Tag Archives: alt-investing

Market Beginners Portfolio – July Update

Summary The Market Beginners Portfolio has had a difficult time over the past few months. The portfolio has significant potential for future growth. I chose to invest in Frontier Communication Corporation because of the future opportunity it provides. Introduction As many of my subscribers know, I have written a large number of portfolios talking for a variety of different goals. However, the original Market Beginners Portfolio represented my first attempt at creating a portfolio designed for someone incorporating multiple different points of view. The overall goal of this portfolio is to create a sample portfolio for someone with $100,000 to invest. The portfolio will be composed of both ETFs and Individual Stocks designed to maximize both safety and income for the portfolio. However, rather than focusing on just income for the portfolio, I will also be focusing on overall stock growth. This portfolio is centered towards overall growth and that involves growth both in the form of income and portfolio value. Rules Discipline is the backbone of any major portfolio. As a result, any good portfolio requires at least a few rules to help keep things in balance. This portfolio has two. The first rule is no new money may be added to the portfolio. While this is not a restriction most people generally face, it is helpful for managing a portfolio and as a result is a rule I include in most of my portfolios. The second rule is that no stock or ETF may make up more than 20% of the portfolio. While having different ETFs or secure stocks may help with the portfolio’s safety, minimizing your positions in different stocks helps to maintain your portfolio’s security. Portfolio Stock Name (Ticker) Number of Shares Purchase Price Current Price Johnson & Johnson (NYSE: JNJ ) 100 $100.55 $100.09 Chevron (NYSE: CVX ) 100 $107.70 $93.14 Pimco Strategic Income Fund (NYSE: RCS ) 1000 $9.19 $8.49 Bank of America (NYSE: BAC ) 1000 $16.47 $18.10 Monsanto Company (NYSE: MON ) 100 $118.25 $107.07 Vanguard Total Stock Market ETF (NYSEARCA: VTI ) 100 $108.73 $109.96 Vanguard Dividend Appreciation ETF (NYSEARCA: VIG ) 200 $81.18 $80.77 Original Portfolio Value: $85,430 Total Cash: $14,570 Current Portfolio Value: $83,770 Current Cash: $14,570 Change In Portfolio Value: -1.94% Portfolio Discussion The portfolio has had a relatively difficult time – it has lost 1.94% over the past few months. Much of this loss is due to a decrease in the prices of Chevron, Pimco Strategic Income Fund, and Monsanto Company. However, the portfolio has done an impressive job in Bank of America seeing that position increase by almost $2000. This helped offset some of the other more significant losses for the portfolio. As for decisions, I am choosing to keep the portfolio relatively simple. However, at this time I am making a 1000 share purchase in Frontier Communications Corporation (NASDAQ: FTR ) at $5.14 per share. That takes the cash position of the portfolio down to $9430. Frontier Communications Corporation is a solid company that has had a difficult time dropping from $8.42 earlier in the year. However, management at the company is solid and the company offers a 8.17% dividend at current prices. Cash I continue to hold a significant cash stake in the portfolio amounting to almost 10% of its assets. Future dividends should help to increase the portfolio’s cash position. The market is currently near all time highs and I am hoping to be able to let the portfolio’s cash position grow until better opportunities can be identified. Conclusion The portfolio has had a difficult time recently losing almost 2% of its value. Despite significant losses in other regions, the portfolio managed to make some of the losses back due to a significant increase in the value of Bank of America. I also chose to invest in Frontier Communications Corporation this month. The company has had a difficult time in recent months and as a result now offers a significant dividend amounting to over 8%. I hope to see this portfolio recover and continue growing in future months. Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More…) I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

