Tag Archives: radio

The Simplest And Most Effective Way To Build Your Own Investment Portfolio

Across the entire landscape right now, I believe Meb Faber has done more than anyone to bring some of the most important developments in asset management to individual investors. He has recently published a number of books that distill some of the secrets of the top investors in the world into easy-to-understand concepts that can be applied by even the most finance-phobic. The book referenced above, “Global Asset Allocation,” really tackles two major mistakes investors regularly make. First, most investors fall prey to “home country bias.” Because U.S. stocks are highly overvalued currently, based on their own history and against almost every other equity market on the planet, this is a real problem especially relevant to today’s markets. Second, while they may be well-diversified within certain asset classes most individual investors are not nearly well-diversified enough across multiple asset classes. This serves to create unneeded volatility in portfolios over the course of longer-term cycles. And unneeded volatility just makes it that much harder to stick to your plan when sticking to your plan may be single most important thing you can do. To demonstrate the value of greater diversification, I built the simple ETF allocation shown below based on the concepts in Meb’s book. I also compared it to the typical 60/40 portfolio along with one invested entire in U.S. stocks. Click to enlarge Charts via PortfolioBacktester.com Below are the backtested returns since 1973 (the first date PortfolioBacktester.com makes available). Notice that the returns are fairly comparable across all three but the more diversified portfolio (#1) greatly reduced your “worst year” and “maximum drawdown” when compared to the other two. Not bad, eh? Click to enlarge Charts via PortfolioBacktester.com Now this is not in any way designed to be specific advice. These are, however, terrific tools for individual investors to use in designing a portfolio allocation that suits their own unique goals and risk tolerance. Combine this with commission-free ETFs at places like Schwab, Vanguard and Fidelity and it amounts to an incredibly low cost and effective way to build your own investment portfolio and in a way that the greatest minds in the business would approve of. Many thanks to Meb for putting this all together. It’s very exciting to me to see that individual investors now have these sorts of tools, knowledge and opportunities that were previously only available to institutional investors. If you’re interested in learning more about this stuff, buy Meb’s latest book and you’ll get “Global Asset Allocation,” among others, for free.

The Timeless Wisdom Of Sir John Templeton

By Tim Maverick Sir John Templeton (1912-2008) may be gone, but he’s still remembered as one of the greatest investors of all time. For one, Sir John popularized the idea of investing globally for U.S. investors. He launched his flagship Templeton Growth Fund when most didn’t even think of investing outside U.S. borders . That pioneering fund racked up an enviable track record, returning an average of 13.8% annually from 1954 to 2004. To this day, many of Templeton’s timeless investing principles still apply. Indeed, some of his principles have shaped how I approach investing. Below are a few of them. They come courtesy of the Franklin Templeton website and the Templeton Foundation. #1: Buy Low Seems obvious, right? But in reality, many investors do the opposite. They chase hot sectors after dramatic moves higher. Sir John always scoured the globe for bargains. He told investors to buy when everyone else is selling, when things look darkest, when all the experts say a certain investment is too risky. Templeton advised us to “buy when others are despondently selling and sell when others are avidly buying.” He would often say, “People are always asking me where the outlook is good, but that’s the wrong question. The right question is: Where is the outlook most miserable? The obvious application of this concept in practice is to avoid following the crowd.” I wonder what Sir John would think of today’s market, where the elite tech and biotech stocks are loved and everything overseas and commodities-related is detested? #2: Invest for the Long Term Hand in hand with value investing is investing for the long term. Templeton said, “Experience teaches us that one of the most common errors in selecting stocks… is the tendency to emphasize only the most obvious factor – namely, the temporary outlook for sales and profits of the company.” In other words, ignore Wall Street’s emphasis on quarterly earnings reports. Too many investors spend too much time looking at the short-term market outlooks and trends. #3: Diversify Sir John didn’t believe that one specific investment is always best – although over the long term, stocks do outperform. More importantly, no one can predict the future. If you’re focused too much on one company, sector or country, your portfolio is at risk. Sir John advised us to diversify by risk, industry, and country. He would say, “In stocks and bonds, as in much else, there is safety in numbers.” #4: Learn From Past Mistakes Everyone makes mistakes investing, even Sir John. As he said, “The only way to avoid mistakes is to not invest – which is the biggest mistake of all.” Instead, Templeton advised us to not become discouraged by loss and especially not to take even greater risks and try to recoup our losses all at once. He believed that the difference between successful and unsuccessful investors is that successful investors learn from their mistakes and the mistakes of others. Relatedly, you should run for the hills anytime you hear someone on CNBC say it’s a new era or that it’s different today. According to Sir John, “The investor who says, ‘This time is different,’ when in fact it’s virtually a repeat of an earlier situation, has uttered among the four most costly words in the annals of investing .” #5: Don’t Be Overconfident In other words, always question your investment approach. Is it still valid? Sir John wrote, “Everything is in a constant state of change, and the wise investor recognizes that success is a process of continually seeking answers to new questions.” A great example of this is how much the investment climate has changed surrounding energy MLPs. Investors poured tens of billions of dollars into funds investing in the sector, only to see losses of up to 35% on some funds this year. Other Templeton Insights Of course, there are plenty more insights to be gleaned from Sir John’s vast experience. He wasn’t a fan of trading – “The stock market is not a casino” – or of index funds – “If you buy the same securities everyone else is buying, you will have the same results as everyone else. By definition, you can’t outperform the market if you buy the market.” He also gave other common sense tips for investors, such as remembering inflation and taxes when investing, doing your homework, and always monitoring your investments. If readers wish to look at a number of Sir John’s investing tips, here’s a link: Templeton Wisdom . Keep in mind that they were written in 1993, so some of the data is very outdated. The insights, however, are timeless. Original post

