Opinion

John Wasik

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.

While nearly every emerging markets fund has been nicked this year, some funds have been clobbered. The WisdomTree Brazil Real ETF (BZF.P: Quote, Profile, Research) lost 90 percent of its assets between January 28 and 29.

A common strategy is to invest in countries that are not part of this rout. That means pulling money out of countries like Argentina, Brazil, Indonesia, Turkey and South Africa and moving into countries whose currencies are more stable. While that’s easy for institutional investors or those holding country-specific exchange-traded funds (ETFs), it’s awfully difficult for individual investors.

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.

What would Keynes have done?

Jan 27, 2014 17:33 UTC

CHICAGO (Reuters) – What many people don’t realize about economist John Maynard Keynes is that he was a professional investor, not just a thinker who addressed big issues. Although Keynes did not foresee the crash of 1929 and was nearly wiped out on three separate occasions, he made money during some of the most challenging years – and pioneered some durable investing principles along the way worth following in all market conditions.

So how would the father of Keynesian economics, who died in 1946, have played 2014?

He likely would not have been swayed by the recent swoon – the S&P 500 Index is down 3 percent year-to-date through January 24. He quickly threw out conventional wisdom and stopped trading based on big economic themes in the early 1930s, instead focusing on the intrinsic value of companies. This strategy later influenced mega-investors like Warren Buffett, George Soros and John Bogle.

The portfolio rebalancing act: Feels bad, works good

Jan 21, 2014 20:30 UTC

CHICAGO, Jan 21 (Reuters) – For most investors, portfolio
rebalancing is an unnatural investment act. You sell off winners
to buy laggards – an unsatisfying move.

Over the long haul, though, rebalancing makes sense because
it lowers market risk and keeps you right with your investment
goals: You’ll reap a higher annualized return if you do it on a
regular basis.

I rebalance once a year, although I’d rather do my taxes,
which is marginally less unpleasant. This year my wife and I
have a particular need to rebalance since our main retirement
portfolio mix has drifted to nearly 60 percent stocks and 40
percent bonds away from our 50/50 allocation goal.

Will last year’s stock market laggards be 2014′s winners?

Jan 13, 2014 20:04 UTC

CHICAGO (Reuters) – If the stock market rally continues, last year’s laggards may be this year’s winners.

Many of the sectors that could do well are late bloomers in the five-year bull run. They may not seem like obvious choices, yet are worthwhile if you’re contrarian or slightly defensive.

Assuming economic fundamentals and corporate earnings remain solid, it could be a decent year for stocks overall and even better for companies that were neglected in 2013.

Column: Will the U.S. bull market continue?

Jan 6, 2014 19:40 UTC

CHICAGO (Reuters) – What are the odds that the U.S. stock market’s bull run will continue?

Despite last year’s record rise – the S&P 500 and Dow Jones industrial average both closed at all-time highs – it does not always follow that one good year will be succeeded by another. The stock market is often roiled by irrational fears, bubblicious greed and a constantly boiling pot of earnings reports.

Yet many pundits predict that corporate earnings and the global economy will continue to expand, so stocks may have another good year. Just don’t invest thinking you will see a repeat of the 26 percent return the S&P 500 Index posted last year.

Will the U.S. bull market continue?

Jan 6, 2014 19:14 UTC

CHICAGO, Jan 6 (Reuters) – What are the odds that the U.S.
stock market’s bull run will continue?

Despite last year’s record rise – the S&P 500 and Dow
Jones industrial average both closed at all-time highs -
it does not always follow that one good year will be succeeded
by another. The stock market is often roiled by irrational
fears, bubblicious greed and a constantly boiling pot of
earnings reports.

Yet many pundits predict that corporate earnings and the
global economy will continue to expand, so stocks may have
another good year. Just don’t invest thinking you will see a
repeat of the 26 percent return the S&P 500 Index posted last
year.

Hot 2014 investing tip: Don’t chase 2013

Dec 23, 2013 18:48 UTC

CHICAGO, Dec 23 (Reuters) – This year, the stock market has
been glowing as brightly as the seasonal lights that now bedeck
holiday streetscapes.

But if you want your investments to keep doing well in 2014,
look away from the shiny stuff. If the winners of 2013 follow
historical patterns, they won’t sustain their market-beating
performances next year.

Consider the most stellar performer of 2012.

As housing rebounded, the iShares U.S. Home Construction ETF
was the place to be in 2012. It led the pack with a nearly 80
percent return for the year, as companies like PulteGroup Inc.
, Lennar Corp. and D.R. Horton, Inc. made up for
time and big money lost to the housing crisis.

Burn Notice: Watch out for leveraged ETFs

Dec 16, 2013 17:40 UTC

CHICAGO, Dec 16 (Reuters) – If you buy insurance on your
home, you know that most of your losses would be covered in a
catastrophe. Can you do the same with your portfolio?

There are lots of ways to buy portfolio insurance, but you
have to be careful with leveraged exchange-traded funds (ETFs),
which may offer protection, but carry a huge downside risk.

Leveraged ETFs have exploded in popularity in recent years
as institutions and individuals are looking for ways to
speculate and hedge positions after the 2008 meltdown. There are
now more than 700 short or leveraged ETFs, topping $50 billion
in assets, up from under 300 products and $28 billion in 2008,
according to Boost, an independent exchange-traded product
provider based in Britain.

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