It’s Time To Get Into The Rebalancing Act

By John P. Reese — If it ain’t broke, don’t fix it can be a useful mantra in many walks of life, but investors should be wary when applying this idea to asset allocations. Movements in the market can shift allocations and result in concentrations that might not necessarily fit your risk profile and/or investment goals. Suppose, for example, you create a portfolio comprised of 60% stocks and 40% bonds. If stocks see a period of large returns and the allocation shifts to, say, a 70% stock allocation, you might consider leaving things alone in the hopes that the trend will […]

Fund Manager Holds Cash in Anticipation of North Korea-Prompted Selloff

AMP Capital’s Nader Naeimi, who heads one of the firm’s dynamic investment funds, has about 30% of his holdings in cash, according to a Bloomberg article from earlier this month, and sees North Korea situation as “one of the factors that could eventually bring down the long bull run in equities.” In addition to his cash holdings, Naeimi has “an allocation to gold and is short emerging-market currencies versus the dollar. His fund has beaten 77 percent of peers over the past year,” according to data compiled by Bloomberg. According to the article, Naeimi said, “Markets need a correction,” adding, “There […]

Investors Should Imagine Pain to Evaluate Asset Allocation

While market worries abound, a recent article in The New York Times argues against trying to predict when the bull market will end or making trades based on those predictions. It adds, however, that there are those who “deserve to worry at any particular moment: those who will need most or all of their investment money soon.” It’s difficult to know, the article says, how much is the right amount to have invested in stocks at any given moment, but a good place to start is for an investor to determine “how comfortable you are with the possibility of losing […]

Singapore’s Sovereign Wealth Fund Warns Investors About Looming Market Risks

Singapore sovereign wealth fund GIC is warning investors that low readings in the market’s “fear gauges” could be signs of trouble down the road, according to aBloomberg article from earlier this month. One of those gauges, the VIX, is reported to have recently hit the lowest level since 1993, even lower than those seen in 2007. GIC’s chief executive officer Lim Chow Kiat says that the level of uncertainty is “very high” versus the low volatility in equity prices, adding, “We think this indicates investor complacency, another reason for us to be more cautious.” The article says Lim argues that […]

Forget Asset Allocation, says Glenmede’s CEO

Stock-picking is still in vogue with Gordon Fowler, CEO of the $24 billion Glenmede Trust fund. A recent Barron’s article describes the process employed by his team. “Every morning, Fowler assembles his wealth advisory group simply to brainstorm about individual stocks and come up with smart client moves.” According to Fowler, deep analysis of equities makes more sense than picking broad asset allocations. “In this environment,” he says, “stock mispricings are bound to arise, and trying to make money through asset allocation becomes progressively more difficult.” His team looks for stocks with “reasonable” valuations, a strong chance for further profits […]