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Tech Is The Best Sector For Investors Right Now (BlackRock Blog)
Although there’s been significant market volatility recently, “anxiety over technology is premature” and it “is still one of my favourite sectors,” writes BlackRock’s Russ Koesterich.
He writes that the technology sector has a lot of momentum, and has “easily” outperformed the broader US market. Year-to-date they were up 12% in the end of September. But despite the fact that tech is significantly outperforming the market, prices are not too expensive — which makes them a good buy.
“Perhaps most importantly, looking forward I can see a catalyst for further gains: increased capital spending. Fixed investment has been weak for well over a decade. Since 2000, US real fixed investment has averaged around 1.5% annualized growth. Prior to the bursting tech bubble, real investment averaged approximately 5% annualized growth,” writes Koesterich.
Goldman Sachs: Investors Need More Alternatives (Investment News)
In the past, investors needed only to invest in stocks for risk and bonds for safety.
“…that’s how they did things back in the 1970s, when things were a lot different than they are today. These days, you own things in your portfolio for some type of return, and that includes alternatives,” argues Goldman Sachs’ Theodore Enders.
He advocates having significant alternative allocations of between 19% to 24% in order to reduce volatility. Smaller percentages will not make a “real difference on long-term performance.”
Increasingly, studies are showing that active managers are having a hard time consistently outperforming their benchmark indexes. By the end of August, although 71% of assets in portfolios were actively managed, the growth of fund flows to actively managed assets was a mere 2% over the past year, as compared with 11% organic growth in flows to passive investment portfolios.
Passive assets have surpassed active in commodities — 64% are passive assets.However, for other categories such as municipal bonds and allocation funds, the majority are still active assets.
Pension Fund Managers Should Add Exposure To High-Yielding Asset Classes (AllianceBernstein)
The financial markets’ changes since 2008 have made a “growing array of less liquid” but possibly high-return investment opportunities available. As a result, assets that were once considered to be “opportunistic” will start to look like “core components” of the average fixed-income portfolio.
“Pension funds, with their large balance sheets and longer time horizons, are in the perfect position to take advantage, either by making direct loans or adding exposure to high-yielding asset classes once available only to banks. Because most investments require intermediate- and long-term funding, they offer higher return potential and yield to compensate investors for giving up liquidity,” writes Bass.
Stocks Might Be More Risky Than Everyone Thinks (Advisor Perspectives)
Many people believe that equity investments undoubtedly turn out well in the long run. However, “with equity investments, as opposed to fixed income, there is no contractual assurance of receiving any of one’s investment back at all, let alone a positive return,” writes Michael Edesess.
One of the biggest supporters of long-run equity investments is professor Jeremy Siegel. The problem with his argument is that his data only covers from 1800 to the present day, during which “real global economic product has averaged about 2.7% annually.” As a result, long-run equity returns were generally favourable.
Before 1800, growth averaged between 0-0.2% per year — significantly less. And Edesess warns that if “the pace of economic growth went back to the levels of the past, prior to the last 200 years,” then long-run equity returns would no longer be a viable option for investors.
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