Opinion

John Wasik

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.

When stocks were getting battered, Keynes was buying. He managed money for his alma mater, King’s College at University of Cambridge, as well as two British insurance companies, friends and family.

In researching my recent book “Keynes’s Way to Wealth,” (McGraw-Hill, 2013, ((link.reuters.com/gyf46v )) ), I discovered that Keynes made money in 12 out of 18 years between 1928 and 1945, a period that includes the Crash of 1929, the Great Depression and World War Two. All told, his annualized return for the Cambridge “Chest” portfolio, a discretionary portfolio he managed, was 13 percent from 1928 through 1945, compared with a negative 0.11 percent for the UK market during that period.

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.

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.

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.

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