John Wasik

Lazy returns: How my Nano portfolio beat the S&P 500

Jan 23, 2012 19:16 UTC

By John Wasik

(Reuters) – I’ve never thought that laziness could be a virtue, but when it comes to investing, it’s often advantageous. You can trade too much and become too pre-occupied with the headlines and business TV shows. It can drive you crazy and you’ll lose lots of money making bad decisions.

Or you can set up a lazy Nano portfolio, which I proposed years ago – and forget about it. Based on my initial plan at MyPlanIQ (link.reuters.com/qus26s), a web-based application to help manage retirement accounts, my hypothetical Nano portfolio returned 7.4 percent in their tactical asset allocation model in 2011.

In contrast, the S&P 500 posted a tiny loss for the year.

I paid so little attention to my Nano last year that I only knew what it returned when MyPlanIQ sent me its independent year-end tally last week. I have no relationship with the site, nor did I ever ask them to monitor the portfolio. They calculated the returns and tweaked the allocations using their own tactical asset algorithm to get better results with fewer funds. While I hold some of the funds in my family’s portfolio, I don’t manage other people’s money. I’m skittish enough managing my own.

I called it Nano because it’s small in composition – only five exchange-traded/mutual funds – and modest in its aspirations. It was my humble contribution to the world of investing – a free exercise in benign neglect and diversification.

Here’s how lazy I am: I don’t try to predict the market, world events, Federal Reserve movements or the next hot sector. In fact, I make no predictions at all – including how my portfolio will perform this year. I have no special skill. My Nano set-up is a middle-of-the road core growth portfolio for someone in their accumulation phase with at least 15 years to go until retirement.

Underwater homes deal may be economy’s saving grace

Jan 20, 2012 19:27 UTC

By John Wasik

(Reuters) – You’re underwater on your mortgage and falling behind on payments. You may lose your home. Can you negotiate with your lender to reduce your principal?

Increasingly, the answer is yes, although still only in rare cases.

In what could become a national policy to stem foreclosures, principal reduction is a strategy you should pursue if your lender is open to the idea. It could also give a boost to the U.S. home market, which saw a spurt in existing home sales in December. (link.reuters.com/xap26s)

The potential number of homeowners who could be helped by this strategy is huge: About one in five mortgages are currently underwater, representing about $700 billion in negative equity, the Federal Reserve estimates. Many of those homeowners go into “strategic default” and foreclosure because it makes little or no economic sense to pay on a mortgage that’s worth more than their home. Up to 1 million of these homeowners may be allowed to do principal writedowns if state attorneys general reach a settlement with banks over questionable foreclosure practices, said Shaun Donovan, U.S. Housing and Urban Development secretary. (link.reuters.com/vun26s)

5 reasons to invest in 2012

Jan 17, 2012 16:25 UTC

By John Wasik

(Reuters) – If you want to be optimistic about investing this year – and there are plenty of reasons to be – you need to understand the tale of two economies.

One narrative is the recovering U.S. economy: Robust corporate profits, increased manufacturing, slightly more hiring and continued global demand. The other story tells of a hobbled euro zone, a possible slowdown in China and the prolonged misery of the U.S. housing market.

Which tale do you choose to believe? I’m loath to forecast which scenario will dominate because both will play out in varying degrees. The euro zone downgrades last week(link.reuters.com/pyw95s) are certainly going to reverberate in the markets, so if you’re over-exposed to European debt and stocks, pare back. In any case, you should be upgrading your portfolio to grab growth and income while reducing risk.

COLUMN: The troubling fine print of Suze Orman’s prepaid card

Jan 14, 2012 00:56 UTC

By John Wasik

(Reuters) – Can those celebrity-linked prepaid cards really help the unbanked?

Lately there have been a spate of them, from Kim Kardashian’s to Lil Wayne’s. When it comes to that newest one, the Approved Prepaid MasterCard issued by the Bancorp Bank and endorsed by personal finance personality Suze Orman, who is also an investor in the product, less is not necessarily more. There are better alternatives.

