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It’s The Baby Boomers — Not Millennials — Who Are Driving Stock-Market (Financial Advisor Magazine)
Everyone’s always talking about the millennials, but so far “the Baby Boomers are still the ones really driving the bus in the stock market,” Bank of America’s Savita Subramanian argues.
Although older people spend less, it’s important to note what they are spending money on. As people age they stop spending money on discretionary items like cars, and costs like education and child care. Instead, the money is directed toward drugs and healthcare.
And this year healthcare shares are up 16% this year on the S&P 500, while companies that “rely on discretionary consumer spending are barely up 1 per cent, the worst performance.” Contrastingly, twenty years ago, health care stocks only made up 9% of the index.
Saving Isn’t The Most Important Thing For Financial Success (Pragmatic Capitalism)
“Saving isn’t the key to financial success,” Cullen Roche writes. “Investing is the key to financial success.”
“Investment (not the financial type you’re probably aware of with regard to buying stocks and bonds) is spending, not consumed, for future production,” Roche adds. “When you invest in your future you build an intangible (or tangible) asset that (likely) makes you more valuable. In other words, when you invest in yourself you make your future production more valuable which makes your future income more valuable which allows you to save more of your future income in the future. Importantly, investing adds to aggregate saving because one does not dissave in order to spend on investment. That is, when you invest you have an asset that is as valuable or more valuable than your prior savings PLUS someone else has your spending as their income.”
Stick With Buying Passive Funds For International Holdings (Financial Planning)
Investors of actively managed funds or exchange-traded funds for their international holds aren’t doing too well, and do better buying passive index funds, according to S&P’s SPIVA US Scorecard.
Over the past year 70% of global equity funds, 75% of international equity funds, 81% of international small-cap funds and 65% of emerging markets funds underperformed their benchmarks. Overall, active managers did “even worse over a three- or -five year period.”
“It gets worse over the longer term. Over the past three years, 65% of actively managed funds underperformed in the broad international category, and 61% underperformed in the emerging markets category, while over five years, 70% underperformed in the broad international fund category, and 68% of actively managed emerging markets funds underperformed their benchmarks,” said Todd Rosenbluth, the S&P’s director of ETF and mutual fund research.
However, all is not lost. Active management still did better in international small-cap.
A Significant Twitter Following Does Not Reflect A Person’s Credibility As A Wealth Manager (Wealth Management.com)
A person’s credibility as a wealth manager should not be evaluated by the number of twitter followers he has, argues Patricia Angus. “The correlation between the number of “followers” and the quality of work is assumed to be high, despite little evidence to that effect,” writes Angus.
“I worry about families who are seeking good advice that’s based on education, training and experience. With all this “tweeting” going on, literally or figuratively, how can someone who doesn’t have the kind of filter that develops after years of experience know whether the advice he receives will be good?” she added.
There’s an assumption today “that by broadcasting the work you do, you’re making the statement that the work has been done well.” But that’s not always the case.
The major benefit of the income only approach is “peace of mind,” says Christine Benz. “Retirees take great comfort in knowing that if they are living off income distributions alone, they should never deplete their principal.”
However, the income investment approach hasn’t been the best choice in recent years because of low yields. Income-centric investors “have had a choice between two paths” in this situation. First, they could stay with high-quality securities and settle for ever-lower yields. This decision affects the standard of living because “they have been able to wring less out of their portfolios,” Benz says.
On the other hand, they could move into higher-yielding but also higher-risk securities, which is what many retirees have been doing. “That is why we have seen this stampede of assets into some higher-risk bond types over the past few years. We have seen pretty strong flows into high-yield emerging-markets bonds — this nontraditional bond category — all groups that have been seeing a greater level of interest in part because income-centric investors have been quite yield starved.”
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