In this month’s video, I look at key trends developing in global stock and bond markets. Chart review includes analysis of large-cap, small cap, emerging market, high yield, interest rates, and gold prices. Observations of risk and reward are noted throughout with an emphasis on caution for new money at this phase of the rally in stocks. Recorded on March 7, 2017.
Many investors are familiar with the GARP acronym, which stands for Growth At A Reasonable Price. The basic definition is to uncover stocks with reasonable fundamentals (undervalued) that have sustainable growth potential. The methodology seems sound and is essentially a way of saying – don’t chase price simply for the sake of recent performance.
On the flip side of that ideology is a perilous path that I have seen many investors tread in recent years. I call it “Yield at Any Price” or YAAP. Read more
A reader recently sent me a question asking why you would own a bond fund when interest rates are on the move higher. This type of sentiment is more than likely on the minds of many investors as they prepare for 2017 and evaluate adjustments to their asset allocation.
The short answer is that every diversified portfolio should have bond exposure to balance out the risk of other asset classes – i.e. stocks and commodities. Bonds have historically provided a shock absorber for the equity side of the portfolio and have not shown any signs of relinquishing that trait. Simply letting go of all your bond exposure will unnecessarily tilt your risks and returns towards a single outcome. Read more
Income investors are typically comforted by the reliability of monthly dividends. This consistent stream of payments is common among bond funds as a steady source of passive income. However, there are much longer gaps in the cash flow cycle from the majority of stock-focused ETFs that pay quarterly dividends. This creates a lumpy pattern over the course of a calendar year that may be inconsistent with fixed budgets and other financial projections.
Fortunately, there are a variety of stock-focused ETFs that have set out to solve this issue by declaring smaller monthly payments rather than larger quarterly deposits. This creates a smoother flow of income and allows for easier forecasting of spendable portfolio yield. The following list of funds are some of the larger and more established offerings in this group.
The fear trade has been one of the most successful avenues for investors to take part in this year. Treasury bonds, gold, utilities, consumer staples, and REITs have all been a big contributor to outsized gains versus a traditional basket of diversified stocks and bonds. These sectors are well-known defensive plays that tend to perk up during periods of duress in stocks or as interest rates fall. They are also beloved by income investors as a meaningful pickup in yield versus a conventional Treasury bond or S&P 500 Index fund. Read more