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“The growing popularity of passive equity investing seems to be an unstoppable feature of the evolving investment industry,” proclaims Mark Harrison, CFA, director of publications at CFA Institute. In fact, “recent analysis by Morningstar, aggregating data on mutual funds and exchange-traded funds (ETFs), suggests passive investing is now the default choice for American investors, attracting an astonishing 68% of the past 12 months of investor inflows.”
However, there’s a more recent wrinkle in the long running debate. “Somewhere between active and passive management is the increasingly popular factor approach, which offers investors the chance to isolate various return drivers, or “factors,” to achieve more transparent and better returns at lower costs,” writes Harrison. “his is an approach that has been already embraced by the fund indexing and ETF industry, where several factor-based products are available.”
Millennials’ Spending Habits Could Be Bad News For Big Banks (The Atlantic Business)
Millennials are “spending money differently than previous generations,” writes Nancy Cook. They “prefer to throw cash at new experiences and adventures and to reward socially responsible companies that they can connect with and that they deem authentic.”
According to Cook, “it’s easiest to see this change in the food industry, where millennials are helping to disrupt the landscape of casual restaurants and boosting the earnings of chains such as Chipotle or Panera.” It may be even worse for big banks. “A three-year research study of more than 10,000 millennials found that a good handful of the least-liked brands were big financial institutions such as Bank of America and Citigroup,” explains Cook. “Leading the authors to name the financial industry as one of the greatest areas for potential disruption by millennials.”
“As the old adage says, It takes money to make money. You don’t have to be wealthy to invest, but you have to invest to be wealthier,” writes Lewis Walker, CFP, president of Walker Capital Management LLC. Unfortunately, “many Americans are losing the asset accumulation battle. The inflation-adjusted net worth of the median household declined 36% over 10 years, according to a New York Times article, citing a study by the Russell Sage Foundation.”
Fortunately, all hope is not lost. There are still various forms of wealth accrual available to Americans ranging from stocks to real estate that can net great results. However, as imporant as accruing wealth is, protecting it is just as important, cautions Walker. “A vital component to wealth building is protecting it. Prudent insurance protection shields you and those you love from the vagaries of life, including accidents and property damage, injury and disability, premature death, lawsuits, and health-care costs.”
The European Central Bank’s Latest Moves May Not Be Enough To Restore Confidence (Columbia Management)
“In typical fashion, last week’s European Central Bank (ECB) announcements found a way to bury the lede,” writes Zach Pandl, portfolio manager and strategist at Columbia Management. “The deposit rate cut to -20 basis points from -10 basis points was characterised as a technical adjustment, and the asset purchase program, while important, lacked a specific quantitative target — forcing investors to infer a rough figure from Mario Draghi’s comments in the press conference.”
Pandl adds, “the steps taken by the ECB were critical for the outlook because they revealed something about the central bank’s reaction function — that policymakers will deploy unconventional tools to prevent inflation expectations from falling too far.”
The Alternative Reality Of The Endowment Model (Institutional Investor)
“The endowment investment model, which is widespread among university, is often flagged as the best-in-class framework for long-term investors, ” proclaims Ashby Monk, Ph.D., executive director of the Global Projects Center at Stanford University and a senior research associate at the University of Oxford.
This is an approach to institutional investment that is almost entirely outsourced and seeks to generate high returns through an aggressive orientation toward private equity and other alternative assets,” writes Monk. Although still popular, Monk believes, “some institutional investors now see it as being at odds with long-term investing and perhaps even damaging to the long-term investment challenge.”
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