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In a low interest rate environment investors may be reluctant to rebalance their portfolio and reallocate to bonds. “The low rate environment doesn’t change the important role of bonds. Diversification remains one of the best ways to help defend clients’ portfolios against unexpected market volatility,” says Fran Kinniry, a principal in Vanguard Investment Strategy Group. High quality U.S. bonds are still “among the best diversifiers of equity risk.” Kinniry also argues that it’s important for advisors to teach their clients to tune out the noise.
Investors Should Stop Chasing Top-Performing Funds (The Wall Street Journal)
Frequently, when it comes to investing, investors look for top performers. But Tom Brakke, writer and investment adviser, writes that this isn’t the best way to go about picking a manager. “Was the short-term performance you see a sign of skill or luck? How would you know? If you think it was “skill,” was the performance driven by a one-time insight or something that is likely to repeat?” writes Brakke in the WSJ.
“Listings of performance winners in financial publications and advertisements from asset managers trumpeting the “stars” that they have earned for past performance aren’t of value to an investor. Don’t start your selection process by focusing on “top performers”; that’s the rear-view mirror, not the windshield.”
Albert Edwards: The US Profit Margin Cycle Has Finally Begun Its Downturn (Business Insider)
Stock market bulls and bears are divided on whether the current elevated profit margins are sustainable or not. “During the excitement of the downward revision of Q1 US GDP from +0.1% to -1.0% investors seem not to have noticed a $US213bn, 10% annualized slump in the US Bureau of Economic Analysiss (BEA) favoured measure of whole economy profits, defined as profits from current production,” writes Edwards.
“The bottom line is that the US profits margin cycle has begun to turn down at long last (see chart below),” said Edwards. “It is doing so from elevated but not unprecedented levels especially the non- financial part of the economy (my former colleague Leo Doyle always told me I had to add depreciation into the profits numerator as the denominator GDP was also measured gross of depreciation i.e. the G in GDP!).”
Advisors Working In Teams Make More Money (WealthManagement.com)
One in three advisors now works on a team, and advisors working in teams bring in more money, according to WealthManagement.com’s annual compensation survey. “The emergence of teams is there. It’s a very significant trend, year after year,” founder of the Ensemble Practice Philip Palaveev told Megan Leonhardt at WealthManagement.com.
Advisors in teams “reported an average of $US923,606 in gross production, versus $US561,247 by solo advisors. Moreover, team practices earned a higher take home pay on average, with the survey finding on average, team players earned $US253,636 in total compensation last year. …Solo advisors took home an average $US247,840 (including fees, commissions, deferred compensation and bonuses). Those advisors sharing the cost of resources, but not clients or revenues, fared the worst, with advisors in a siloed practice earning an average $US196,975 in 2013.”
3 Reasons Why It’s Premature To Call The Top In Profit Margins (Business Insider)
Goldman Sachs economist David Mericle thinks it is “premature” to call the Q1 decline in profit margins “a turning point” for three key reasons. “First, most of the decline in the national accounts measure of corporate profits arose from the BEA’s adjustment for the expiration of bonus depreciation, a somewhat uncertain procedure,” writes Mericle. “Second, weak growth and productivity in Q1 likely weighed on profits, but should strengthen going forward. Third, wage growth has shown little evidence of a pick-up and remains well below the rate that would consistently detract from margins. We instead expect margins to rise a touch this year and next.”
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