Opinion

John Wasik

Three ways for investors to catch the global tailwind in 2014

Dec 9, 2013 17:58 UTC

CHICAGO (Reuters) – There is a growing consensus that U.S. stocks, as well as stocks around the world, are going to catch a tailwind going into 2014.

Expanding economies and continued central-bank stimulus are the bellows behind this expected growth. If you do not have international stock exposure, now is the time to broaden your portfolio with these three exchange-traded funds (ETFs).

One of the best vehicles to grab growth around the world is a global stock ETF. The Vanguard Total World Stock Index ETF owns more than 5,000 stocks, but has its top holdings in mega-cap American companies like Apple Inc, Exxon Mobil Corp and Google Inc.

The Vanguard fund is up 22 percent for the year though December 6 and has beaten a world stock benchmark by about 2 percentage points over the past three and five years. The fund charges 0.19 percent for annual expenses.

If you do not want a portfolio dominated by U.S. blue chips, then consider the iShares MSCI Emerging Markets Index ETF. The fund invests in an index of companies in developing nations and holds stocks like Samsung Electronics Co Ltd, Taiwan Semiconductor Manufacturing Co and China Mobile Ltd.

Is it too late to jump on the stock buyback bandwagon?

Dec 2, 2013 18:01 UTC

CHICAGO (Reuters) – Public companies share the wealth with shareholders in a number of ways. Sometimes they channel profits into quarterly dividends. They can also buy back their own shares.

Corporations have been on a buyback binge in recent years. S&P 500 companies purchased $118 billion of their stock in the second quarter of this year, up 18 percent from the first quarter, according to S&P Dow Jones Indices. (During the second quarter of 2012, companies bought back $111 billion.)

Although the merits of buybacks are hotly debated among analysts, they often can be beneficial for investors. A small group of exchange-traded funds are capitalizing on this trend. In a bull market, companies that buy their own stock on the cheap can benefit when the overall market is rising.

Column: How to catch the market’s upside with a downside cushion

Nov 25, 2013 21:14 UTC

CHICAGO (Reuters) – Sometimes the very name of a fund sounds like a security blanket if you’re a risk-averse investor. Case in point: “Managed volatility funds” promise some of the stock market’s upside with a cushion on the downside.

This burgeoning class of more than 400 funds is gaining a gaggle of devotees. There is more than $200 billion invested in them, according to Strategic Insight, up from $31 billion in 2006. While “managed volatility” isn’t well defined, these funds provide a strategy that dampens volatility over time.

So why worry about market volatility when the market continues to head higher and both the Dow Jones Industrial Average and S&P 500 Index keep hitting new highs? Because market downturns are often unpredictable and the overall risk of loss never goes away. Yet while volatility funds provide some cushion from frenetic markets, you pay a price for modest protection.

How to catch the market’s upside with a downside cushion

Nov 25, 2013 17:31 UTC

25 (Reuters) – Sometimes the very name of a
fund sounds like a security blanket if you’re a risk-averse
investor. Case in point: “Managed volatility funds” promise some
of the stock market’s upside with a cushion on the downside.

This burgeoning class of more than 400 funds is gaining a
gaggle of devotees. There is more than $200 billion invested in
them, according to Strategic Insight, up from $31 billion in
2006. While “managed volatility” isn’t well defined, these funds
provide a strategy that dampens volatility over time.

So why worry about market volatility when the market
continues to head higher and both the Dow Jones Industrial
Average and S&P 500 Index keep hitting new highs? Because market
downturns are often unpredictable and the overall risk of loss
never goes away. Yet while volatility funds provide some cushion
from frenetic markets, you pay a price for modest protection.

Choosing an index fund when the indexes are sky-high

Nov 18, 2013 20:28 UTC

CHICAGO (Reuters) – When stocks are on a roll – as they have been thus far this year – you want to go big or go home.

Quite naturally, most investors want to take advantage of the market’s healthy gains this year. Yet with so many 401(k) offerings and a plethora of stock-index mutual and exchange-traded funds (ETFs) out there, which ones will give you the most bang for your buck?

