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In traditional glide path approach an investors asset allocation becomes more conservative as they get older. But this isn’t the best approach according to Ben Inker at GMO told Morningstar’s Kevin McDevitt. “I think the biggest concern we have about the traditional way putting together a glide path is it’s assuming that you’re always getting paid the same amount for taking risk,” Inker said. “It’s assuming that stocks are always at fair value and bonds are always at fair value.
“And one thing that’s pretty clear is valuations matter, and we think it’s not reasonable to say, “I’m 25 years old; I can afford to take a lot of risk.” That’s fine. But if you’re not getting paid for taking a risk, don’t take it. And by the same token, even if you’re a 75-year-old well into retirement, if bond yields are really low, and stocks are cheap, you should own some stocks.
“I think the most important problem is that they don’t respect the fact that valuations change, and as valuations change your portfolio should change, as well.”
BlackRock is out with its mid-year update to “The List” — five things investors should know for the rest of the year, and five things they should do. One key thing they point out is that interest rates maybe be low but they are trending up. With that in mind, they point out that there are “very few bargains” for those looking to buy bonds.
“All told, navigating the bond market remains very difficult, but bonds are an important source of income and play a vital role in a portfolio,” according to BlackRock. “Our advice: Choose wisely. Some areas of the bond market are more vulnerable to rising rates than others. Shorter-maturity bonds, which are used as cash alternatives by many investors, could face greater upward movement in yields and resulting principal losses. this may surprise some investors, making that an area to approach with caution.
“With yields likely to be volatile, and some areas of the bond market feeling the effects more so than others, a flexible, go-anywhere bond portfolio that can make adjustments on the fly is an invaluable addition to your fixed income toolkit.”
66% Of Investors Think There Is Room For More ETFs In The Market (Charles Schwab)
The 2014 ETF Investor Study by Charles Schwab found that 66% of investors think there is room for more exchange traded funds (ETFs). 46% said they plan to increase their ETF investments in the next year. “It’s clear that investors expect innovation and choice when it comes to ETFs, but that enthusiasm is coupled with a desire for a deeper understanding of how to choose and use the products,” Heather Fischer at Charles Schwab said in a press release. “Although 40 per cent of investors still consider themselves ETF novices, that group has been steadily shrinking and is down from 45 per cent in 2013. What this means is that education remains a top priority but as ETF investors are becoming increasingly savvy, they are seeking products, strategies and access that go beyond the basics.”
Women are taking on a bigger role in wealth creation, according to US Trust’s Wealth and Worth report that surveyed 680 high net worth individuals (HNWI). 52% of high net worth couples said women entered the relationship with financial assets that were equal to or more than their partner. But men were still dominant when it came to making financial decisions. 60% of high net worth couples say men still dominate investment decision making, but women are sharing the process in about 30% of households, and taking the lead in 10%.
Job Satisfaction Is High Among Advisors, But So Is Stress (Financial Planning)
79% of advisors surveyed by Adhesion Wealth Advisors Solutions ranked their job stress level at 7 out of 10, reports Maddy Perkins at Financial Planning. This despite high job satisfaction among respondents. “Pessimistically, it just seems like a lot of things aren’t adding up in terms of the economy with how the markets are behaving,” Richard Dragotta, an advisor with LPL Financial told Perkins. “The opportunities are less and less, and more people are trying to catch the tail of something. Making new highs all the time is stressful, and having less and less conviction to come up with solutions for clients makes it a little more stressful.”
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