The strong rise in the stock market, led by big gains in the financials, energy, and industrials sectors, has dominated the news recently. Dubbed by some as the “Trump Rally,” widespread anticipation of less regulation, lower taxes, and pro-growth policies have pushed major stock indexes to record highs. While the most aggressive, risk-on investors have reaped the full scope of these gains, the effects on the retirement and brokerage accounts of the average investor have been more moderate. The reason why is simple.
As the presidential election approaches, more and more articles are appearing with titles such as “Here’s How to Hedge Your Portfolio against a Trump Victory” and “How to Invest if Hillary Clinton Wins the Election.” Yet even in light of the unprecedented polarization surrounding this election cycle, prudent long-term investors should pay these theories no mind. Continue reading “How the Election Will (Not) Impact Your Portfolio”
The traditional certificate of deposit, otherwise known as the CD, has long been a popular instrument for savers to consider. Simply put, these products generally offer higher interest rates when compared to traditional savings accounts in exchange for a commitment of those funds by savers for a predetermined period of time. That said, Wall Street had taken to morph this basic CD into something that can yield, ahem, far different results. Why, then, has there been an uptick in interest over the last several years? Simple: investors have been starved for yield amid a record low interest rate environment!
(click to enlarge)
As a follow-up to our blog post from July 27, 2016 entitled The Perils of Investing In Leveraged Funds, we wanted to illustrate what has happened with two popular leveraged commodities ETFs. Continue reading “The Perils of Investing in Leveraged ETFs — Illustrated”
In the investing world, returns are always in demand, but the path by which investors pursue these returns can be very detrimental to a portfolio’s health. Leveraged funds, which have been around for two decades now, seek to beat the market returns of their unleveraged, index-tracking counterparts by essentially increasing the stakes of the bet through the use of derivative instruments. The idea seems straightforward, but the results are not always what investors expect them to be.
Factor investing, which revolves around an investment according to specific, pre-determined characteristics (“factors”), has piqued the interest of many in the investing world as investors hope they can finally beat the market on a consistent basis. According to MSCI.com, indexes can be constructed according to these six risk factors: Value, Low Size, Low Volatility, High Yield, Quality and Momentum. By doing so, factor investing combines simplicity, transparency, and the affordability of indexing with the irresistible prospect of “beating the market,” which explains its surge in popularity over recent years.
Since 2009, the efforts of the Federal Reserve and other global central banks to keep interest rates down have been an essential driver of the capital markets. With the Brexit news causing even more uncertainty and leading to a broad flight-to-quality, the historically low interest rates will probably stick around for some time.
Some deals might be too good to be true, and when it comes to investing, a healthy amount of skepticism is important in order to differentiate the deals from the duds.
With persistently low rates right now, yield-starved investors have been looking for more ways to boost their returns. The 10-year Treasury yield is hovering around 1.5%, and equities offering yields of 5% or more have become even more attractive in this environment as a result. Should investors just take the plunge then and expect a big return with these investments?
With great risk comes great reward – and it’s no different in the world of investing. Today’s investors are increasingly taking on more risk though, in the form of owning more stocks, in order to achieve a higher return on their investments. According to A Wealth of Common Sense, a blog by Ben Carlson, investors now own about as much stocks as they did at the market peak in 2007. Here are some reasons why investors are increasing the equity exposure in their portfolios today:
We’ll skip the fancy charts and graphs for this post to convey in a concise manner why we think you should avoid getting bit by the Gold Bug, even as the metal’s price has increased materially so far in 2016.