The answer is surprisingly complicated because there are so many similar options. Many of the best funds are either ignored by investors who insist on owning individual stocks or are not offered in retirement plans. You may have to hunt them down or request that your employer add them.

Column: Smart-beta stock ETFs focus on fundamentals

Nov 12, 2013 12:06 UTC

CHICAGO (Reuters) – Holding stocks in a passive index fund as a core portfolio holding has generally been a rock-solid idea. You can own nearly the entire market at a low cost and not get snagged in market timing errors.

Yet most index funds are capitalization-weighted, meaning they hold the most popular stocks by market value. That could lead to owning the most overpriced stocks, which may incur more downside risk when the market heads south.

A better alternative could be to own “smart-beta” funds. While still built on indexes, the stocks within these baskets are often picked for their cash flow, book value, dividends and sales. That means instead of picking all of the potentially over-valued stocks that have won the market’s latest beauty contest, more fundamental measures are applied.

Smart-beta stock ETFs focus on fundamentals

Nov 12, 2013 12:00 UTC

CHICAGO, Nov 12 (Reuters) – Holding stocks in a passive
index fund as a core portfolio holding has generally been a
rock-solid idea. You can own nearly the entire market at a low
cost and not get snagged in market timing errors.

Yet most index funds are capitalization-weighted, meaning
they hold the most popular stocks by market value. That could
lead to owning the most overpriced stocks, which may incur more
downside risk when the market heads south.

A better alternative could be to own “smart-beta” funds.
While still built on indexes, the stocks within these baskets
are often picked for their cash flow, book value, dividends and
sales. That means instead of picking all of the potentially
over-valued stocks that have won the market’s latest beauty
contest, more fundamental measures are applied.

Column: Why IPOs are unlikely to produce long-term gains

Nov 4, 2013 18:00 UTC

CHICAGO (Reuters) – As the founders and backers of Twitter move toward the ultimate tweet – an initial public offering – it’s a good time to ask whether IPOs are good investments.

Can the hot social media buzz surrounding Twitter be sustained for the company to survive a flame-out? While few can accurately predict future earnings growth, management decisions and whether the service can grow and gain more popularity, it’s good to cast a cautious eye on IPOs in general and cast a wider net.

Keep in mind that Main Street and Wall Street investors may have entirely different takes on IPOs. Short-term traders may “flip” the stock after a few days – or even hours – and then move on. Individual investors may be gun-shy about owning IPOs after last year’s botched offering of Facebook. It took a year for investors to recover from the company’s initial price decline.

Why IPOs are unlikely to produce long-term gains

Nov 4, 2013 17:57 UTC

4 (Reuters) – As the founders and backers of
Twitter move toward the ultimate tweet – an initial
public offering – it’s a good time to ask whether IPOs are good
investments.

Can the hot social media buzz surrounding Twitter be
sustained for the company to survive a flame-out? While few can
accurately predict future earnings growth, management decisions
and whether the service can grow and gain more popularity, it’s
good to cast a cautious eye on IPOs in general and cast a wider
net.

Keep in mind that Main Street and Wall Street investors may
have entirely different takes on IPOs. Short-term traders may
“flip” the stock after a few days – or even hours – and then
move on. Individual investors may be gun-shy about owning IPOs
after last year’s botched offering of Facebook. It took a
year for investors to recover from the company’s initial price
decline.

Beyond the Glitches: Profiting from Obamacare

Oct 28, 2013 17:16 UTC

CHICAGO, Oct 28 (Reuters) – In the shadow of the bungled
rollout of the U.S. Affordable Care Act health insurance
exchanges, a handful of companies are quietly profiting from the
biggest expansion of healthcare since Medicare in the mid-1960s.

Companies that were supposed to be collateral damage from
the new wave of ACA regulations have become Wall Street
darlings. Those that specialize in health records technology,
insurance and pharmaceuticals will benefit from the need for
more drugs, medical services and policies through the state and
federal exchanges.

In its first weeks, the ACA healthcare exchange websites
were swamped with more than half a million Americans applying
for insurance, with more than 19 million visiting the federal
site alone. Despite numerous technical roadblocks, those strong
traffic numbers bode well for companies that benefit from
selling new policies along with the Medicaid expansion that is
part of the new health law.

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