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How Sustainable Is The Nikkei Rebound? Japan ETFs In Focus

Japan’s key index, the Nikkei, ended in the positive territory for the first time this year on Wednesday. The Nikkei gained 2.9%, or 496.67 points, on Wednesday, after losing nearly 1,800 points from the start of this year through Tuesday. Despite hitting the highest year-end close last year in 18 years, the benchmark was struggling to finish in the green from the start of this year following China-led global growth worries and the oil price slump. Reasons Behind the Rebound Better-than-expected trade data out of China, gains in the U.S. markets and decline in the yen’s value against major currencies emerged as the main reasons behind the rebound. The General Administration of Customs reported that Chinese exports declined 1.4% in December, narrower than a 6.8% drop in November and the markets’ estimate of an 8% decline. Though imports declined for the 14th consecutive month in December, the 7.6% drop in imports compared favorably with November’s plunge of 8.7% and the markets’ forecast of an 11.5% decline. Meanwhile, modest gains in the U.S. markets on Tuesday also boosted the Nikkei. A late rebound in Healthcare and Technology stocks helped the benchmarks to offset a further decline in oil prices. Also, the weaker yen helped the major exporters, including large-cap auto companies and tech companies, to attract investors, as it raised the possibility of an increase in export volumes. Will It Sustain? The sustainability of this rebound in the near term will largely depend on some key factors, including the condition of the Chinese economy, the movement of crude and the health of the Japanese economy. Though better-than-expected Chinese trade data boosted the markets on Wednesday, the decline in both exports and imports indicate that both global and domestic demand continued to remain weak. Meanwhile, the World Bank recently reduced its outlook for Chinese GDP growth in 2016 by 30 percentage points to 6.7%, below last year’s estimated growth rate of 6.9%. The bank also predicted that the economy may grow at a slower pace of 6.5% over the next two years. Separately, given the weak outlook for the Chinese economy, which is one of the leading importers of oil, and an already oversupplied market, there is little hope of a recovery in oil prices. Crude is currently trading at a 12-year low, with every indication of a slide below $30 per barrel. In this scenario, the Japanese economic environment will play a key role in setting the course of the Nikkei in the coming months. Japan opted for several economic stimulus measures last year, which proved to be more effective than the steps taken by China and the eurozone. The economy rebounded strongly in the third quarter to register a GDP growth rate of 1%, as against the second quarter’s contraction of 0.5%. Meanwhile, the impact of recent modifications in the quantitative easing program by the Bank of Japan (BOJ) will also remain in focus. The bank opted for raising the Japanese government bonds’ (JGBs) average maturity from 7-10 years to 7-12 years, and announced that it will allocate 300 billion yen of assets annually in purchasing ETFs that seek to follow the JPX-Nikkei Index 400. Japan ETFs in Focus In this scenario, popular Japan ETFs and funds that closely track the performance of the Nikkei will remain on investors’ radar in the coming months. The Precidian MAXIS Nikkei 225 Index ETF (NYSEARCA: NKY ), which tracks the performance of the Nikkei 225 Index, returned nearly 9.4% last year. Meanwhile, the performance of other popular Japan ETFs will also remain in focus in the near term. In 2015, the iShares MSCI Japan ETF (NYSEARCA: EWJ ), the WisdomTree Japan Hedged Equity ETF (NYSEARCA: DXJ ) and the Deutsche X-trackers MSCI Japan Hedged Equity ETF (NYSEARCA: DBJP ) returned 8.9%, 3.3% and 4.5%, respectively. Original Post

