A Look at Some Alternative Ways to Manage Risk

By Jack Forehand, CFA The 60/40 portfolio gets a bad rap. It seems like there is a new article or study every week talking about its weaknesses or outlining why it no longer makes sense in the current market environment. But despite all of this, it has just kept rolling along and doing exactly what it is supposed to do. Even with bond yields at very low absolute levels coming into this crisis and many… Read More

Learning from the Hierarchy of Investor Needs

By Justin J. Carbonneau (@jjcarbonneau) —  The original “hierarchy of needs” model was developed by Abraham Maslow in 1943. Maslow proposed the hierarchy as a way to understand human motivation and later extended it to human curiosity. The hierarchy can be viewed as a pyramid with layers, which included things like “physiological,” “safety,” “belonging and love,” “esteem,” and “self-actualization”. Each part builds off the one below, and before one could move up the pyramid the… Read More

Funds Could Boost Expected Rates of Return

Fiduciaries may be overlooking a “very simple and lucrative source of expected returns,” according to a recent article in Chief Investment Officer. The article explains how fund return forecasts are based in part on Strategic Asset Allocation (SAA) by projecting a static SAA for a given level of risk. But market movements cause a portfolio to “drift around its SAA, so when approving an SAA policy, a board also approves allowable policy ranges before a… Read More

Put Cash Back in Your Portfolio

It’s time to consider putting cash back into your portfolio, according to a recent article in The Wall Street Journal. “The value of cash was demonstrated in the first quarter,” the article reported, adding that both stocks and bonds lost money during that period for the first time since the failure of Lehman in 2008. Cash and “near-cash” products, the article points out, have three properties that should appeal to investors at the moment: an… Read More

The Two Most Important Investing Decisions

By Jack M. Forehand (@practicalquant)  —  There are so many interesting things to debate in investing. The active vs. passive debate has been the subject of more articles than I can count. Although the conclusion that most people should invest passively is clear, there are many nuances to it that continue to be debated every day. And for those people that do decide to be active, there are a variety of decisions that come along… Read More

It’s Time To Get Into The Rebalancing Act

By John P. Reese — If it ain’t broke, don’t fix it can be a useful mantra in many walks of life, but investors should be wary when applying this idea to asset allocations. Movements in the market can shift allocations and result in concentrations that might not necessarily fit your risk profile and/or investment goals. Suppose, for example, you create a portfolio comprised of 60% stocks and 40% bonds. If stocks see a period of… Read More

Fund Manager Holds Cash in Anticipation of North Korea-Prompted Selloff

AMP Capital’s Nader Naeimi, who heads one of the firm’s dynamic investment funds, has about 30% of his holdings in cash, according to a Bloomberg article from earlier this month, and sees North Korea situation as “one of the factors that could eventually bring down the long bull run in equities.” In addition to his cash holdings, Naeimi has “an allocation to gold and is short emerging-market currencies versus the dollar. His fund has beaten 77… Read More

Investors Should Imagine Pain to Evaluate Asset Allocation

While market worries abound, a recent article in The New York Times argues against trying to predict when the bull market will end or making trades based on those predictions. It adds, however, that there are those who “deserve to worry at any particular moment: those who will need most or all of their investment money soon.” It’s difficult to know, the article says, how much is the right amount to have invested in stocks… Read More

Singapore’s Sovereign Wealth Fund Warns Investors About Looming Market Risks

Singapore sovereign wealth fund GIC is warning investors that low readings in the market’s “fear gauges” could be signs of trouble down the road, according to aBloomberg article from earlier this month. One of those gauges, the VIX, is reported to have recently hit the lowest level since 1993, even lower than those seen in 2007. GIC’s chief executive officer Lim Chow Kiat says that the level of uncertainty is “very high” versus the low… Read More

Forget Asset Allocation, says Glenmede’s CEO

Stock-picking is still in vogue with Gordon Fowler, CEO of the $24 billion Glenmede Trust fund. A recent Barron’s article describes the process employed by his team. “Every morning, Fowler assembles his wealth advisory group simply to brainstorm about individual stocks and come up with smart client moves.” According to Fowler, deep analysis of equities makes more sense than picking broad asset allocations. “In this environment,” he says, “stock mispricings are bound to arise, and… Read More