“Portfolio” refers to a combination of assets, such as stocks, bonds, exchange-traded funds (ETFs), or other securities, held by investors or institutions for investment purposes. A portfolio can be divided into many different asset classes. In one portfolio, investors may hold debt, equities, real estate, and precious metal investments. It is recommended that for those investors who are planning to build a portfolio for the long run—be it for their retirement, to buy their first home, to support their children’s education—investors should diversify their investments in different asset classes so that their portfolio is protected from any deep market sell-offs.
One of the more common themes that I keep reading about these days is the strength of U.S. economic growth. It’s important to get at least some understanding of the potential for economic growth, as this will impact your investment strategy. Recent data is definitely making me ask the question: just how strong is the level of economic growth in America? We all know that this holiday season was much weaker than expected for retail companies. Considering that consumer spending fuels the majority of economic growth in America, this is certainly not a positive environment for that sector—but that shouldn’t ... Read More
Left for dead: that’s what appears to be what most investors have done to gold mining stocks. With the price of gold bullion down significantly in 2013, it appears many are simply ignoring all gold mining stocks, lumping them into one category and avoiding the group as a whole. Personally, I love buying when things are on sale. I hate paying full price on anything, no matter if it is for a stock or clothes. When it comes to gold mining stocks, the market sentiment hasn’t been this bearish in years.
Market sentiment tends to oscillate, and for the long-term ... Read More
With the new year just beginning, many investors will begin looking at their portfolio and trying to figure out how to shift their investment strategy to include sectors that should outperform in 2014. One investment strategy I like to use during the beginning of the year is to look for a situation where fundamentals are improving, but market sentiment remains weak. At year-end, many times you will see tax loss selling occurring. Essentially, investors are selling those holdings that have gone down the most to crystallize the losses for tax purposes. This also presents an opportunity—if the long-term investment strategy is sound. One sector that has been hit hard is the precious ... Read More
This past weekend, a friend of mine made a statement that there must be a large amount of economic growth coming shortly because of the booming stock market, driven by investor sentiment. As I told him, the two are not necessarily tied together. Over the past few months, we have heard about how economic growth is about to accelerate here in America, and this has helped drive investor sentiment in the stock market higher. However, I think there are many questions that need to be answered before we can assume economic growth will reach escape velocity, and investor sentiment is heavily contaminated with a large addictio ... Read More
What does it take to develop a successful, long-term investment strategy? This is the correct question to ask, rather than asking simply which stock(s) to buy. To be successful over the long term, you need to have a comprehensive investment strategy that takes into account your goals and risk parameters. Having said all of that, at the end of the day, I’m looking for a company that has both an attractive valuation and the ability to increase corporate earnings at a rate above market expectations. One way to develop an investment strategy is to look at the factors driving corporate earnings for a specific industry and individual company. A great example is the automoti ... Read More
There’s uncertainty on the stock market. Troubles are coming from the emerging markets, and they are causing investors to panic and sell their stocks. We see they are scared. But as this is happening, there’s a trade in the making, and those investors who have raised some cash (as I’ve been suggesting my readers do) and are looking to park their money somewhere safer than stocks can profit from this opportunity. The trade I’m talking about is the trade that’s happening in U.S. bonds and gold bullion—some call this phenomenon a “flight to safety.” I call it a potential opportunity. We know bon ... Read More
The year 2013 was a stellar year for stocks. The key stock indices have seen record increases: the S&P 500, which showed its best performance since 1997, increased by almost 30%; the Dow Jones Industrial Average saw a similar increase; and the NASDAQ Composite Index performed even better, ending the year with a return of more than 35%. Looking at these numbers, one must really ask how their portfolio has done. If your portfolio had similar returns—well done! If it lagged, here’s something to note: hedge funds returned only 7.4% for the year. They lagged by almost 23% compared to the broader market return—the most since 2005. (Source: Bit, K., “Hedge Funds Trail Stocks for ... Read More
Stocks are currently near multi-year highs. Instead of thinking about the next big trade, now it’s time to make sure your portfolio is not overly vulnerable to a stock market correction if it were to surface. Of course, you should always take some profits off the table, which is key to stock market success. In my view, a critical investment strategy is the concept of asset allocation, diversification, and the addition of small-cap stocks to maximize the expected return of your portfolio. The concept of asset allocation should be a key part of any prudent strategy and ... Read More
The Federal Reserve expects inflation to stay below two percent until the year 2015. (Source: “Economic Projections of Federal Reserve Board Members and Federal Reserve Banks Presidents, September 2012,” Board of Governors of the Federal Reserve System, September 13, 2012.) The goal of the Federal Reserve is to keep the inflation rate between one and three percent so there are no price swings and Americans don’t suffer. In November 2012, the Bureau of Labor Statistics affirmed that our central bank is meeting its inflation targets—the consume ... Read More
One of the basic rules that investors should follow when it comes to portfolio management is to not have a bias. What biases eventually do is either hinder investors from making better decisions or cause investors to not even recognize an opportunity that can take their portfolio to new heights. For example, take the Affordable Care Act, more commonly referred to as “Obamacare.” A friend of mine, who is saving for his retirement, has a bias when it comes to this topic. He says it’s not worth it for Americans, and it’s just another expense to add to the budg ... Read More
Over the Labor Day weekend, I met up with my old friend, Mr. Speculator. As always, we had a debate about portfolio management. We had a long conversation about what really is the right way to manage your investments—and, for that matter, if there is any. Should investors invest 40% of their portfolio in bonds and 60% in stocks? Should it be the opposite? Or is there another possible combination? He said, “Moe, I am a firm believer in going for the fences every time for now, but do you really think I will continue to have the same approach in the long run?” (Turns out, there’s actually a ratio ... Read More
Sometimes, to evaluate their portfolio performance, investors might look at the starting and ending values of their portfolio, or the simple rate of return, but they forget about the most important part—the risk they took to get there. The simple rate of return only gives investors a percentage change in their portfolio, and nothing more than that. If someone wants to be a better investor, they must consider the amount of risk they took in order to get that rate of return and how their portfolio reacts to swings in the overall market. To better evaluate their portfolio, investors can look at a few other measures, aside from the simple rate of return, including portfolio standard deviation and the por ... Read More