Foreign ETFs On CNBC

Tyler did a segment on foreign ETFs by interviewing James Pacetti of ETF International and Paul Mazzilli of Morgan Stanley. There was not a lot of meat on the bone. Morgan Stanley recommends 12%-20% in foreign stocks with their favorite area being emerging markets. Mr. Pacetti said that a minimum of 10% a portfolio should be foreign but was not given time to elaborate, although he clearly had more to say. For what its worth I have around 30% of my clients portfolios in foreign equities, mostly through individual stocks. If anyone watching did not know that there are ETFs that provide foreign exposure, they know now but I think we may be a ways from some real meaty content on...

Media

I am scheduled to appear in my regular slot on CNBC Asia during the first half hour of Market Watch Tuesday night (US...

No, No, No!

Charles Schwab is the latest firm to offer target date retirement funds. A lot of firms have this type of product. They allow investors to “set it and forget it.” These funds will reduce equity exposure and increase bond exposure as time goes on toward the target date. I hate this type of product. How would any investor feel if at the end of one year the allocation to equities drops from 60% to 40%, the next year the market embarks on a 30% rally and money flows out of bonds to facilitate that rally? Devastated. The other thing I read in this article is that Schwab’s offering will be funds of funds. I have to confess I did not know that any company uses the fund of funds approach with these target products. This makes them even less appealing than I thought. This ties in with the last post I put on the blog. Sometimes the direction of the markets are clearer than other times. Do you think that some one in their 70’s needs to capture a good chunk of a huge up year for stocks? I do. While there are never any guarantees there are times where a do it yourselfer can survey the landscape and put the odds in their favor without using an ill-conceived, statically allocated...

100% Equities

Mercifully the Murrays were preempted by the president. They were going to debate whether or not an investor with a long time horizon should be 100% equities. This is always a fun debate. As a little statistic to start, stocks have been up 92% of every rolling ten year period going back to before the depression. Based solely on numbers this is a compelling data point to argue for 100% equities, again for people with long time horizons. Long time readers will know that I favor equities over bonds most of the time for most people. That does not mean 100% necessarily but bonds do not offer growth for long term money. Bonds are a tool to be used, if desired, to help navigate choppy waters. There are times like the late 1990’s and 2003 where stocks have a clear tail wind and should be overweighted. This year is not one of those years, at least not yet. Think of it this way, in a volatile year where the market closes out the year up 4% would you trade 1% or maybe 1.5% for a lot less volatility. Maybe you would or maybe you wouldn’t but you can probably see where that prospect would appeal to a lot of people. I don’t think I made this term up but this addresses an individual’s sleep factor. Whether you manage your own money or hire someone to do it for you chances are you have some sort of target allocation for stocks, bonds and cash. Don’t be bashful about overweighting or underweighting equities as you feel circumstances dictate. It makes sense...

I Still Don’t Understand

I caught about two minutes of a Vern Hayden segement on Bloomberg TV this morning before we went hiking. He was recommending a few open end funds for people. Mr. Hayden is a CFP. I imagine he makes money creating financial plans for people. I would also imagine that he makes money one way or another off of the funds he buys for clients. I do not know if he charges an ongoing fee management fee or “sells” a portfolio of funds to clients or something else. The reason I don’t know is it appears Mr. Hayden has no web site. I spent about 15 minutes searching for one. I did find a listing for him in the Chamber of Commerce in Westport, CT. Other businesses listed had websites but Mr. Hayden’s listing had no website. In the interview he started one sentence with “I look for managers…” This type of service baffles me. Well, does and it doesn’t. People often tend to be willing to pay multiple layers of fees. When funds do poorly the client can blame the advisor who can then blame the fund manager and switch to a different fund. There is something psychilogical about this type of interaction. It lets people blame someone else. The other aspect of this is what kind of intelligence does it take to assemble a portfolio of five star funds. Funds that achieve that distinction may or may not beat the market in the next 12 months but the client doesn’t get hurt. One of those funds having a bad year is easily dismissed as a one off. Is...