Opinion

John Wasik

Betting against the buck easier said than done

Feb 24, 2014 17:57 UTC

CHICAGO, Feb 24 (Reuters) – The U.S. dollar has been taking
it on the chin of late. Last week saw the dollar hit a
seven-week low against its rival currency, the euro. The
greenback also declined against a basket of major currencies,
hitting one of the lowest points of the year to date.

The even worse news is that there’s not much anyone can do
about it right now. Investors whose assets are denominated in
the buck can lose value relative to other currencies, and it’s
difficult to find reliable vehicles to hedge against the
decline.

Some $4 trillion is traded in foreign exchange every day,
most of it by institutions. It would be nearly impossible for an
individual to have the information or trading capability
available that large banks and hedge funds employ.

What would you need to know to profit? A panoply of data
goes into real-time currency pricing. You’d have to
simultaneously monitor news on central bank policies, inflation,
gross domestic product, retail sales, manufacturing and housing
prices.

Trying to hedge the decline – if it even becomes a
longer-term trend – is nettlesome. Exchange-traded funds that
allow you to do this are imperfect vehicles that may not reflect
day-to-day sentiment. And you are also paying dearly to invest
in them, due to high management expenses, so that means making
money in them is difficult.

Boring might be better for fund investors in 2014

Feb 18, 2014 12:00 UTC

CHICAGO, Feb 18 (Reuters) – With U.S. stocks doing a
stutter-step after a five-year bull run, a shift into
low-volatility funds might give you a little more traction if
the market retrenches.

Low or “minimum” volatility funds have become more popular
since the 2008 meltdown. Buying mostly defensive stocks with
high dividends and modest price variations, they represent an
$11 billion market for moderately risk-averse investors.

The most popular fund in this category, the PowerShares S&P
500 Low-Volatility ETF, holds more than $3 billion in
assets. It owns brand-name stocks like McDonald’s Corp
and Johnson & Johnson, along with lesser-known companies
like Sigma-Aldrich Corp.

Column – How to deal with emerging markets volatility

Feb 10, 2014 17:46 UTC

CHICAGO (Reuters) – Since the beginning of the year, emerging markets have been like cats on a hot tin roof.

Hot money is skittering out of foreign markets as countries from Argentina to Turkey have been clawed by economic and political turmoil. But even with heightened concerns about the prospects of developing countries, emerging markets should still be a part of your larger portfolio.

A combination of currency crises and the “taper” of the Federal Reserve’s bond-buying program – possibly resulting in economic slowdowns – have triggered the exodus in emerging markets. More than $12 billion left emerging markets stock funds in January alone, according to EPFR Global, with bond funds in this sector losing nearly $3 billion last week alone.

How to deal with emerging markets volatility

Feb 10, 2014 16:03 UTC

CHICAGO (Reuters) – Since the beginning of the year, emerging markets have been like cats on a hot tin roof.

Hot money is skittering out of foreign markets as countries from Argentina to Turkey have been clawed by economic and political turmoil. But even with heightened concerns about the prospects of developing countries, emerging markets should still be a part of your larger portfolio.

A combination of currency crises and the “taper” of the Federal Reserve’s bond-buying program – possibly resulting in economic slowdowns – have triggered the exodus in emerging markets. More than $12 billion left emerging markets stock funds in January alone, according to EPFR Global, with bond funds in this sector losing nearly $3 billion last week alone.

For investors, a ‘lazy portfolio’ may be a tonic for uncertain 2014

Feb 3, 2014 23:57 UTC

CHICAGO (Reuters) – For investors concerned about increasing market volatility, a defensive position might be a savvy move if stocks continue to retreat from 2013 highs.

You can do that with a “lazy portfolio”: Simply buy and hold passive investments and rebalance then annually. There are several flavors, including one that I designed years ago, but generally they are simple, diversified and somewhat defensive.

Even the best lazy portfolio, as monitored by the online service MyPlanIQ.com, which creates risk-managed portfolios, fell well short of the stellar performance of the S&P 500 large company index, which gained 30 percent last year.

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