Top 5 of the Week of October 8th
A Wealth of Common Sense’s Ben Carlson kicks off our Top 5 this week by asking if real estate is a non-correlated asset class. Real Investment Advice’s Lance Roberts considers the risk of a future ETF-driven liquidity crash. And The Irrelevant Investor Michael Batnick discusses how investing lessons are learned.
For Bps and Pieces, Phil Huber examines emerging markets in more detail. And from Intrinsic Investing, Sean Stannard-Stockton, looks at the rise of FAANG…
The Hunt for Non-Correlated Assets
- The last financial crisis has sparked motivation in many investors to hunt down non-correlated asset classes
- However, because stocks have become massive since then and liquid-alt and hedge fund strategies have been pretty inconsequential too, their efforts haven’t unearthed any useful results
- Real estate returns have been reasonably uncorrelated to the U.S. stock market since 2009, which would supply a nice correlation benefit
Passive Investing Rising Risk
- Passive investing has risen in popularity as a byproduct of investors running the gamut of the last ten years of “liquidity and loose monetary policy”
- The outcome of which has caused asset prices to reach a level of expense only seen once previously in history
- With more ETFs than individual assets, there is an increasing risk of a sudden reversal thanks to the lack of market liquidity
Do you believe a reversal is on the horizon? Share your comments in the section below
A Hard Lesson Learned
- Given the data we have in history about the nature and success of speculative bubbles
- You would think that investors would learn from mistakes made by previous generations
- Unfortunately, investors tend not to absorb hard lessons until they are “brought home with a hammer”—hard lessons must be lived before they are learned
The Ups and Downs of Emerging Markets
- The only thing you can rely on with Emerging Markets is to expect volatility and higher risk in comparison to Developed Markets
- This is because there have been numerous corrections and repeated bear markets in Emerging Markets in the last 14 years
- This being said, it’s worth persevering with Emerging Markets—as long as you understand the risks—because they do offer a differentiated return stream and access to a wide slice of global equity
FAANG In All Its Glory
- In the current 5 market leading stocks, FAANG, Apple is the only one that remains which is Technology
- The other 4 which dominate the top spot are Communication Services—a relatively new market industry—and all grew a staggering 30% in revenue in 2017
- While some investors are asking if this could be an indication of a new market bubble, the rules that applied to tech stocks don’t fit here, so we need to ask new questions instead
Top 5 of the Week is a summarized collection of financial investment articles that we like and think you might like too. Having written thousands of pages of equity strategy and company research between us, we understand the allure of the ever-changing world of finance. Investing is an art form—and like everything, something you can work on and improve at. There are some excellent writers out there on the finance web, some offer a running commentary on today’s market, some are doing research, some have tips on how to Become a Better Investor, and some just lift the cloud of fog behind a lot of financial jargon. Each week we will keep you up to date with the top 5 articles worthy of your attention.
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DISCLAIMER: This content is for information purposes only. It is not intended to be investment advice. Readers should not consider statements made by the author(s) as formal recommendations and should consult their financial advisor before making any investment decisions. While the information provided is believed to be accurate, it may include errors or inaccuracies. The author(s) cannot be held liable for any actions taken as a result of reading this article. The Become a Better Investor Team doesn’t necessarily endorse any stocks or shares mentioned in the articles or the author of such articles linked to and summarized in Top 5 of the Week and cannot guarantee the accuracy of its information.