Tag Archives: stocks

VT – The Easy Way To Start Investing For Retirement

Summary Investing for retirement can be as simple or as complex as you want to make it. If you enjoy researching investments, trading frequently, struggling with your taxes and some sleepless nights when your investments are tanking – then this article is not for you. If you want to get started investing or simplify the investing process then please keep reading. Simply Investing – Philosophy Your chance of long term investment success increases significantly by keeping your investing simple, consistent and well diversified. Whether you are just starting to invest for yourself or your kids or thinking about taking control of your investing back from your investment advisor, remembering to keep investing simple, consistent and well-diversified, will help lead to success. The problem for many people is investing can get complicated quickly and when it gets complex it is easy to lose focus on your overall investment objective, which often leads to mistakes. Investing doesn’t have to be difficult, time consuming, involve large fees or lead to restless nights. Establishing a core investment in well-diversified, low expense, Exchange Traded Funds (ETFs) is a good way to either get started investing or to reduce the complexity of your investment portfolio. An investment portfolio with a “core” allocated to ETFs held for the long term is probably the best option for most people starting to invest. As one’s investing experience, the time one wants to dedicate to investing activities and desired risk, increases, an investor may want to allocate a percentage of their portfolio to “edge” positions, which offer additional risk and opportunity. Vanguard Total World Stock ETF (NYSEARCA: VT ) This article reviews VT, an ETF that Simply Investing believes can effectively make up a large portion of the core of most people’s retirement portfolios. Future articles will look at additional ETFs that can be added to the core portion of your portfolio and for those interested, potential holdings for the part of your portfolio allocated to edge positions. VT – Regional allocation and investment approach Source: Vanguard (allocation as of 10/31/2015) VT seeks to track the performance of the FTSE Global All Cap Index. It has holdings in over 7,000 stocks with broad exposure across developed and emerging equity markets around the world, including the U.S. VT’s broad global diversification helps to minimize volatility that any one region may experience. As indicated above, the majority of VT is invested in North American stocks and although not broken out above, 53% of the common stock holdings are in the U.S. VT -Equity Characteristics and Holdings Source: Vanguard (as of 10/31/2015) As the table above indicates, VT is very well diversified, holding 7,391 stocks. The median market cap is quite large at $34.0 billion. VT’s current price/earnings ratio is high compared to historical levels for global markets. The high current price/earnings ratio is not unique to VT. The price/earnings ratios for the U.S. market and many global markets are currently higher than historical norms. These high price/earnings ratios are likely due to the low returns that alternative investments, such as fixed income, currently offer. Investing for retirement should be done on a consistent basis. A simple investment plan to follow, makes it that much more likely to happen. The relatively high current price/earnings ratio of stocks suggests that if you have a large amount of capital to invest today, it is advisable to dollar cost average this investment into the market over a period of time. Source: Vanguard (as of 10/31/2015) VT’s top 10 holdings are dominated by U.S. companies, with nine out of the 10 holdings based in the U.S. However, these top 10 holdings only account for 8.2% of total net assets and as previously indicated foreign stocks make up 47% of VT’s holdings. VT makes a good core portfolio holding with a diversified mix of stocks from U.S., other developed and emerging markets. Expenses VT’s expense ratio is 0.17%, this is well below the average expense ration of similar funds at 1.27%. Given the relatively high price of the market today, it is likely that future returns may be lower than those recently experienced. In this environment, it is important that the core of your portfolio is allocated to funds with low expense ratios such as VT. Conclusion Your chance of long term investment success increases significantly by keeping your investing simple, consistent and well diversified. One of the easiest ways to accomplish this is to build a core retirement portfolio around ETFs such as VT. In fact, VT might be the only investment many people’s equity portfolio requires, but future articles will look at additional ETFs that can be added to your core portfolio and for those interested, holdings for the “edge” of your portfolio that offer additional risk and opportunity.

