Working with Dr. Harry Markowitz on the Loring Ward Investment Committee has taught me to never look at any type of change to a portfolio until I’ve done extensive mean variance optimization (MVO) work. However, there are about 100 different decisions you must make when running an MVO process and it starts with your input assumptions.
Political coups, rampant inflation, debilitating deflation, capital controls, civil unrest… any one of these could scare investors out of a particular region. Yet each of these daunting events occurred in a market that outperformed the US over the last 10 years. Continue reading
March is one of my favorite months of the year because of the celebration of St. Patrick’s Day. Let’s take a look at some of the St. Patrick’s Day traditions that are fun but have no place in an advisor’s business.
Source: “Corporate Bond Market Transaction Costs and Transparency,” Edwards, Harris, Piwowar. The Journal of Finance, Volume 62, Issue 3, June 2007.
Are you using individual bonds to differentiate your portfolio offering for affluent investors? Many advisors do, often citing liability matching and taxes as the main justifications for such a strategy. Although, I don’t argue there may be cases where individual bonds make sense for a client, I believe it is important to consider the tradeoffs of using individual bonds vs. a bond mutual fund before making that decision. Below I’ve summarized the key points to consider when deciding between an individual bond and bond mutual fund strategy.
2013 was a great year for investors. Stock markets in all 24 developed countries had positive returns, with Greece being the best gaining 49%.
What may be surprising to many investors is that the PIIGS (Portugal, Italy, Ireland, Greece and Spain), which were in financial turmoil during the last few years, were among the top performers in 2013. The BRICs (Brazil, Russia, India, and China), which had strong GDP growth, were among the bottom performers.
Chart 1: 2012 GDP Growth Rate and 2013 Market Return
Source: World Economic Outlook Database October 2013, Morningstar Direct January 2014.