Financial Floyd Blogspot

Good Evening, This article by Shaker Investments provides a rare glimpse of why it is hard for practitioners to select mutual fund managers. Shaker Investments wrote a good piece on why it is so hard to actually pick funds. In the blog, the author mentions that an economic cycle is usually 10 years, but we have been in a 10-year bull run which throws off traditional analytical methods. The author mentions that it is best to have a solid understanding of how the fund investments, which I completely agree with. Everything looks good trending up, but looks can be deceiving. If you are in an ETF or Mutual Fund, maybe it is a good time to become acquainted with the holdings/strategy of those funds.

Good Morning,   This week Business Insider published an article about the Yield Curve inverting and what it means. For those that have ever wondered what this means the main takeaways were:   1. When the Yield Curve inverted on March 22nd it was the first time since 2007 (no coincidence that this was before the Global Financial Crisis)   2. Inversion means that short term rates are longer than long (in this case the three-month rate is higher than the 10-year rate), and it is a signal of a looming recession (1 to 3 years in advance, others have used about 30 months)   3. The article noted that this time it is more about asset bubbles (sound familiar?)   While I'm not a doomsday person, we have been in a robust period for a long time (stock market highs, lower volatility, record low unemployment, etc.). Over the past six months, we have experienced a strong correction during the fourth quarter which has lead to a strong first quarter. On Frida...

Good Morning, History doesn’t repeat itself, but it does rhyme. This weekend MarketWatch produced an article based on an interview with Jeremy Grantham (co-founder of GMO) by CNBC. Unfortunately, he did not leave readers(or viewers) with a rosy picture in this article but he dropped some gems worth noting: 1. Future return expectations for the next 20 years will be around 2-3%, instead of the 6%+ in the past couple of decades 2. Based on his estimations the current market is overvalued 3. He doesn’t see the developed market's returns rising much more this year due to Central Bank influence This article was short, but digging deeper into the first point about expected returns is constantly overlooked. A lower rate of return requires a higher savings rate in order to have a larger nest egg at retirement. Most investment professionals use the historical 6%, but based on our current GDP growth rates and current bond yields seems 3% more appropriate. His notion of the ma...

Good Afternoon, March is Woman's History Month, and MarketWatch put out an article about the disparities in the advice given to women versus men. This is a great article that not only touches upon the differences and how to take control of the situation. Some key takeaways from the article are: 1. Advisors tone down the risk for women 2. Women believed to have less experience by Financial Advisors 3. Flaws in the information gathering step hinders the execution of the investment plan 4. Types of questions asked to women tend to be more personal and financial The article highlights ways to solve these issue which are:  1. Seek out more Financial Advisors before committing to one 2. Take charge of the conversations 3. Have a healthy level of skepticism 4. Ask for a woman Financial Advisor These steps lessen the inherent bias of financial advisors, but the first step should be to educate yourself first. That should be the answer for any gender because without sufficient inf...

Good Afternoon, This week I had the privilege to speak at the We Are Stock Traders Round Table event. During the event, there was a question about how do you construct a portfolio and I thought that would be a good topic to share with everyone. Creating a portfolio is different for everyone because we all lead different lives. My approach works for me, and in the spirit of this blog, it would be a good starting point for most. 1. First I start off by looking at my income and judging how steady it is and what impacts me either earning more or less. 2, From there I define my goals and objectives for the portfolio. What is the purpose of that portfolio? What is the time horizon? What is your risk tolerance? 3. After defining those points, then I select the core allocations for my portfolio. This serves as the base of my portfolio and will dictate my return/risk profile. 4. Once the core allocations have been selected, then I add other investments based on my view/outlook for the b...