Best And Worst Q4’15: Mid Cap Blend ETFs, Mutual Funds And Key Holdings

Summary The Mid Cap Blend style ranks eighth in Q4’15. Based on an aggregation of ratings of 18 ETFs and 344 mutual funds. IJH is our top-rated Mid Cap Blend style ETF and LSIRX is our top-rated Mid Cap Blend style mutual fund. The Mid Cap Blend style ranks eighth out of the twelve fund styles as detailed in our Q4’15 Style Ratings for ETFs and Mutual Funds report. Last quarter , the Mid Cap Blend style ranked ninth. It gets our Dangerous rating, which is based on aggregation of ratings of 18 ETFs and 344 mutual funds in the Mid Cap Blend style. See a recap of our Q3’15 Style Ratings here. Figures 1 and 2 show the five best and worst-rated ETFs and mutual funds in the style. Not all Mid Cap Blend style ETFs and mutual funds are created the same. The number of holdings varies widely (from 21 to 3330). This variation creates drastically different investment implications and, therefore, ratings. Investors seeking exposure to the Mid Cap Blend style should buy one of the Attractive-or-better rated ETFs or mutual funds from Figures 1 and 2. Figure 1: ETFs with the Best & Worst Ratings – Top 5 (click to enlarge) * Best ETFs exclude ETFs with TNAs less than $100 million for inadequate liquidity. Sources: New Constructs, LLC and company filings The ProShares S&P MidCap 400 Dividend ETF (NYSEARCA: REGL ) and the Validea Market Legends ETF (NASDAQ: VALX ) are excluded from Figure 1 because their total net assets are below $100 million and do not meet our liquidity minimums. Figure 2: Mutual Funds with the Best & Worst Ratings – Top 5 (click to enlarge) * Best mutual funds exclude funds with TNAs less than $100 million for inadequate liquidity. Sources: New Constructs, LLC and company filings The Boston Trust & Walden Funds SMID Cap Fund (MUTF: BTSMX ), the Nationwide Herndon Mid Cap Value (MUTF: NWWQX ) (MUTF: NWWPX ), and the Boston Trust & Walden Funds MidCap Fund (MUTF: BTMFX ), are excluded from Figure 2 because their total net assets are below $100 million and do not meet our liquidity minimums. The iShares Core S&P MidCap ETF (NYSEARCA: IJH ) is the top-rated Mid Cap Blend ETF and the Legg Mason Partners ClearBridge Mid Cap Core Fund (MUTF: LSIRX ) is the top-rated Mid Cap Blend mutual fund. IJH earns a Neutral rating and LSIRX earns a Very Attractive rating. The State Street SPDR Russell Small Cap Completeness ETF (NYSEARCA: RSCO ) is the worst-rated Mid Cap Blend ETF and the Satuit Capital Management US SMID Cap Fund (MUTF: SATDX ) is the worst-rated Mid Cap Blend mutual fund. RSCO earns a Neutral rating and SATDX earns a Very Dangerous rating. Cullen/Frost Bankers (NYSE: CFR ) is one of our favorite stocks held by Mid Cap Blend ETFs and mutual funds and earns our Attractive rating. Since 2010, Cullen/Frost has grown after-tax profits ( NOPAT ) by 8% compounded annually and improved its NOPAT margin from 25% to 28%. The company currently earns a return on invested capital ( ROIC ) of 9%. CFR has been beaten down 15% this year despite solid fundamentals. At its current price of $64/share, CFR has a price to economic book value ( PEBV ) ratio of 1.2. This ratio implies the market expects Cullen/Frost to grow its NOPAT by only 20% over the remainder of its corporate life. If Cullen/Frost can continue to grow NOPAT by 8% compounded annually for the next five years , the stock is worth $78/share today – a 13% upside. Cavium Inc. (NASDAQ: CAVM ) is one of our least favorite stocks held by Mid Cap Blend ETFs and mutual funds and earns our Dangerous rating. After turning a $10 million profit in 2010, Cavium’s NOPAT has fallen to -$23 million on a trailing-twelve-month basis. Cavium currently earns a bottom quintile ROIC of -7%, which is a significant decline from the 7% earned in 2010. Despite the deteriorating fundamentals, CAVM is up 15% on the year and the expectations baked into the current stock price leave shares with significant downside risk. To justify its current price of $71/share, Cavium must immediately achieve pre-tax margins of 6.5% (same margin as 2010) and grow revenue by 20% compounded annually for the next 26 years . Given the competitive semiconductor industry in which Cavium operates, it seems highly optimistic to expect double-digit revenue growth for nearly three decades. Figures 3 and 4 show the rating landscape of all Mid Cap Blend ETFs and mutual funds. Figure 3: Separating the Best ETFs From the Worst ETFs (click to enlarge) Sources: New Constructs, LLC and company filings Figure 4: Separating the Best Mutual Funds From the Worst Funds (click to enlarge) Sources: New Constructs, LLC and company filings D isclosure: David Trainer and Kyle Guske II receive no compensation to write about any specific stock, style, or theme.

Market Lab Report – Premarket Pulse 11/20/15

Major averages closed nearly flat yesterday on lower volume that was well below average. The majors made big advances over the last few days, so yesterday’s action can be considered a constructive digestion of the recent gains. Nevertheless, we remain in a period of elevated volatility. Before this year, the S&P 500 has never traded so flat and chaotic in its entire 48-year history. The last time the S&P 500 was this flat was in 1993, but that pattern was coherent so money could easily be made that year. The battle between quantitative easing and a sick economy that refuses to jump start is evident in this yearâs chart pattern. Fortunately, such anomalies always come to an end as external manipulation of the same type in the same manner has a limited shelf life. The only thing that doesnât change is change. So always expect markets and conditions to change. That said, the S&P 500 chart pattern that has emerged this year is perhaps telling us that we are reaching an important tipping point. Unless the Fed starts up QE4, or unless the US economy really does start to improve which, in turn, helps the global economy, this sideways pattern could be expressing an important top. We will be discussing this further in today’s webinar. But rather than try to predict markets, stay in the present by calmly taking action as needed as new information by way of price/volume action in leading stocks and major averages presents itself. Short-sale targets Tesla Motors (TSLA) and Apple (AAPL) have rallied with the market. AAPL was bolstered by a buy recommendation from Goldman Sachs which pushed the stock through its 50-day moving average. However, the stock found resistance at the top of its prior gap-down “falling window” of November 10th and the 120 price level. We would view this as a potential short-sale point up to the 200-day moving average at 121.96, using the 200-day line as a guide for an upside stop. TSLA ran into resistance near its 10-week moving average, and we would consider it shortable as close to the 10-week line at 229.02 as possible, using the 200-day moving average at 233.13 as a maximum upside stop. These would be optimally actionable if the general market were to tip back to the downside.