John Wasik

Take the lazy portfolio route to big returns

Apr 8, 2013 21:04 UTC

CHICAGO (Reuters) – I have always found that laziness is a virtue when it comes to managing my own money. The less I trade, the better my performance.

Years ago, in an attempt to come up with a hypothetical portfolio that provided low-cost diversification, I created what I called a “Nano” – small and compact – portfolio as a investment strategy intended to capture returns from the U.S. and global stock, bond and real estate markets. Lazy portfolios are generally passive and rebalanced once a year. The idea is to set the allocations and leave them alone – not try to time the market.

Thanks to MyPlanIQ.com, a useful website that creates and monitors portfolios (I have no connection to it), I have been able to track the performance of my virtual Nano holdings over time. My set-up has done reasonably well, but as with all portfolios, results depend on the period being looked at and on performance relative to the market as a whole.

To see my portfolio on MyPlanIQ, click on link.reuters.com/guv27t

MyPlanIQ updates me once a year on how the portfolio has done relative to other lazy portfolios that it tracks. This year, I was pleasantly surprised to see that my three-year average return through March 29 is in third place behind a portfolio put together by William Bernstein, an investment adviser, neurologist and author of such books as “The Four Pillars of Investing,” and one by David Swensen, the manager of Yale University’s endowment. Since I admire both men, esteemed professional money managers, I’m humbled to be in their company.

My Nano portfolio returned 9.7 percent annually in the three-year period. That compares with 12.1 percent for Bernstein’s “No Brainer Four Fund Portfolio” and 11.3 percent for Swensen’s “Yale Individual Investor Portfolio.”

A five-point strategy for riding the bull

Apr 5, 2013 13:36 UTC

CHICAGO (Reuters) – With the U.S. stock market rallying this year, it may be enticing to take extra cash on hand and ride the bull.

If anything, it is all too easy to pour contributions into actively managed U.S. large-stock funds. Some 90 percent of all retirement plans surveyed last year by the Plan Sponsor Council of America, an employer group, offered actively managed domestic stock funds, and most IRAs and 401(k)s hold these funds.

But a stock fund may not track the market as closely as an index fund. And there are several other asset classes that are worth scrutinizing. If you are jumping into the market with a bit of cash that goes beyond what you already have set up – say, $10,000 out of savings – it would make sense to cover a broad range of global options instead of exclusively focusing on U.S. large-company stocks.

Four reasons why boomerang effect will prolong stock rally

Apr 1, 2013 19:00 UTC

CHICAGO, April 1 (Reuters) – This is no April Fool’s day
joke, but catastrophes are good for stocks – eventually. The
market usually boomerangs into massive rallies in the wake of
them. That’s what seems to be happening now, which sustains the
argument for a continued rally after the S&P 500 index and the
Dow Jones Industrial Average hit new highs last week.

You can see the herd-like movement of mass emotions play out
in history. John Maynard Keynes called it “animal spirits” – the
spontaneous optimism that causes investors to keep buying.

I was not surprised to learn that the greatest stock rally
in American history was after the catastrophe of World War One:
between 1921 to 1929, the market gained about 500 percent,
according to the Leuthold Group, a Minneapolis investment
research firm.

Five questions to get to brass tacks with your money manager

Mar 22, 2013 13:30 UTC

CHICAGO (Reuters) – When interviewing a money manager, most investors want to know investment performance. It is a natural question, but there is much more you need to know beyond absolute returns.

In lieu of focusing exclusively on annual performance, it will be more important to know about a money manager’s record on capital preservation and expenses.

Anyone can do well in a bull market and many have lucky years. But when you are looking for a money manager, you want to find out what capacities he or she has beyond that – what makes them earn the fee? Here are some questions that will help you get beyond the surface:

When sluggish economies are good for stocks

Mar 19, 2013 15:20 UTC

CHICAGO, March 19 (Reuters) – A sluggish U.S. economy can
actually give stocks a boost.

According to a recent study from Ned Davis Research, when
the U.S. gross domestic product growth rate was 0.5 percent or
less, the S&P 500 Index rose at a rate of 10.5 percent
per year. Conversely, when the GDP rose above 6 percent, the S&P
500 lost 4.6 percent a year.

Of course, the stock market is not always a reliable
indicator of an economy. It often displays an exaggerated
reaction to most economic news from day to day.

The cost of missing rallies is huge

Mar 15, 2013 12:59 UTC

CHICAGO, March 15 (Reuters) – Will Rogers, the great cowboy
and humorist from Oklahoma, entertained America during the
darkest days of the Great Depression. His investing advice? “The
best way to make money is to buy a stock. Then, when it goes up,
sell it. If it’s not going to go up, don’t buy it.”

Today’s individual investors still seem to be playing this
fool’s game. Despite overwhelming academic evidence to the
contrary, most investors think that they can time the market.

But in reality, they are often just following herd instincts
or their own irrational impulses and getting trampled. While
being out of the market when it is tanking is no sin, not being
invested during a rally carries a steep price.

Why it is worth investing in Britain now

Mar 11, 2013 18:03 UTC

CHICAGO, March 11 (Reuters) – Despite all the evidence to
the contrary, I am bullish on John Bull. Although Britain’s
economy is struggling, it may be poised for a decent long-term
rebound, but not for the usual reasons.

The struggles are evidenced by recent news out of London
that the British Chambers of Commerce lowered their economic
growth forecast for 2013 to 0.6 percent from 1 percent. That is
below the 1.2 percent rate predicted by the Office for Budget
Responsibility, which is considered an official prediction.

I saw this stagnation in action when I visited London and
Cambridge recently, and noticed a lot of empty restaurants.
Service employees told me there was little new work at a time
when immigrants from ailing European Union countries such as
Greece, Italy and Portugal were still trickling in for the few
low-skilled jobs available. One local business owner told me the
economic climate in the city is dour.

U.S.-China manufacturing cost gap is closing

Mar 8, 2013 16:36 UTC

CHICAGO, March 8 (Reuters) – A long-term U.S. manufacturing
rebound is under way, and it will likely endure because the
United States is becoming more competitive with China and other
emerging economies.

According to a recent report by the Boston Consulting Group
titled “Made in America, Again,” the cost advantage China has
over the United States is shrinking fast. “Within five years,
rising Chinese wages, higher U.S. productivity, a weaker dollar,
and other factors will virtually close the cost gap between the
U.S. and China for many goods consumed in North America,” the
report said.

That means jobs that were once outsourced to the People’s
Republic and elsewhere may be coming back to America. Coleman
Co, for instance, is bringing manufacturing of its plastic
coolers back to Wichita, Kansas, from China. Ford Motor Co
is repatriating some 2,000 jobs. Increased productivity through
automation combined with competitive wages is moving many U.S.
companies to “in-source” production. Here are some other key
factors in this trend:

As tech sector goes for an upgrade, it is time to invest

Mar 1, 2013 17:23 UTC

CHICAGO, March 1 (Reuters) – Despite the drama concerning
U.S. agencies potentially dimming lights due to the sequester
saga, global companies are brightening the scenario for
technology purchasing. That could spark a turnaround in the
sluggish sector.

Telecommunication services and information technology are
laggards in the U.S. stock market’s current bull rally, up only
3.6 percent and 2 percent year-to-date, respectively, through
Feb. 22. That compares with a 6.6 percent rise for the broader
S&P 500 Index.

This contrasts with consumer staples and discretionary
items, which are up more than 9 percent and 5.8 percent,
respectively, according to S&P. This reflects widespread
optimism that consumer spending will return.

Nine reasons to smile about the stock market

Feb 25, 2013 21:18 UTC

CHICAGO, Feb 25 (Reuters) – Over the past few months, it has
been much easier to make a case that widespread financial
anxiety is easing, although trying to quantify the upsurge can
be like trying to catch a frog. As soon as you grab for it, it

At the beginning of last year, investors were grouchy about
nearly everything and kept putting money into bond funds, while
the stock market slipped. Then numerous economic indicators
started pointing north and sour global financial news became
less prevalent, and the tide turned as money started flowing out
of bonds and into stocks.

As financial anxiety eases, investors feel they can take
more risk and worry less about the worst-case scenario. This is
good news for the overall economic picture in the United States.