The new bailout agreement for Greece comes at a time when manufacturing is slowing throughout Europe, raising fears of a region-wide recession.
If you're a private wealth advisor, please join Advisors4Advisors (A4A) to get its full benefits.
Register now, and we will donate $20 of our $60 membership fee to Bubbles The Clown’s financial literacy program, and you can post an icon on your website saying you support Bubbles' 501(c)3 charitable organization.
Plus, get other membership benefits, including:
Analysis daily of issues affecting advisors
Aggregation of news from dozens of sites targeting wealth managers
Reviews by advisors of practice management applications
30 independent experts blogging on advisor business issues
24/7 access to webinars with 50 hours of CFP® CE and 100 hours of IMCA CE
While avoiding the region may be the most prudent step for most, some investors may be interested in companies with stock prices that appear to be depressed due to the debt crisis.
Morningstar Inc. searched for actively managed funds run by value-oriented stock-pickers tilting more heavily toward Europe than the related index.
The company named Oakmark International (OAKIX) and Tweedy Browne Global Value (TBGVX) as promising funds that meet the criteria. Oakmark is up 15% so far this year, and Tweedy Browne has beaten its category average by at least four points for four straight years.
Investors are placing more money with direct-investment firms such as Fidelity Brokerage Services, The Vanguard Group Inc., Charles Schwab & Co. and TD Ameritrade Inc. Many of these investors also have relationships with financial advisors, who may not know about the outside accounts.
If you're a private wealth advisor, please join Advisors4Advisors (A4A) to get its full benefits.
Register now, and we will donate $20 of our $60 membership fee to Bubbles The Clown’s financial literacy program, and you can post an icon on your website saying you support Bubbles' 501(c)3 charitable organization.
Plus, get other membership benefits, including:
Analysis daily of issues affecting advisors
Aggregation of news from dozens of sites targeting wealth managers
Reviews by advisors of practice management applications
30 independent experts blogging on advisor business issues
24/7 access to webinars with 50 hours of CFP® CE and 100 hours of IMCA CE
Assets placed with direct-investment firms rose 19% between 2008 and 2010, compared with a 14% increase in traditional accounts with financial advisors, according to Cerulli Associates Inc.
While the $3.7 trillion total in direct-investment accounts remains far less than the $12.5 trillion in advisor channels, it’s a growing piece of the pie.
The direct-investment firms have widened the range of clients they serve by adding higher-quality financial advice to their services.
“The platforms are becoming more advice-driven," Katherine Wolf, associate director at Cerulli, told InvestmentNews. “And that's where we see the threat to the advisory model.”
That advice tends to be highly standardized, allowing advisors to continue to offer far more personalized advice and services. Even so, some investors who already have advisors want to self-direct a portion of their assets for various reasons.
Target date funds are difficult to evaluate because they gradually reduce risk, i.e. equity exposure, through time. In evaluating these funds, therefore, two questions are relevant: What is the “right” amount of risk at a point in time, and has that risk been rewarded?
If you're a private wealth advisor, please join Advisors4Advisors (A4A) to get its full benefits.
Register now, and we will donate $20 of our $60 membership fee to Bubbles The Clown’s financial literacy program, and you can post an icon on your website saying you support Bubbles' 501(c)3 charitable organization.
Plus, get other membership benefits, including:
Analysis daily of issues affecting advisors
Aggregation of news from dozens of sites targeting wealth managers
Reviews by advisors of practice management applications
30 independent experts blogging on advisor business issues
24/7 access to webinars with 50 hours of CFP® CE and 100 hours of IMCA CE
At least you would think that these would be the important questions. The reality is that few questions are asked when choosing a target date fund, because most advisors select their bundled service providers without vetting them.
Fidelity, T. Rowe Price and Vanguard own 75% of this $400 billion industry, which would be just fine if there were no better choices. But there are.
The following scorecard compares and contrasts the risk-reward results for the “Big Three” to each other and to an alternative – the SMART Funds®. SMART Funds dominate with higher returns and less risk.
SMART Funds are collective investment funds (CIFs) from Hand Benefit & Trust in Houston. The benefits of CIFs are competitive fees (SMART institutional funds are 58 basis points all in) plus the trust company serves as a fiduciary to the 401(k) plan, unlike mutual funds.