First, a disclosure. I knew Orman well before she became brand-name famous (we’re both from Chicago) and she even wrote a blurb for my book, “Late-Start Investor,” in 1998. She’s generally done some good things for financial consumers.

Playing the “January effect”

Jan 9, 2012 19:33 UTC

By John F. Wasik

(Reuters) – For years, one of the more bankable phenomena in finance has been the January effect.

The premise is simple: Institutions and traders sell off stocks the end of the year for tax reasons and portfolio dressing. Then they start buying again in January, often favoring small companies, also known as “small caps.”

With myriad signs that the U.S. economy is in recovery, this may be another good year for the January effect. Even if it isn’t – and I refuse to make predictions for short-term traders – it would be a good idea to add bargain-priced small caps to your core portfolio through index mutual funds or exchange-traded funds (ETFs).

The old abnormal: How even PIMCO’s Bill Gross can err

Jan 6, 2012 17:33 UTC

Jan 6 (Reuters) – No matter what theme you adopt in a
market forecast, predictability has always been a bugaboo. Just
ask Bill Gross, the legendary manager of the PIMCO Total Return
bond fund.

Gross’s $244 billion baby saw at least $5 billion in assets
flee in 2011, more than $1.4 billion in the fourth quarter
alone. Relative to the size of his fund, this is a notable vote
of no confidence ().

Investors voted with their money because of Gross’s bet
against U.S. Treasuries last year. Like many of us, he digested
the headlines and became dyspeptic over the Congress defaulting
on its debt, sluggish economy, the S&P credit downgrade and
euro zone debt woes. Yet what actually happened didn’t follow
Gross’s “new normal” script. Instead we got the “old abnormal”
of unpredictability.

New tech trend for 2012 and beyond

Jan 3, 2012 17:51 UTC

Jan 3 (Reuters) – Despite gloomy headlines from Europe over
the past year, a new technology mash-up is emerging that could
spark some exciting ideas for investors.

There is long-term growth in convergent technologies that
integrate the Internet, green transportation, building-based
micro-power plants and power distribution into a collaborative
worldwide grid, according to author and consultant Jeremy
Rifkin, founder of the Foundation on Economic Trends.

It is a development trend that stretches into the next
decade and is worth investing in right now, said Rifkin.

Key wealth management concerns for 2012

Dec 29, 2011 16:18 UTC

29 (Reuters) – You won’t get too many arguments at
holiday parties if you say that 2011 has been one of the most
challenging years for investors.

With the European crisis unresolved and major bi-polar
dysfunction in Washington, it’s never been more difficult to
plan ahead. Yet there are always core wealth management
concerns that you need to address.

Here are some that I think are key.


Under pressure from the brokerage and insurance industry,
the Securities and Exchange Commission is reconsidering a
proposal to make all advisers fiduciaries.

Promising Sectors for 2012

Dec 27, 2011 18:49 UTC

Dec 27 (Reuters) – For 2012, think volatility — again.

Yet that doesn’t mean that economic recovery won’t be part
of the story. A focus on the industries likely to benefit from
a rebound and long-term demographic trends bodes well for these

* Health Care. If you don’t have health-care stocks as part
of core holdings in broad-based index or sector funds, you’re
going to missing almost guaranteed growth.

The leading edge of the 77-million-plus Baby Boomer
generation has hit 65, a wave that will last more than 20
years. That will increase the demand for medical services,
devices and pharmaceuticals.

Biggest financial surprises of 2011

Dec 22, 2011 17:36 UTC

By John Wasik

(Reuters) – In every year, there are a host of surprises that come along like earthquakes: They are nearly impossible to predict.

Who would have thought that Congress would be at loggerheads over raising its debt ceiling or that Standard & Poor’s would cut the credit rating on U.S. Treasuries? On top of that, who would have then foreseen that U.S. paper would still be regarded as a global safe haven, gold would tumble and interest rates would continue to fall?

We can be thankful that more didn’t go wrong with the global economy, although things could certainly go haywire next year. Here are some things that surprised me personally and professionally this year and may flummox us in the next 12 months.