Good Morning South Dakota

We are in South Dakota for the week. More on that in a moment. IndexUniverse had a post the other day looking at some ETFs that are in the pipeline. The article seemed to imply that the ten funds the profiled would begin trading soon but I am not sure if that is the case (and maybe the article was not implying they’d be out soon). The first fund in their list was the Index IQ Physical Diamond Trust. I had a little fun with this one when it was first filed for by Index IQ. This will be a difficult asset class to track and consistency of the stones will require some extra work as well. I am not aware of any sort of capital market proxy for diamonds and so if that is true the fund will be breaking new ground. That is good because it will offer something new to investors and it is bad because things may not work as smoothly a they hope. The fun with this idea is the Jason Bourne’s safety deposit box aspect of the fund and the possibility that when it starts out the entire AUM of the fund will fit into one envelope. The next fund on the list was the CurrencyShares Singapore Dollar Trust. The Sing dollar has safe haven attributes but it runs on the small side. When CurrencyShares first started issuing funds I asked them about a Sing dollar fund and there were logistical issues that apparently have been overcome. I believe that stashing some money in assorted, select currencies is a valid concept even if difficult to implement....

Good Morning South Dakota

We are in South Dakota for the week. More on that in a moment. IndexUniverse had a post the other day looking at some ETFs that are in the pipeline. The article seemed to imply that the ten funds the profiled would begin trading soon but I am not sure if that is the case (and maybe the article was not implying they’d be out soon). The first fund in their list was the Index IQ Physical Diamond Trust. I had a little fun with this one when it was first filed for by Index IQ. This will be a difficult asset class to track and consistency of the stones will require some extra work as well. I am not aware of any sort of capital market proxy for diamonds and so if that is true the fund will be breaking new ground. That is good because it will offer something new to investors and it is bad because things may not work as smoothly a they hope. The fun with this idea is the Jason Bourne’s safety deposit box aspect of the fund and the possibility that when it starts out the entire AUM of the fund will fit into one envelope. The next fund on the list was the CurrencyShares Singapore Dollar Trust. The Sing dollar has safe haven attributes but it runs on the small side. When CurrencyShares first started issuing funds I asked them about a Sing dollar fund and there were logistical issues that apparently have been overcome. I believe that stashing some money in assorted, select currencies is a valid concept even if difficult to implement....

Trust Your Gear

The above picture was posted on Facebook by Bivouac which is kind of like REI in New Zealand. The caption read trust your gear. Investors need to trust the long term strategy they have chosen for their portfolios and by extension their financial futures. Investing can be as simple or as complicated as anyone wants to make it. The building block here is that an adequate savings rate combined with proper asset allocation and reasonable diversification gives people a very good chance of having what they need when they need it. From there all of the decisions that people make, behavioral defects they succumb to and extra time they spend on their portfolios will either help that a long to a little better result or hinder the end result which could mean simply coming up a little short or being completely wiped out. Reasonable diversification could be as simple as 50-70% in an ETF like iShares All World Country ETF (ACWI) and the rest in iShares Aggregate Bond (AGG). The performance will never be lights out (in a good way) but will never get taken down any sort of oversized bet like a mutual fund that got caught with 50% in financials in 2008. On the complicated side of the ledger are quant mutual funds with thousands of positions making dozens of trades every day (this is not to say these types of funds are good or bad simply that they are complicated). Most people are in between those two extremes. Chances are whatever strategy you have chosen to implement for yourself or whatever strategy you pay a professional to...

Trust Your Gear

The above picture was posted on Facebook by Bivouac which is kind of like REI in New Zealand. The caption read trust your gear. Investors need to trust the long term strategy they have chosen for their portfolios and by extension their financial futures. Investing can be as simple or as complicated as anyone wants to make it. The building block here is that an adequate savings rate combined with proper asset allocation and reasonable diversification gives people a very good chance of having what they need when they need it. From there all of the decisions that people make, behavioral defects they succumb to and extra time they spend on their portfolios will either help that a long to a little better result or hinder the end result which could mean simply coming up a little short or being completely wiped out. Reasonable diversification could be as simple as 50-70% in an ETF like iShares All World Country ETF (ACWI) and the rest in iShares Aggregate Bond (AGG). The performance will never be lights out (in a good way) but will never get taken down any sort of oversized bet like a mutual fund that got caught with 50% in financials in 2008. On the complicated side of the ledger are quant mutual funds with thousands of positions making dozens of trades every day (this is not to say these types of funds are good or bad simply that they are complicated). Most people are in between those two extremes. Chances are whatever strategy you have chosen to implement for yourself or whatever strategy you pay a professional to...

The Big Picture for the Week of July 29, 2012

A few quick items this morning. Yesterday I met with my colleagues at our offices in Phoenix to discuss various things that most RIA firms need to touch on including some sort of market recap/look ahead from me. An important nugget on this front that is worth remembering is that central banks all over the world have employed desperate and unprecedented action to try to stimulate growth and economic activity. At best, the actions taken have not created as much growth or activity as expected and at worse they have been a failure but either way it is reasonable to expect that desperate and unprecedented action is distorting markets. It is easier to remember that this distortion exists when looking at the treasury market but all markets have been impacted and no one should be shocked if there is even more volatility whenever central banks cease their desperate and unprecedented actions. A reader left a very kind comment yesterday about a certain ETF that will not lower your cholesterol having an outsized gain in yesterday’s session. It is very human to react to a very good day or very bad day for your portfolio but if you are an investor (as opposed to a trader) it is important to think in terms of the time frame you actually are investing for. As I like to joke; quick, how’d you do in the second quarter of 2010? That you don’t know without looking hopefully is a reminder that it is the longer term that is most important. The Olympics are now underway of course. First item to mention there is...