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What is Smart Beta Investing?

Smart beta is a relatively new term in investment management, but the concept has been around for decades.  It is a type of factor investing, a strategy in which the securities are chosen based on attributes that are associated with higher returns, which uses different rules of portfolio construction than traditional asset class investment.  The idea of smart beta is to potentially add value to a portfolio by systematically selecting alternative weightings and portfolio holdings in a way that deviates from the manner in which traditional market capitalization based indices have been created. Regular rebalancing is also part of this strategy. Rebalancing is a process in which the original weighting in the portfolio is realigned.

Did you know your IRA offers you protection?

Evidence based investment approach.

Most people are unaware that typically assets held within their Individual Retirement Accounts (IRAs) are protected from creditors, including being shielded from US federal bankruptcy proceedings. Every three years, the level of protection increases with inflation.  For 2016, the number is $1,283,02511.

It would be very difficult for the average investor to breach this limit. Why?  Because even if the investor has been contributing since IRAs have been available, they would’ve had to maximize funding and had stellar investment performance…both unlikely scenarios.  The cap applies not only to IRA, but also to Roth IRA tax-year contributions and earnings on those contributions.

Investing: It’s an on-going process, not a point in time

At any gathering around the world, I’m invariably approached by someone who wants to know when and where they should enter the market. For the past couple of years, those of my friends and family in the States have been pleased with how their portfolios have been performing.  I generally agree with them knowing that there is significant home country bias in their portfolios.  However, the rest of the world hasn’t fared as well.  In our market, primarily the US expat market, we hear something opposite from those in the States.  Presently, 22 August 2016, the US is all but fully valued (some may say over-valued) according to Research Affiliates . It’s impossible to pick and choose markets in advance to garner the benefits that appear to be easy to select in the rear view mirror.  Times are challenging now.  In fact, times are generally challenging.  Below are some of some of the key indices around the world to provide some insight as to how things really are and have been over the past few years.  It’s very easy to take a snippet from an article or listen to the talking heads on television and believe that markets are doing something they’re actually not.  As Wealth Managers, our job is to provide a solid portfolio structure that will give the best chance of a positive result based on risk appetite.  We diversify broadly, both from a geographical and industry perspective.  The easiest way to keep this in mind is to think about the late 1990’s.  Tech was the rage and if you weren’t in it, you would receive paltry high single to low double digit returns.  That was great while it lasted, but, like all other fads, that fizzled and many people and institutions were burned.  Don’t give in to the hype of greener pastures.  You’ve heard it before, this time, make sure you don’t go searching.

Brexit: How would my portfolio cope?

Another day, another dozen of Brexit comments. New poll results seemingly driving the value of the Pound. It is not easy these days for investors to ignore the discussion around this month’ vote. And probably most of you are worried that the value of your portfolio will be negatively impacted. So I hope it is valuable that we revisit two of our core investment principles.

Should I Stay or Should I Go?

The title is from the British punk rock group, The Clash. However, it feels very relevant in today’s stock market environment. We have investors constantly enquiring as to when and if they should sell out of the market. It’s easy to understand this question, especially as this year is off to a horrible start. But, before doing anything, first try to understand what’s happening in the world. First and foremost, the global economy is still growing, even if its rate of growth is less than the “experts” believe. Take for instance the US, Banks and individuals are supposedly carrying a lot less debt now than they were. Therefore, if that’s the case, they should have more “rainy day” funds on hand if the downturn worsens.

The goal for most individuals is to invest for decades and not days or months. Yes, markets move up and down, but according to reports, over every 15-year period since World War II, people have generally made money, sometimes a lot of money. The markets tend to reward optimists and pragmatists for that matter. When markets fall or have fallen, “smart” investors are very likely to have applied the following strategies:

1. DON’T Panic. Investing is as much about psychology as it is about the raw numbers. Selling out of fear is almost always a mistake.

2. Diversify. Not applying this strategy might be the number one mistake made by individuals. Basically, it means don’t put all your eggs in one basket. An article I recently read stated that the Bible and even Shakespeare spoke of not putting all your money in one asset.

3. Rebalance. It is critically important that from time to time, to check in and make sure a portfolio is still adhering to the plan. Taking the concept further, from an intuitive standpoint, this makes all the sense in the world. Many people like to believe they buy low and sell high, but empirical data suggests otherwise. Rebalancing, means buying those asset classes at a low which have dropped in value and selling the ones that have done better at a gain. Moreover, by rebalancing it can reduce the risk in the portfolio.

Mark Scher
Partner/Senior Wealth Manager

Why do we care about falling prices?

Why should we care that prices are falling?  Isn’t it better for consumers to pay less for goods?  The prospect of deflation is so scary to economists and central banks alike, that it is causing the latter to pour trillions of dollars into their respective economies to prevent these drops in prices.  Just recently, the European Central Bank (ECB) pledged to buy government bonds as part of yet another quantitative easing to the tune of €1.1 trillion.  Many consumers do not understand the concept.  This is why everyone is concerned: