Top 5 of the Week of April 16
Allan Roth from ETF.com heads up our Top 5 this week looking at how to boost your returns to beat index funds. A Teachable Moment’s Anthony Isola reveals how to increase your portfolio’s longevity. And writing for Fortune Financial Advisor, Lawrence Hamtil explores the low-volatility “paradox.”
Jon Danielsson, Marcela Valenzuela, and Ilknur Zer have co-authored a post from Vox EU about using low risk to predict financial crises. And Mark Rzepczynski discusses what to do in the face of rising inflation on his blog…
- When it comes to beating low-cost index funds, your strategy should be owning those funds and rebalancing
- Avoid typical investors’ responses to market ups and downs, instead be the investor who is “fearful when others are greedy and greedy when others are fearful,” as Warren Buffett advises
- Do this by rebalancing to your target asset allocation; buy those stock funds when the market is down and sell after it goes up, all the while maintaining your level of risk
Improve The Lifespan and Health of Your Money
- Healthy money starts with a healthy mind, so rein in that emotional part of you that acts before you think when it comes to short-term investments and events
- Just as exercise is healthy, keeping your portfolio active is good for your finances; rebalance your asset allocation periodically to maintain globally diversified investments
- Watching what you eat is the key to a long life, and the same is true for your money, trim back on the noise created by financial media—remember, less is more
How do you keep your money healthy? Share your comments in the section below
The Low-Volatility ‘Paradox’
- The low-volatility paradox argues that possibility that low volatility makes investors behave in ways that make the markets more fragile and prone to crisis
- Research suggests it’s a market anomaly that’s becoming persistent across markets and over time
- Advice suggests that investors should use momentum and ‘income’ as factors in a defensive strategy to counterbalance the paradox
Early Warning Financial Crisis Indicators
- Before 2008, the market had become somewhat complacent in that crises were to play a part in history only—that year’s Global Crisis was a wake-up call to all investors
- Since then many investors have been searching for methods to attempt to predict future events on the market horizon to prepare in advance
- Data shows that keeping watch on volatility in markets at low-levels can be a critical crisis predictor and can make a great early warning signal
Build on Firm Foundations
- Inflation continues to rise, and in today’s market climate, it looks to be centered around 2%
- Rather than go for long-term only options in fixed commodity weights, consider buliding a commodity portfolio instead
- Establish the base of such a portfolio on risk-premiums like “carry (backwardation/contango), momentum (trend), value, and volatility”
- These foundations will set you up to gain from any inflation increases
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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