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“It’s hard to beat asset allocation when defined across a wide array of asset classes. It’s even harder if the benchmark re-balances the mix on a periodic basis. The historical record is a reminder that we should think twice about second-guessing Mr. Market’s portfolio choices. This sounds like a dumb idea, until you look at the results for a majority of “smart” money managers.
“Another dumb idea that ends up looking rather savvy is keeping expenses low, which is quite easy to do with index mutual funds and ETFs. Replicating GMI with ETFs, for instance, can be done for less than 50 basis points, perhaps a lot less, depending on the products you choose. Many of the active funds in the chart above charge two to three times as much.
“The power of broad diversification across asset classes, favouring low-cost index funds, and simple rebalancing is a no-brainer that serves as a robust, investible benchmark. Yet relatively few investors take full advantage of this strategy. That’s probably why GMI’s competitive results persist: most investors are doing something else. But innovation seems to come at a steep price in relative and perhaps absolute terms.”
Appaloosa Management’s David Tepper was on CNBC today making the bullish case for stocks. He says there is “overwhelming” evidence that the economy is getting better.
“I’m definitely bullish. Look, ever see the movie My Cousin Vinnie? So there’s this moment at the end of the movie where where he is making the case, summing it up. And he sums up so many different things that the prosecution says, case dismissed, because the evidence is so overwhelming. Kind of like that right now. It’s so overwhelming. The economy is getting better, autos are better, housing is better, continues to improve except they can’t find enough people to work in housing, that’s the only thing holding it back right now.
“The Fed, well, before we get to the Fed, Australia just eased, the ECB just eased, Korea just eased, japan is in massive easing mode, and these United States of America, we just are just amazed at the way these numbers work. as we go out further. …Guys that are short they better have a shovel to get themselves out of the grave that they’re in.”
How To Determine Your Retirement Withdrawal Income Rate (Investment News)
Many investors are worried about outliving their savings. At the InvestmentNews Retirement Income Summit in Chicago, Wade Pfau, National Graduate Institute for Policy Studies, discussed “whether it is better to base a retirement income withdrawal rate on predictable historical returns or one that focuses on basic retirement needs,” according to Investment News. This he says is basically a matter of the likelihood of failure as opposed to the size of it. And he doesn’t think one method is necessarily better than the other.
Investors Are Freaking Out About A Chinese Economic Hard-Landing Again (Bank of America)
A string of less than impressive data out of China has raised concerns about Chinese economic growth. A new Bank of America fund manager survey shows that one in four investors thinks a Chinese hard landing is the biggest tail risk. And it is second only to Europe’s sovereign debt crisis.
Retail Banks Have A Huge Opportunity In Wealth Management (Financial Planning)
Retail banks entering into the wealth management business can do so quickly if they can incorporate technological advances. This is because there is a growing class of middle-income investors that can’t attract private banks. But retail banks are operating in an extremely competitive environment and to attract new customers they often have to poach them. “This is all about stealing share now. It’s not about telling people to bring money from your mattress,” Wayne Cutler of Novantas told Financial Planning.