FA Insights is a daily newsletter from Business Insider that delivers the top news and commentary for financial advisors.
There Are Two Sides To Every Trade Argument (Vanguard Advisors Blog)
Every trade has two sides, writes Steve Utkus a principal and director of the Vanguard Center for Retirement Research. That should teach investors a few key things, like humility: “The person on the other side of the trade, takes an entirely different view of the opportunity than you do.” It should also teach them to be sceptical. Utkus also said that this gets to the “heart of the debate over active versus passive investing.”
“It’s not that active portfolio managers don’t have great ideas for the stocks (or bonds or other assets) they buy or sell. (By the way, this is true whether the active manager is with another firm or managing one of Vanguard’s many active funds.) But in order to create a great track record over time, active managers must be consistently right on hundreds of buying and selling ideas each year — and thousands over a decade. They’re often smart and hardworking. But so are the people on the other side of the trade. As a result, the odds of consistently being right on hundreds or thousands of investment themes is very hard. And that’s before you deduct the higher fees needed to come up with all of these ideas.”
What Advisors Need To Remember When Clients Want To Retire Out Of State (The Wall Street Journal)
Advisors should do their research and debunk myths for clients looking to retire out of state, writes Richard Kagawa, president of Capital Resources and Insurance Inc, in a new WSJ column. “Taxes are one of the biggest factors–everything from sales, property, and income taxes to cigarette and diesel taxes,” he writes.
“There are also cost of living expenditures for things like food and heat that need to be considered, as well as state-by-state anomalies. For instance, I live on the beach. Salt invades everything. It pops through my driveway and ruins the landscaping. It sneaks under the stucco and kills the plants. In Florida, meanwhile, the state bird is the mosquito. You may have a nice pool but you can’t enjoy it in the summer unless it’s screened-in. These are costs you need to consider.”
FINRA Sees Uptick In Q1 Arbitration Cases (Investment News)
The number of arbitration cases brought to the Financial Industry Regulatory Authority (FINRA) were up to 1,011 in the first quarter, up from 919 last year. This is however down from 1,183 cases in Q1 2012. One of the reasons arbitration cases are believed to rise this year is because of the collapse in Puerto Rico municipal bond funds, reports Mark Schoeff Jr at Investment News. “We’ll have to see how the Puerto Rico bond cases play out,” Bryan Ward, a partner at Sutherland Asbill & Brennansaid told Schoeff. “A few big wins can be a strong marketing tool for getting more clients.”
Why Investors Should Stick With Energy Stocks (BlackRock Blog)
The U.S. is awash in oil and expected to overtake Saudi Arabia as the world’s largest energy producer soon, writes BlackRock’s Russ Koesterich. Yet, the price of Brent Crude is close to multi-year highs, at $US100 a barrel. This is for two key reasons. First, the geopolitical tensions in Russia and Ukraine have oil traders worried that an uptick in violence could impact Russian oil production and or exports. Second, “production has been falling in Libya, Nigeria and South Sudan, mostly due to terrorism and political instability,” writes Koesterich.
“For some time, I have been advocating an overweight to this sector, and I continue to stand by that position,” Koesterich writes. “The sector provides an important feature today: a potential hedge against rising geopolitical risk. Should events in Ukraine continue to deteriorate and lead to an escalating series of sanctions and higher oil prices, I believe energy stocks are likely to continue to outperform the broader market. I expect tensions to remain high and the issue to linger, although an outright invasion of Ukraine by Russia remains less likely.” He also thinks cyclical stocks will do better as the global economy recovers and that the energy sector still offers investors a bargain.
JIM ROGERS: If You Want To Get Rich You Should Buy Farmland (Interactive Investor)
As the global population grows so will demand for food. “If you want to get rich you should be buying farmland. It’s the farmers, the producers, who are going to be in the captain’s seat when the prices go through the roof,” Jim Rogers co-founder of Quantum Fund and chairman of Rogers Holdings told Iain Murray. Of course investors that can’t buy a farm can invest in funds that buy farmland.
“Moreover, with certain caveats, it’s an asset that you can pass on as a tax-free inheritance. In pure monetary terms, it’s an investment that delivers impressive capital gains over the long term, but a relatively unimpressive annual yield of 2% or less,” Murray writes. Of course if investors want broader investment in agriculture they can also look at funds that are focused on the food industry.
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