market climate reminds me of a scene from the old TV sitcom F-Troop. U.S. soldiers ask their Native American friends, the Hekawi tribe, how they got their name. As Chief Wild Eagle, the Hekawi leader, said back then (paraphasing: many moons ago, Tribe travel west, then come big day tribe fall over cliff, that when Hekawi get name. Medicine man say I think we lost. Where the heck are we?
The Retirement Income Problem
The most vital and pervasive issue investors will face in the next decade is how to wring out enough income from the savings they have amassed to maintain or enhance their lifestyle. To do so, they will need to be far more flexible in their investment approach. They also must adapt to an environment for "high quality bonds" (Treasuries, Municipals and Corporates) that does not at all resemble that which they are accustomed to.
Fiscal Cliff vs. Jimmy Cliff: How the leap may look more like Y2K or the Mayan calendar
As "Cliff" makes his way from post-election debate to complete absurdity I did some research. As it turns out, many of the potential outcomes of the Fiscal Cliff in January are in sync with the titles of popular songs from this Reggae superstar Jimmy Cliff. No, I'm not a Reggae fan, but it was pretty funny when I looked it up and I think I can get some points across while writing something that will keep advisors into the holiday spiritbefore reality returns soon.
Meet Cliff
Oh, we had heard about Cliff. We were warned about this nefarious character many months ago. We knew he was lurking and we knew he was not going to just go away. Cliff had invited himself into our lives, and unless we dealt with him, he was not going anywhere. You, the hard-working financial advisor, have probably been wondering when everyone else would notice him. That time came when the sun came up Wednesday after the election. There he was, casting his extraordinarily long and potentially costly shadow. Fiscal Cliff finally entered the national spotlight. It is time to meet him.
5 Ways for Incumbent Advisors to Get -- And Keep -- Their Clients' Vote of Confidence
Obama and Romney are asking for four years to deliver results -- ask your clients for three. First, a brief disclaimer: Nothing in this article is intended to be politically motivated. OK, with that out of the way, let's talk about a most critical issue in our industry that is easily forgotten in today's madcap, have-it-now, sensationalized world: investment evaluation horizon.
5 Counterintuitive Reasons Why the Investment Vehicle of the the Decade is ... Stocks
These days there are more varieties and combinations of investments than selections on a Starbucks menu -- but that's not necessarily a good thing. Now, you can invest in emerging markets, dividend-paying stocks, bonds from Africa and commodities that only farmers and professional speculators used to traffic in. Heck, clients can even tell an advisor they would like a double-long, midcap equity ETF.
How 5 Seriously Overworked Buzzwords Can Come Between You and Your Client
In my experience, several investing buzzwords have done more harm than good for investors. While they are important concepts, they have been so commoditized by the financial planning industry that their true meaning has been misinterpreted. All the while, Wall Street firms have reaped the benefits by mass-customizing portfolio management. What started as a concerted effort to help investors has been reduced to a marketing pitch and investors keep falling for it.
Mid-year Market Review
After one of the most trying years for investors in 2011, the first half of 2012 had a similar feel. The split-personality of optimism about a slow but visible recovery in the U.S. and weekly do-or-die drama in Europe produced the type of half-year that, frankly, we expected. Specificially, a continued pattern of news-driven, unsustainable moves in both directions landed much of the U.S. stock market in a tight price range.
The 4 Biggest Investment Performance Myths - and How They Can Torpedo Advisor-Client Trust
In 26 years in the investment industry, I have seen investor and advisor behavior from many different angles: as an advisor, portfolio manager, strategist, author and proprietor. Two things have been quite consistent during that quarter-century: 1) That clients and advisors both care deeply about investment performance and 2) that investment performance is rarely evaluated with proper perspective.
Results 51–100
of 175 found.