Relatively Calm Emerging Markets Attracting Investors

Emerging markets—long considered turbulent–are seeing the lowest volatility they have in three years, which is attracting funds and bolstering returns. This according to a recent article in The Wall Street Journal. The MSCI Emerging Markets Index is up 25% over the past 12 months, the article reports, compared with a 15% return for the S&P 500. It attributes the flow in part to the fact that valuations haven’t risen as much as they have in the U.S. equity market. According to Credit Suisse Group strategist Alvise Marino, “When investors believe the market is unlikely to be hit by negative surprises, […]

3 Questions Investors Can Ask To Help Prepare For and Deal With Market Volatility

Market volatility, such as we have seen recently, often causes investors stress. The best way to deal with it may depend on the individual investor. Asking yourself the following three questions can help. What is your risk tolerance? As Michael Kitces of Pinnacle Advisory Group puts it: “now is the time to review what your risk tolerance really is,” asking “did you fool yourself into thinking you had more risk tolerance because you were underperceiving risk” when the market was more stable? When do you need the money you have invested? If you are invested for 10 years or more, […]

… Or Does It?

In our previous post, we highlighted the “low-volatility effect” — the historical tendency for lower-volatility stocks to outperform higher-volatility issues. But IndexUniverse’s Elisabeth Kashner says the issue may be more complex than the simple notion that low volatility leads to better returns. Recently, Kashner says, low-volatility strategies have lagged. Part of that is a result of sector allocations, but not all of it.  “Low-volatility investing became popular only recently, after investors saw the resilience of low-volatility strategies during the Great Recession,” she says. “Despite years of rising markets, investors have been seeking defensive strategies, and have been strangely rewarded by […]

Nygren: Volatility Isn’t Risk

For years, volatility and risk have been synonymous in stock market discussions. But in recent commentary, top performing fund manager Bill Nygren says otherwise. In a piece posted on Oakmark’s web site, Nygren notes that Oakmarks’ funds have been more volatile this year, and cites a couple reasons. One, he says, is that in a quest for yield in this low-yield bond climate, many investors “have begun to pay nearly unprecedented prices for stocks that distribute most of their earnings as dividends.” That has caused those stocks — which include many telecoms and utilities — to trade like bonds, rising […]

O’Shaughnessy On How To Deal With The “Cruel Beast”

The emotional ups and downs of the past few years have had many investors jumping in and out of the stock market in alternating bouts of fear and relief. Quantitative investment strategy guru James O’Shaughnessy has some advice for them: Stop it. In a column for MarketWatch, O’Shaughnessy and son Patrick O’Shaughnessy write that “volatility is a cruel beast, because it leads investors to make emotionally based decisions that center on the near term future and ignore longer-term opportunities. Moreover, many investors are staying out of the stock market entirely or selling their equity stakes.” But, they say, history shows […]