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Advisor Perspectives
Insights into the world of high- and ultra-high net worth investing
November 3, 2009- Vol 3, Issue 44
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If you missed Dan Richards' webinar last week, It's not Business as Usual: Five New Imperatives
for Effective Client Communications, you can view a replay of it here.
Since Putnam introduced its absolute
return funds earlier this year, over 4,200 advisors and $650
million in assets have flocked to the new financial products.
Putnam's four funds seek to beat inflation by 100, 300, 500 and 700 basis
points, and their performance over their first nine months (3.1%, 6.4%,
8.4% and 12.2%, respectively) was encouraging for their investors. Impressive as those results may be, the question
is whether they are sustainable.
Author and fund
manager Vitaliy Katsenelson provides
us with his list of the best books on
investing. It contains six sections: Selling, Think Like
an Investor, Behavioral Investing, Economics, Stock Market History, and
Books for the Soul.
The fiduciary standard of conduct is
necessary to properly align investors' interests with those of the advisors
who serve them, says Ron Rhoades in
this guest contribution. Moreover, the fiduciary standard of conduct
is not onerous and should not be feared. Advisors who embrace a fiduciary standard of conduct must simply
follow the guidelines he sets forth.
Even with the recovery in markets since March, given client losses in the
last two years this can still be a tough time to conduct portfolio
reviews. Dan Richards provides a
five-step approach to effectively conducting those reviews.
More articles below...
It is widely accepted that ETFs offer significant advantages
over mutual funds, especially lower costs and taxes. But, as advisor
Sam Bass argues in this guest contribution, the mutual fund industry may be
all the more concerned that increasing numbers of investors are accepting
the view that ETFs, and passive
strategies in general, are better for wealth accumulation than active
management - even if one assumes active strategies can generate positive
alpha over extended periods of time.
A convenient reason to eliminate a fund from consideration is high expenses. While that
criterion alone is often a good guideline, blindly relying on it can cause you to overlook otherwise attractive
funds, says consultant Jack Doyle in this guest contribution.
Tom Howard responds to two
letters to the Editor in last week's issue, which follow-up our article on
the latest Fama-French study defending
passive management. Howard says there
is plenty of academic evidence of "plain old stock-picking
skill."
The fundamentals for the dollar could not be worse. The U.S. economy has continued to struggle, the federal deficit
has skyrocketed, and the government has adopted super-easing monetary
policies and aggressive fiscal spending. But anxiety over a potential dollar collapse is overblown. A gradual
decline appears more likely, according to Frank Wei of FundQuest
in this guest contribution.
Lastly, we highlight submissions to Advisor Market Commentaries.
We welcome guest submissions from our
readers. For more information, here are our guidelines.
If you are experiencing problems
opening or navigating through our newsletters, we can send you a text-only
version. Please send an email to feedback@advisorperspectives.com requesting the "text-only" version.
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"unsubscribe" in the subject line.
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Consistently beating inflation by a margin as wide as 700 basis points
would be an ideal outcome for any retirement-oriented investor, especially
if it can be done with less volatility, as Putnam claims, than the
traditional equity-centric portfolio. That is the tantalizing appeal
of these funds - an appeal amplified by the experience of the recent bear
market, which left many investors seeking more stable and secure investment
options.
Absolutely Maybe
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The
Best Books on Investing
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We find ourselves
glued to the computer screens or CNBC waiting to find out what the Dow's
next tick is going to be. Unfortunately, we are left with only a headache
and wasted time. What's next? Here is Vitaliy Katsenelson's advice: read.
The Best Books on Investing
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I
am a Fiduciary Financial Advisor
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The issue of fiduciary responsibility remains at the center of controversy,
as regulators debate whether broker-dealer registered representatives
should fall under the constraints of fiduciary responsibility. Ron
Rhoades identifies what it takes to be a fiduciary financial advisor.
I am a Fiduciary Financial Advisor
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Five
Steps to an Effective Portfolio Review
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You have two
fundamental objectives when meeting with clients - first to keep them
invested and second to keep them invested with you. Here's a five
step structure for portfolio reviews to help achieve those goals
Five Steps to an Effective Portfolio
Review
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The issue is less whether your fund manager will beat the market - a few
will; but rather the uncertainty of when that outperformance will occur
relative to the real-life requirements on an investor's portfolio.
Alpha or Wealth?
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Advisors have come under pressure from a number of quarters - peers,
professional organizations, regulatory bodies, and clients - to assign
primacy to expenses in the fund selection process. Retail investors
hear, especially from the media, that they must avoid "expensive"
funds because those high expenses will depress future returns. Fiduciaries
are counseled to avoid funds (and share classes) that have
"above-average" expense structures. If any of this deserves
credence, we should be able to find a clear relationship between fund
expenses and returns.
The Expense Paradox
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More
on the Fama-French Farewell Tour
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Six years ago Tom
Howard would have said that hiring an active manager was the triumph of
hope over reality. But my own research, along with the growing body of
manager-decision research, has convinced him otherwise. Before settling for
an old, stale notion regarding active management, you owe it to yourself
and to your clients to understand the investment implications of this
emerging body of research.
More on the Fama-French Farewell
Tour
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Worry
of the Dollar's Collapse Is Overblown
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Investors should take a patient, long-term approach that may include
overweighting their portfolio allocations to international stocks and
large-cap stocks, as these companies tend to generate more revenue and
profits in foreign currencies.
Worry of the Dollar's Collapse Is
Overblown
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Highlights
from Advisor Market Commentaries
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In the US, the short answer is that unless the US consumers become a
massive saving machine, to the tune of 8% or more of GDP and rising each
year, and willingly put their savings into US government debt, it's
[reducing the deficit] not going to happen. So sometime in the coming
years, interest rates are likely to start to rise in order to compensate
bond investors for what they perceive as risk. That will bring us to some
very difficult and painful choices.
"Catching Argentinian
Disease" by John Mauldin of Millennium Wave Advisors
Unfortunately, the GDP report only confirms what many already suspect - the
US economy is on government induced life support.
An economy that encourages governments to subsidize spending at the expense
of consumer saving is an unsustainable mirage. Without job and wage
growth, consumers will remain reluctant to spend, creating a tremendous
drag on future growth prospects. Is there a possibility that we are
simply too dependent on the GDP report for a comprehensive view of the
economy? As the Fonz would say, "Exactamundo."
"Equity Correction May Be Short
Lived" by Chris Maxey of Fortigent, LLC
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