FA Insights is a daily newsletter from Business Insider that delivers the top news and commentary for financial advisors.
10 Business Lessons From The Beatles (Money & Markets)
Josh Brown finds investing and finance-related lessons in almost every book he picks up. Drawing on Bob Spitz’s The Beatles: The Biography Brown puts together 10 lessons he learned from The Beatles that apply in business and investing.
Some of these include collaboration – “Are you surrounded by the right people, people whose own talent inspires you and pushes you to develop your own skills?” Or don’t make the same mistake twice. Dick Rowe famously rejected The Beatles and about two years later Beatlemania was gripping London. “Less than two years later, as the early stages of Beatlemania are gripping London, Dick Rowe bumps into George Harrison at a concert. All is forgiven by now, of course, but the label executive mentions to Harrison that he’s on the lookout for talent. George mentions the Beatles’ friends, the Rolling Stones, and before he can get the rest of the sentence out of his mouth, Rowe is off like a shot.” Brown’s takeaway, think about opportunities you’re overlooking.
Stocks have gone sideways for almost a decade, though some have called it a secular bear market. Now, Jurrien Timmer at Fidelity writes that we may be entering a secular bull market.
Looking at the S&P 500 since 1871, Timmer writes that on average secular bear markets last 14.5 years. And we seem to be in the thirteenth year of prolonged periods of below-average returns and by historical patterns this is likely to end soon.
“This study of market history seems to suggest that maybe the worst is over. If so, it will be important for investors to take a close look at their portfolios to make sure they are not too defensively positioned and that their investment mix is in line with their long-term goals.” He does however warn that not everyone feels the same way and that pension funds in particular have lowered their risk profiles.
Hedge Funds Are Selling Stocks And Private Investors Are Buying Them (Bank of America)
Bank of America’s Savita Subramanian writes that hedge funds are selling stocks to private investors who have increased their purchases.
“Net buys were $1.22bn, the largest since November, and continued to be led by private clients. Private clients have now been net buyers for four consecutive weeks, a sharp reversal from their large net sales ahead of the Fiscal Cliff late last year.
“Institutional clients were also net buyers last week after two weeks of net sales, while hedge funds were the sole net sellers. Pension funds, a subset of institutional clients, were net sellers for the fourth consecutive week.”
Photo: BofA Merrill Lynch
Regional Brokerages Are Simplifying Their Compensation Packages (The Wall Street Journal)
Regional wealth management firms like Raymond James are updating and simplifying their compensation packages to attract brokers from the biggest retail brokerages.
When Raymond James recently simplified its compensation plan it was the first significant for the first time in over 20 years. This new plan means advisor’s pay won’t be determined by the type of product that is being sold i.e. option, stock, or mutual fund. It now has 15 payout levels, compared to five/ These changes will take effect in September.
Some have said the big theme in 2013 will be the ‘Great Rotation’ from money out of bonds to stocks. Some have said those that speak of a ‘Great Rotation’ don’t understand how markets work. Citi’s Tobias Levkovich says such a scenario is over a year away and that current data being used doesn’t paint a clear picture.
“A so-called Great Rotation towards stocks has not developed from the evidence that can be compiled recently. The data on US equity mutual fund flows have been mixed based on different tracking sources. Indeed, one mutual fund flow data provider reported outflows during January while others suggested there were significant weekly inflows.
“…Note, we suspect that investors will need to be convinced by five-year return numbers showing equities outperforming bonds and that means it may take another year for the rotation to develop (since the tough 1Q09 will have to be “anniversaried” away).”
Six Mistakes Investors Often Make (The Globe And Mail)
Duke University professor Dan Ariely and Rotman School of Management researcher Nina Mazar write that there are six common mistakes that investors make.
1) Saving – people save too little and spend too much should 2) Retirement – most people assume we need 60 – 70 per cent of current income for retirement, studies suggest it is actually closer to 135 per cent 3) Insurance – people hate deductibles and often end up choosing more expensive policies in the long run 4) Shopping – we invest in extended warranties even though we know they’re bad deals and just profit the vendor 5) Mortgages – do your research and don’t just buy mortgages from the same mortgage originators 6) Don’t become victim to the ‘state quo bias’ by sticking with a plan because it’s what you first chose.