Vanguard Says There Are 6 Components To A Good Diversified Portfolio

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How To Construct A Diversified Portfolio (Vanguard via Josh Brown)

A new white paper from Vanguard says there are six key components to creating a diversified portfolio. 1. “Defined investment goals and constraints.” 2. “Broad strategic allocation among the primary asset classes such as equities, fixed income, and cash.” 3. “Sub-asset allocation within classes, such as U.S. or non-U.S. equities or large-, mid-, or small-capitalisation equities, and so on.” 4. “Allocation to indexed and/or actively managed assets.” 5. “For taxable investors, allocation of investments in taxable and/or tax-advantaged accounts.” 6. “Selection of individual managers, funds, or securities to fill allocations.”

Regulators Warn Those Trying To Buy Or Sell Their Pensions (FINRA)

Both the SEC and the Financial Industry Regulatory Authority (FINRA) have told retirees that selling or buying pensions or settlement income streams to be cautious. This is because they could carry hidden costs and high rates.

“Anyone receiving a monthly pension or regular distributions from a settlement following a personal injury lawsuit may be targeted by salespeople offering an immediate lump sum in exchange for the rights to some or all of the payments the person would otherwise receive in future. Typically, recipients of a pension or structured settlement will sign over the rights to some or all of their monthly payments to a factoring company in return for a lump-sum amount, which will almost always be significantly lower than the present value of that future income stream.”

The Short Sellers Are Getting Destroyed (Bespoke Investment Group)

The most shorted stocks are leading the current market rally.

Shorted stocks leading market rally

 Forget The BRICS, Make Way For The MIPS (Guggenheim Partners)

While growth is slowing in the BRICS, Scott Minerd at Guggenheim Partners writes that there is room for “exponential growth in other emerging markets.” And he argues that Malaysia, Indonesia, the Philippines, and Singapore (MIPS) are very attractive. 

“Southeastern Asian countries including Malaysia, Indonesia, the Philippines, and Singapore (the MIPS) could enjoy stronger growth over the next decade, owing to improved fundamentals and positive demographic trends. Since the end of the global financial crisis, equity markets in the MIPS have substantially outperformed the BRICs.”

We Will See High Excess Returns On The S&P 500 For The Next Five Years (Business Insider)

New York Fed economists Fernando Duarte and Carlo Rosa say that going by the equity risk premium (ERP) stocks are at their cheapest  level in 50 years. 

“To calculate the ERP in the chart above, Duarte and Rosa collected “20-nine of the most popular and widely used models” for forecasting stock returns and incorporated the average expected return into the ERP calculation.

“We surveyed banks, we combed the academic literature, we asked economists at central banks,” they write. “It turns out that most of their models predict that we will enjoy historically high excess returns for the S&P 500 for the next five years.”

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