5 Second-Half Tips For Investors

Rising Rates Aren’t the Only Market-Mover Much of the market’s focus so far in 2015 has been on when the US Federal Reserve (Fed) will raise rates. With the Fed promising to be “data-driven,” each economic release has received more scrutiny than usual. But the decision on rates is not the only driver of markets. Increasingly, events and data outside the US are having an impact on markets here at home, adding to the range of factors that affect investors: 5 Tips for Investors 1. Ensure adequate exposure to risk assets. Many investors with longer time horizons are in jeopardy of being unable to fund their goals because their allocations are over-exposed to cash and core bonds. For long-term goals like retirement or a college education, portfolios need exposure to asset classes that have the potential to deliver growth – which means investors need adequate exposure to stocks. 2. Watch out for interest-rate complacency. At some point, the Fed will begin raising interest rates, and we don’t believe most market participants are prepared for the hike. Equity investors should anticipate some negative short-term reactions in the stock market, but should also keep in mind that equities have historically sustained several rate rises before declining. What’s more, given how low short-term rates currently are, higher rates would be unlikely to constrain economic output and activity which means that any equity-market selloff should be limited. The greater risk of complacency may lie with owners of US treasuries and other core bonds who are anticipating continued lower rates, those investors may be unpleasantly surprised. 3. Be risk-aware. While many investors worry about more obvious risks, such as tail risk (the risk of an asset or portfolio moving more than three standard deviations away from its current price), they may be less aware of other dangerous threats, such as liquidity risk. For example, in a recent Allianz Global Investors survey on risk, we found that 95% of institutional investors believe tail risks pose a medium, high or very high risk of likelihood over the next 12 months, but 40% view liquidity risk as little or no threat. And even though investors worry about tail risk, far fewer believe they are adequately equipped to protect against it: just 27% use strategies that hedge against it. It’s critical for investors to be well-informed about all the risks facing their portfolio and the risk-management tools they have at their disposal. 4. Protect against volatility. We expect increased volatility in both stock and bond markets. This may mean investors should reduce their exposure to fixed income. However, investors shouldn’t abandon stocks because of higher volatility; instead, they should manage that volatility wherever possible. We recommend the use of options strategies and other sophisticated tools, in addition to broad portfolio diversification and exposure to dividend-paying stocks, which have historically offered lower volatility than the overall stock market. 5. Use active management. In this unique and unpredictable market environment, we expect correlations among stocks and among asset classes to fall, creating a more differentiated market environment in which active managers can outperform. In addition, we expect rotations in leadership among different asset classes. Investors might want to consider using an actively managed multi-asset investment that offers broad exposure and can adjust allocations to take advantage of opportunities (including low valuations) and manage risks (including rising rates and geopolitical crises). Strategies like these can also help investors offset behavioral biases and self-inflicted psychological obstacles by providing one professionally managed investment that they can “set and forget.” The Bottom Line In the second half of 2015, investors need to recognize that downside risk has increased for both stocks and bonds. However, if they have long time horizons – and if they use risk-management tools in a well-diversified, actively managed portfolio with adequate exposure to risk assets – then they should be in a much better position to meet their long-term goals.

Principal To Launch Global Opportunities Equity Hedged Fund

By DailyAlts Staff The Principal Financial Group is actively working to expand its presence in the liquid alternatives arena. On July 9, the firm launched its first ETF, the Principal EDGE Active Income ETF (NYSEARCA: YLD ), which uses a risk-managed approach to invest “opportunistically” across a wide range of income-generating asset classes. This alternative income ETF joined the firm’s alternative mutual fund, the Principal Global Multi-Strategy Fund (MUTF: PMSAX ). And now Principal is planning the launch of a new liquid alternative, the Global Opportunities Equity Hedged Fund, according to a recent SEC filing . Global Opportunities Equity Hedged The Global Opportunities Equity Hedged Fund will seek long-term capital appreciation with lower volatility than the global equity markets. It will pursue these ends by means of investing in U.S. and emerging-market equity securities paired with equity derivatives at the time of purchase. Under normal circumstances, the fund’s holdings will include securities from at least three foreign countries, and foreign securities will constitute at least 30% of its assets. Portfolio managers Christopher Ibach, Xiaoxi Li, and Principal CIO Mustafa Sagun select investments on the basis of value and/or growth potential, and they use a hedging strategy intended to reduce volatility by investing in equity derivatives. Currency forwards may also be used to hedge currency risk. According to the fund’s SEC filing, its net exposure will vary over time, but the fund will always maintain more long equity exposure than it has short exposure through derivatives. Shares of the Global Opportunities Equity Hedged Fund will be available in A-, P-, and institutional-class shares with an investment management fee of 1.10% and respective net-expense ratios of 1.55%, 1.30%, and 1.25%. The minimum initial investment for A-class shares will be $1,000. P- and institutional-class shares have no minimums for qualified investors. Principal’s Other Alternative Fund The Principal EDGE Active Income ETF only launched on July 9, and thus doesn’t have a performance record to speak of. The Principal Global Multi-Strategy Fund, however, debuted back in October 2011, and has earned a three-star rating from Morningstar. For the year ending June 30, 2015, the fund had returns of 2.41%, ranking in the top 29% of all funds in its Morningstar category. For more information, visit principalfunds.com .