SMART Funds use the patent-pending Safe Landing Glide Path® that integrates the tenets of Modern Portfolio Theory (MPT) with the disciplines of Liability Driven Investing (LDI), emphasizing safety at the target date. Other target date funds are far more aggressive at the target date, averaging 40% in equities versus the Safe Landing Glide Path’s 5%.
There is no fiduciary upside to taking risk at the target date – only downside.
At longer dates, the Safe Landing Glide Path equity allocation is similar to other glide paths except the risky asset allocation is substantially more broadly diversified, encompassing global stocks, bonds, commodities and real estate.
So here’s what we see in the past five years, and what we expect to see going forward. Near-dated SMART funds have outperformed in the past five years because of their rigorous risk controls. In normal (positive) stock market environments, near-dated SMART Funds will lag in performance. This is the opportunity cost of emphasizing safety near the target date.
Longer-dated SMART Funds have outperformed in the past five years because of their broad diversification, and we expect this to continue into the future.
The usual risk-reward trade-offs will apply to all SMART Funds, so we expect that the reward-to-risk ratios of the SMART Funds will dominate those of the industry at all target dates. We also think that over a full market cycle the longer-dated SMART Funds will continue to dominate the industry on both a return basis and a reward-to-risk basis, because of the broader diversification employed by the SMART Funds.
There are better target date funds. Please see our humorous video at Satire and Bloomberg’s report at Bloomberg.
John Bogle, founder of The Vanguard Group Inc., believes stocks will outperform bonds over the next decade and turn in an average annual return of 7%. Just don’t invest in stocks through exchange-traded funds, he advises.
If you're a private wealth advisor, please join Advisors4Advisors (A4A) to get its full benefits.
Register now, and we will donate $20 of our $60 membership fee to Bubbles The Clown’s financial literacy program, and you can post an icon on your website saying you support Bubbles' 501(c)3 charitable organization.
Plus, get other membership benefits, including:
Analysis daily of issues affecting advisors
Aggregation of news from dozens of sites targeting wealth managers
Reviews by advisors of practice management applications
30 independent experts blogging on advisor business issues
24/7 access to webinars with 50 hours of CFP® CE and 100 hours of IMCA CE
The fact that investors can trade the funds intraday leads to poor decisions such as buying high and selling low, Bogle said at the Bloomberg Portfolio Manager Mash-Up in New York. He also objects to the proliferation of ETFs because it makes it more difficult for investors to choose the right funds.
Of course, part of your job as an advisor is to counsel clients against emotional investment decisions and frequent trading, and to choose the funds that are right for them. But as more individual investors choose ETFs, the cumulative effect of increasing trading activity may impact overall results.
In the meantime, Bogle said he believes bond yields will remain fairly low and stock should benefit from a strengthening U.S. economy over the next 10 years, perhaps with some “bumps along the way.
The market bottomed three years ago and has jumped 21% on an annualized basis since that time. That means capital gains distributions could be on the horizon, at the same time the long-term capital gains rate is slated to go up to 20% for many investors next year.
If you're a private wealth advisor, please join Advisors4Advisors (A4A) to get its full benefits.
Register now, and we will donate $20 of our $60 membership fee to Bubbles The Clown’s financial literacy program, and you can post an icon on your website saying you support Bubbles' 501(c)3 charitable organization.
Plus, get other membership benefits, including:
Analysis daily of issues affecting advisors
Aggregation of news from dozens of sites targeting wealth managers
Reviews by advisors of practice management applications
30 independent experts blogging on advisor business issues
24/7 access to webinars with 50 hours of CFP® CE and 100 hours of IMCA CE
There are several ways fund investors can begin taking taxes into account, says Christine Benz, Morningstar's director of personal finance. Bond-fund investors can shift assets toward tax-free municipal bonds, for example.
“Index funds and exchange-traded funds that track broad market segments also tend to be naturally tax-efficient and are therefore good bets for investors looking to limit capital gains distributions from the holdings in their taxable accounts,” she writes.
Benz also identified some high-performing tax-managed funds, naming Vanguards’ suite of tax-managed funds her favorite.
For investors who are looking for tax-managed funds in the mid-cap category she singled out Buffalo Mid-Cap (BUFMX), and for those seeking a contrarian strategy she recommends Primecap Odyssey Stock (POSKX).
