Opinion

John Wasik

Column: Ways to hedge your bets in the bond market smackdown

May 31, 2013 14:52 UTC

CHICAGO (Reuters) – For investors who piled into bond funds this year, the past week has been an abject lesson of how to get bruised in short order.

An uptick in yields smacked bond prices, which move inversely to yields. Funds investing in high-yield and long-maturity issues got hit the worst. Yields on 10-year Treasury Notes hit a peak of 2.23 percent, the highest since April of last year, before dropping to 2.16 percent on Wednesday.

The pre-June bond swoon is a harbinger of things to come. The U.S. economy is heating up after years of decline, which will trigger greater demand for credit and lower bond prices.

The good news? There are a bevy of alternative vehicles to help you hedge bond price surges.

But first, some things to consider: Bond yields have largely been watered down by the Federal Reserve’s bond-buying program in an effort to grow employment and the economy since the 2008 market and credit meltdown. The U.S. economy grew 1.7 percent in 2011 and 2.2 percent last year.

Ways to hedge your bets in the bond market smackdown

May 31, 2013 12:02 UTC

CHICAGO (Reuters) – For investors who piled into bond funds this year, the past week has been an abject lesson of how to get bruised in short order.

An uptick in yields smacked bond prices, which move inversely to yields. Funds investing in high-yield and long-maturity issues got hit the worst. Yields on 10-year Treasury Notes hit a peak of 2.23 percent, the highest since April of last year, before dropping to 2.16 percent on Wednesday.

The pre-June bond swoon is a harbinger of things to come. The U.S. economy is heating up after years of decline, which will trigger greater demand for credit and lower bond prices.

Column: Five trends that favor stocks over bonds

May 29, 2013 12:05 UTC

CHICAGO (Reuters) – With the S&P 500 Index up more than 16 percent this year and health care, its top sector index, up 24 percent, it seems counterintuitive that so many investors are clinging to the low single-digit returns in bonds.

Money certainly isn’t gushing into stock mutual funds, even though the Dow Jones industrial average and the Standard & Poor’s 500 Index have hit a series of record highs.

Between April 24 and May 1, investors pulled more than $4 billion out of U.S. equities while pumping almost $1 billion into bonds, according to the Investment Company Institute, the trade group for mutual funds, exchange-traded funds and other U.S. investment companies. The following week, more than $7.3 billion was invested in bond funds, compared with only $363 million in U.S. stocks.

Five trends that favor stocks over bonds

May 29, 2013 11:59 UTC

CHICAGO, May 29 (Reuters) – With the S&P 500 Index up more
than 16 percent this year and health care, its top sector index,
up 24 percent, it seems counterintuitive that so many investors
are clinging to the low single-digit returns in bonds.

Money certainly isn’t gushing into stock mutual funds, even
though the Dow Jones industrial average and the Standard
& Poor’s 500 Index have hit a series of record highs.

Between April 24 and May 1, investors pulled more than $4
billion out of U.S. equities while pumping almost $1 billion
into bonds, according to the Investment Company Institute, the
trade group for mutual funds, exchange-traded funds and other
U.S. investment companies. The following week, more than $7.3
billion was invested in bond funds, compared with only $363
million in U.S. stocks.

Column: Three reasons why the golden age of dividends is dawning

May 24, 2013 12:51 UTC

CHICAGO (Reuters) – The golden days of summer might also brighten the portfolios of dividend lovers.

With most large corporations swimming in cash as the economy and earnings improve, adopting a dividend-centric strategy looks even more promising for moderate-risk investors.

Dividends, the portion of earnings that corporations pass along to shareholders in the form of quarterly payments, are becoming more generous. Not only do they reward long-term shareholders with higher total return, they are proven inflation hedges.

Three reasons why the golden age of dividends is dawning

May 24, 2013 11:59 UTC

By John Wasik

CHICAGO, May 24(Reuters) – The golden days of summer might
also brighten the portfolios of dividend lovers.

With most large corporations swimming in cash as the economy
and earnings improve, adopting a dividend-centric strategy looks
even more promising for moderate-risk investors.

Dividends, the portion of earnings that corporations pass
along to shareholders in the form of quarterly payments, are
becoming more generous. Not only do they reward long-term
shareholders with higher total return, they are proven inflation
hedges.

Column: Two ways to pick your summer stock retreat

May 20, 2013 20:00 UTC

CHICAGO (Reuters) – It used to be easy to abide by the old Wall Street nugget that you should pull out of the market in spring and come back in the fall.

But research shows that it doesn’t make sense to completely abandon the stock market during the summer months, particularly when it comes to individual sectors. Not all of them will decline.

There are several ways to seize gains if you want to make some portfolio adjustments. Here are two approaches.

Two ways to pick your summer stock retreat

May 20, 2013 19:55 UTC

CHICAGO, May 20 (Reuters) – It used to be easy to abide by
the old Wall Street nugget that you should pull out of the
market in spring and come back in the fall.

But research shows that it doesn’t make sense to completely
abandon the stock market during the summer months, particularly
when it comes to individual sectors. Not all of them will
decline.

There are several ways to seize gains if you want to make
some portfolio adjustments. Here are two approaches.

Column: Business Development Companies – High yield, high risk

May 17, 2013 12:07 UTC

CHICAGO (Reuters) – In a frantic search for yields, investors often turn toward relatively unknown products. Business Development Companies (BDCs) are one of latest vehicles to grab investor attention – and money.

BDCs are companies that lend to young, thinly traded and often distressed companies that have credit ratings in the “junk” status. They are as close to a private equity enterprise as you’re going to get in a public company. Yet their high yields come at a price in terms of elevated risk that should not be underestimated, and investors must proceed with caution.

Like Real Estate Investment Trusts (REITs), BDCs must pass through at least 90 percent of their profit to shareholders. Most of their borrowers carry the lowest-possible credit ratings such as BBB-, or are not rated at all. They hold a variety of companies in their portfolios, so some are more diversified than others.

Business Development Companies: High yield, high risk

May 17, 2013 11:59 UTC

CHICAGO, May 17 (Reuters) – In a frantic search for yields,
investors often turn toward relatively unknown products.
Business Development Companies (BDCs) are one of latest vehicles
to grab investor attention – and money.

BDCs are companies that lend to young, thinly traded and
often distressed companies that have credit ratings in the
“junk” status. They are as close to a private equity enterprise
as you’re going to get in a public company. Yet their high
yields come at a price in terms of elevated risk that should not
be underestimated, and investors must proceed with caution.

Like Real Estate Investment Trusts (REITs), BDCs must pass
through at least 90 percent of their profit to shareholders.
Most of their borrowers carry the lowest-possible credit ratings
such as BBB-, or are not rated at all. They hold a variety of
companies in their portfolios, so some are more diversified than
others.

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