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Aiming For Mediocre Returns Is The Best Investment Strategy (Abnormal Returns)
Aiming for mediocre returns is a better investment strategy than pursuing high returns with an active strategy. This is according to Tadas Viskanta of the Abnormal Returns blog. When you factor in fees and costs, pursuing active returns end up being far less profitable than a strategy that aims for more mediocre returns.
According to Barry Ritholz of The Big Picture, “We know that 80 per cent or so of mutual fund managers underperform their benchmarks each year. We have seen Morningstar studies that show of the remaining 20 per cent, factor in fees, and that number drops to 1 per cent.”
Instead, Viskanta recommends an investment strategy that is “low impact, tax-aware” and “focused on low costs, index funds, broad diversification, portfolio rebalancing.”
NYSE Margin Debt Is Generating A Huge Sell Signal (Bank Of America)
The margin debt at the New York Stock Exchange is rising steadily, following a pattern similar to that of early 2010. The last time this happened, the S&P 500 “corrected by 16% in two months,” according to a note by BoFA Merrill Lynch technical analyst Mary Ann Bartels.
Take a look at this chart that correlates the S&P 500 and NYSE margin debt:
Photo: BofA Merrill Lynch Global Research, NYSE, Bloomberg
REITs Are Generating Double Digit Returns (Wall Street Journal)
Stock real estate funds have been performing well for about five years now, but real estate investment trusts, or REITs, are doing even better. Instead of buying buildings or land, REITs buy mortgage-backed securities. And in the past year they’ve become a more popular investment.
The $1.1 billion iShares Mortgage REIT Capped (REM) exchange-traded fund, which is already up more than 12 per cent in 2013, saw net inflows of more than $700 million in that last year.
“Despite their run, REITs remain attractive to income investors,” said Matt Reiner, chief investment officer at Capital Investment Advisors. “But we warn our clients that funds using stock REITs are very different animals than those buying mortgages.
“Compared to Treasuries, mortgage REITs are paying much better yields—and we don’t see that trend reversing soon.”
Visible Risk Is Back, And It’s A Good Thing (Advisor Perspectives)
Visible risk has reentered the market, said Astor Asset Management’s Rob Stein in a note. And since visible risk is, by nature, quantifiable, it is much better than the alternative—”complete uncertainty,” he said. Going forward, now that visible risk is back, markets will react in a rational, “real” manner.
“When faced with uncertainty, markets become volatile and follow irrational patterns,” he said, “With visible risk, on the other hand, it is far easier to calculate the potential downside and invest accordingly.”
More Investors Want To Add Collectibles To Their Investment Portfolios (Investment News)
The number of high net worth investors who own art and other collectible are on the rise. According to a survey by Barclays, 49 per cent of investors with investible assets of $1.5 million or more owned fine art in 2012, up 8 percentage points from 2007.
Clients often want to include assets like art or collectibles as a part of their investment strategy, but it isn’t a very good idea to do so. Such assets are illiquid, and it’s hard to tell exactly how much they are worth.
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