Uneven Growth

By | 2018-03-27T08:31:11+00:00 March 27th, 2018|Global Market Update|

What do you do when your portfolio becomes lopsided? Photo: Alan Murray-Rust. Source: Geograph That’s the challenge that a lot of investors are facing. Facebook and Amazon and the other growth darlings have done so well for so long that they now represent an oversized position in many portfolios. It’s a simple matter of mathematics: If a holding in a 20-stock portfolio doubles in a single year while the rest of the portfolio remains stable, it’s weighting in the portfolio roughly doubles. If that [...]

Balancing Act

By | 2018-01-29T07:22:36+00:00 January 29th, 2018|Global Market Update|

How often should we rebalance our portfolios? Photo: Alberto 1412. Source: Wikimedia Many people have balanced portfolios. And it’s a good idea to divide our assets between stocks, bonds, real estate, and cash. You never know what’s coming up next. But when one asset grows or shrinks a lot compared with the others, our portfolios can begin to look out of balance. When should we even things up? Rebalancing a portfolio is generally a good move. It forces us to sell assets that have [...]

Letting Profits Run

By | 2017-08-30T05:58:43+00:00 August 30th, 2017|Global Market Update|

“Let your winners run, and cut your losses quickly.” – Jesse Livermore Ancient Greek Runners from a pottery shard. Public Domain. Source: Wikipedia This is pretty good advice when it comes to investing. The legendary investor Jesse Livermore coined this “trading commandment” a century ago. But it’s hard to put into practice. Studies show investors fear losses more than they enjoy winners. When a stock goes up we take the gain, often too early, in order to eliminate the risk of losing it later. [...]

Postmodern Portfolios

By | 2017-07-17T12:21:37+00:00 November 28th, 2016|Global Market Update|

What’s the best way to hit your investment target? Photo: Eddi Laumans. Source: Wikipedia There’s a school of thought that says people are basically the same: apart from our individual quirks, we all want a little income and a little growth from our investments. So we should combine a balance of stock and bond funds together to have a low-cost, broadly-diversified portfolio. There’s a lot to be said for this: it’s cheap and it gets people started on the investment process. And people usually [...]

Consider the Alternatives (Part 1)

By | 2017-07-17T12:21:45+00:00 August 30th, 2016|Global Market Update|

What are alternative investments? Duck-billed platypus, an egg-laying mammal. Photo: Klaus. Source: Wikipedia Alternative investments are assets that don’t fit into the normal asset-class categories of stocks, bonds, or cash. They include private equity, hedge funds, managed futures, collectables, commodities, and so on. They’re related to the standard asset types, but they have a slightly different twist. So physical gold is an alternative investment, while gold mining company stocks are not. Real estate is an alternative investment; Real estate investment trusts that trade on [...]

Confessions of a Closet Quant

By | 2017-07-17T12:34:14+00:00 September 25th, 2014|Global Market Update|

“Where you stand depends on where you sit.” Photo Credit: Hans Neleman This observation can be applied to management, politics, or investments. I got into this business from the bond-side; I was a bond analyst and Treasury Note trader for a mid-sized bank before I became a portfolio manager. Bonds are math-y things: the maturity date, call date, coupon rate, yield to maturity, and settlement details all affect the price in different ways. […]

Liquid Illiquidity

By | 2014-09-18T09:51:27+00:00 August 11th, 2014|Global Market Update|

Will ETFs be part of the next crisis? ETF investing is taking over the investing world. In the last 15 years the product has gone from a curiosity with a few generic funds to a major investment alternative. There are now over 1500 funds traded in the US with over $1.7 trillion in assets. Investors can use ETFs to gain exposure to stocks, bonds, commodities, and futures in various countries, regions, and sectors. ETFs offer diversification, transparency, and tax-efficiency. One of their most attractive [...]

Building Finance?

By | 2014-09-18T09:55:54+00:00 July 25th, 2014|Global Market Update|

What is investing like? Many people believe that modern finance began in 1952 when Harry Markowitz published his paper, “Portfolio Selection,” for which he was later awarded the Nobel Prize. His work lays out the mathematical basis for diversification. By combining uncorrelated securities, investors can reduce the riskiness of their portfolios without lowering returns. But Markowitz had a problem. When he sat before his dissertation committee to defend his thesis, they didn’t know how to classify his work. “It’s not economics,” they objected. “It’s [...]

Balanced Beaming

By | 2014-01-09T11:01:54+00:00 January 9th, 2014|Global Market Update|

Is it time to rebalance? Most of us believe in balance. In sports, a balanced stance keeps you ready for the next point. In conversation, a balance between listening and speaking keeps both you and your friend engaged. And a balanced diet means that a mix of protein, fats, and carbs can give you the energy and nutrients you need. So it makes sense that a balanced portfolio will help financially. A mix of domestic and international stocks, bonds, and cash—tailored to your specific [...]

Building For The Future (Part 7)

By | 2013-02-26T10:15:53+00:00 February 26th, 2013|Global Market Update|

Home maintenance isn’t on most people’s list of favorite things to do, but without scheduled upkeep, bad things happen. Hot water tanks rust, roofs leak, painted walls start peeling, and your shiny new home begins to look tired and frayed around the edges. In the same way, an investment portfolio needs to be maintained if it is to continue to meet your needs. There are two major forms of adjustment to an investment portfolio: strategic and tactical. Strategic adjustment has to do with you--you [...]