ETF Update: A Look Back At December And 8 Funds To Kick Off The New Year

Welcome back to the SA ETF Update. My goal is to keep Seeking Alpha readers up to date on the ETF universe and to gain some visibility, both for the ETF community, and for me as its editor (so users know who to approach with issues, article ideas, to become a contributor, etc.) Every weekend, or every other weekend (depending on the reader response and submission volumes), we will highlight fund launches and closures for the week, as well as any news items that could impact ETF investors. Recently, Zacks published a piece on the funds that launched in 2015 and gained in assets under management right away. They were the S PDR DoubleLine Total Return Tactical ETF (NYSEARCA: TOTL ), the SPDR S&P North American Natural Resources ETF (NYSEARCA: NANR ), the iShares Exponential Technologies ETF (NYSEARCA: XT ), the Goldman Sachs ActiveBeta Emerging Markets Equity ETF (NYSEARCA: GEM ) and the SPDR Russell 1000 Momentum Focus ETF (NYSEARCA: ONEO ). While all of these funds saw strong support from investors, none ended the year with positive returns. Overall, markets took a turn for the worse in end of Q3 and beginning of Q4 and had to spend the rest of the year climbing out of that hole (most sectors are still stuck). There were 23 launches in December and no closures for the month. December Total Launches Fund Name Ticker SPDR S&P 500 Fossil Fuel Free ETF SPYX MomentumShares U.S. Quantitative Momentum ETF QMOM SPDR Russell 1000 Momentum Focus ETF ONEO SPDR Russell 1000 Low Volatility Focus ETF ONEV SPDR Russell 1000 Yield Focus ETF ONEY Direxion Daily S&P Biotech Bear 1X Shares LABS Direxion Daily Natural Gas Related Bear 3X Shares GASX Daily Healthcare Bear 3x Shares SICK Tierra XP Latin America Real Estate ETF LARE Elkhorn FTSE RAFI U.S. Equity Income ETF ELKU iShares FactorSelect MSCI Emerging ETF EMGF Pacer Trendpilot European Index ETF PTEU Pacer Autopilot Hedged European Index ETF PAEU Guggenheim Dow Jones Industrial Average Dividend ETF DJD SPDR S&P North American Natural Resources ETF NANR JPMorgan Diversified Return Europe Equity ETF JPEU WisdomTree Dynamic Long/Short U.S. Equity Fund DYLS WisdomTree Dynamic Bearish U.S. Equity Fund DYB MomentumShares International Quantitative Momentum ETF IMOM Legg Mason Developed ex-US Diversified Core ETF DDBI Legg Mason Emerging Market Diversified Core ETF EDBI Legg Mason US Diversified Core ETF UDBI Legg Mason Low Volatility High Dividend ETF LVHD Only a couple of these funds ended December with positive returns; it was a hard month to jump into the market. Hopefully, our rocky start to 2016 doesn’t set any trends in motion, otherwise these new launches from the last two weeks could have a hard time finding traction. There were 12 funds launched in the last 2 weeks, including the last 4 funds on the December launch list above. With tons to cover, let’s jump right in. Fund launches for the week of December 28th, 2015 Fund launches for the week of January 4th, 2016 Reality Shares launches its second ETF (1/6): The Realty Shares DIVCON Leaders Dividend ETF (BATS: LEAD ) was launched just over a year after the company’s first offering, the Realty Shares DIVS ETF. “Unlike many dividend funds based on decades-old dividend history or yield, the new passive ETF features rules-based stock selection and weighting using a proprietary dividend health rating methodology, DIVCON, which systematically ranks companies’ future dividend growth prospects based on a weighted average of seven factors,” according to a press release on Reality Shares’ site. WisdomTree rolls out 4 new Dynamic Currency ETFs (1/7): The following newly issued funds offer currency hedged exposure to international equities, each indicated in their names, and weighted by dividend yield: The WisdomTree Dynamic Currency Hedged International Equity Fund (BATS: DDWM ), the WisdomTree Dynamic Currency Hedged International SmallCap Equity Fund (BATS: DDLS ), the WisdomTree Dynamic Currency Hedged Europe Equity Fund (BATS: DDEZ ) and the WisdomTree Dynamic Currency Hedged Japan Equity Fund (BATS: DDJP ). iShares launches 3 Adaptive Currency Hedged ETFs (1/7): The iShares Adaptive Currency Hedged MSCI Japan ETF (BATS: DEWJ ), the iShares Adaptive Currency Hedged MSCI Eurozone ETF (BATS: DEZU ) and the iShares Adaptive Currency Hedged MSCI EAFE ETF (BATS: DEFA ) are new additions to the iShares lineup. Like the WisdomTree funds launched on the same day, these funds offer currency hedged exposure to international equities, but weighted by market capitalization rather than dividend yield. All 7 of these funds were launched on the BATS exchange. There were no fund closures for the weeks of December 28th, 2015 or January 4th, 2016 Have any other questions on ETFs or ETNs? Please comment below and I will try to clear things up. As an author and editor, I have found that constructive feedback is the best way to grow. What you would like to see discussed in the future? How can I improve this series to meet reader needs? Please share your thoughts on this first edition of the ETF Update series in the comments section below. Have a view on something that’s coming up or a new fund? Submit an article.