Top 5 Mutual Fund Sectors In 2015

While most of the major mutual fund sectors struggled to finish 2015 in the green amid concerns stemming from China-led global growth worries and the slump in oil prices, some succeeded in coming out with flying colors. The strong rebound in the fourth quarter, after a declining trend till the third quarter, primarily boosted these funds. The Dow and the S&P 500 posted their worst yearly performances since 2008, and cash flows were also on the discouraging side. Mutual funds witnessed huge cash outflows in 2015, which hit record highs multiple times. While US-focused mutual fund categories failed to register double-digit gains in 2015, only the Japan Stock category registered growth. Mutual funds started the year 2015 on a positive note, with 87% of funds finishing in the green in the first quarter. But their performance deteriorated in the second quarter, when only 41% of funds succeeded in registering gains. The performance in the third quarter was the worst in four years. While only 17% of mutual funds finished in the green in the quarter, the Bear Market funds category, which bet against the market uptrend, emerged as the top gainer in both August and September, adding 9.1% and 4.2%, respectively. However, mutual funds recovered significantly in the fourth quarter, which also included October – the best month in four years. Meanwhile, foreign mutual funds, including those focused on acquiring Japanese stocks, outperformed domestic mutual funds last year. In such a scenario, we present the top 10 mutual fund categories in 2015: Mutual Fund Category 2015 Return (%) Japan Stock 11.97 Health 8.05 Foreign Small/Mid Growth 7.04 Technology 5.21 Consumer Defensive 4.15 High Yield Muni 4.09 Foreign Small/Mid Blend 3.79 Muni California Long 3.72 Large Growth 3.6 Preferred Stock 3.18 Source: Morningstar Major Concerns As mentioned earlier, mutual fund cash flows remained weak in 2015, mostly due to the overall negative tone of the U.S. markets. As a matter of fact, in the first half of 2015, fund inflows slumped 36% year over year to $143 billion. This drastic fall was largely due to the dismal second quarter, wherein inflows declined to $41 billion through June 17, comparing unfavorably with $102 billion of inflows in the first quarter. The markets were affected all-year round by several concerns, such as sluggish growth in major economies, including China and the eurozone, the slump in oil prices, a strong dollar and rate hike fears. Worries emanating from Grexit concerns, the plunge in biotech stocks following price gouging concerns and geopolitical tensions in regions like Yemen and Syria also dealt huge blows to the major benchmarks. Additionally, in the week that the Fed finally decided to hike rates, bond mutual funds witnessed massive outflows. According to Lipper, for the week ending December 16, $15.4 billion was pulled out of taxable bond funds. Also, high yield junk bond funds witnessed the largest outflow of $3.8 billion since August 2014 in the same week. An outflow of $5.1 billion from investment-grade bond funds was the biggest since Lipper started recording data in 1992. 5 Best-Performing Fund Categories in 2015 In this section, we have highlighted the five best-performing mutual fund categories of 2015 and also recommend one mutual fund from each category that has a Zacks Mutual Fund Rank #1 (Strong Buy) and other strong fundamentals. Japan Stock Japan opted for several economic stimulus measures last year, which proved to be more effective than the steps taken by China and the eurozone. The economy rebounded strongly in the third quarter to register a GDP growth rate of 1%, contrary to the second quarter’s contraction of 0.5%. Japan’s key index, Nikkei, hit an 18-year high in 2015. Hence, the Japan Stock category, which was also the best gainer in the first half of 2015, finished right at the top with nearly 12% gains last year. Fidelity Japan Smaller Companies Fund No Load (MUTF: FJSCX ), which invests most of its assets in securities of Japanese small-cap companies or other instruments that are economically connected with Japan, was one of the top performers of this category. The fund returned 12.6% last year. It also has a 3- and 5-year annualized return of 16.6% and 10.2%, respectively. Moreover, FJSCX’s expense ratio of 0.97% is lower than its category average of 1.43%. Healthcare The healthcare category, which is considered as a consistent performer, came in second in 2015. A massive sell-off in biotech stocks through August and September, and concerns regarding Hillary Clinton’s plan to prevent “price gouging” for specialty drugs had a negative impact on the category. However, a strong rebound in the fourth quarter helped the sector to finish the year on a positive note with a modest gain of 8.1% in 2015. Encouraging third-quarter earnings results, merger and acquisition activities, product approvals and encouraging pipeline updates were mainly behind the rebound. Vanguard Health Care Fund Investor (MUTF: VGHCX ) invests in healthcare companies, including pharmaceutical firms, medical supply companies and companies engaged in operations related to medical and biochemical. The fund returned 3.8% in 2015 and has an expense ratio of only 0.34%, compared to the category average of 1.37%. VGHCX also has a 3- and 5-year annualized return of 24.8% and 20.3%, respectively. Foreign Small/Mid Growth Although concerns regarding sluggish growth throughout the globe had a negative impact on markets in most of 2015, the Foreign Small/Mid Growth sector managed to register healthy gains. Investors found foreign countries attractive, as the central banks of major regions opted for economic stimulus measures. As a result, the sector occupied the third position with more than 7% yearly gain. AllianzGI International Small-Cap Fund A (MUTF: AOPAX ) primarily invests in securities of companies having market capitalization similar to those included in the MSCI World Small-Cap Index. The fund returned 9.8% last year. It also has a 3- and 5-year annualized return of 9.8% and 6.1%, respectively. AOPAX’s expense ratio of 1.45% is lower than its category average of 1.53%. Technology Though several concerns, including a stronger dollar and weak global growth, negatively impacted the technology sector, it was one of the few bright spots in 2015. Broad-based gains in the sector helped the tech-heavy Nasdaq to clearly outperform the other major benchmarks in 2015. Meanwhile, the sector was one of the best performers in the third-quarter earnings season. These factors boosted the category to increase 5.2% in 2015. T. Rowe Price Global Technology Fund No Load (MUTF: PRGTX ) invests the majority of its assets in companies expected to derive a large proportion of their revenues from the development and application of technology. It returned 10.4% in 2015 and has an expense ratio of 0.91%, which compares favorably to the category average of 1.45%. The fund also has a 3- and 5-year annualized return of 24.4% and 17.3%, respectively. Consumer Defensive This is one of the main categories that gained from the low oil price environment. Also, a steady increase in consumer expenditure played an important role in boosting the U.S. economy throughout 2015, helped the category to finish in the positive territory. Additionally, a strong job market, which includes healthy job gains and a declining unemployment rate, also boosted the category for most of the year. As such, Consumer Defensive returned nearly 4.2% in 2015 and finished in the top five. Fidelity Select Retailing Portfolio No Load (MUTF: FSRPX ) invests a large chunk of its assets in securities of firms involved in merchandising finished goods and services to consumers. The fund returned 17.8% last year. It also has a 3- and 5-year annualized return of 21.4% and 19.1%, respectively. FSRPX’s expense ratio of 0.81% is lower than its category average of 1.41%. Original Post

8 Investing Lessons Learned From Fantasy Football

Summary The importance of analogies. Fantasy football’s lessons for lifetime profit. One last word. Everyone loves a colorful analogy. I suppose that is because a well-placed and entertaining analogy provides a more memorable imprint on the receiving brain than a simple statement does. I’m a big fan of melodrama, so it definitely appeals to me. To say “Seeing John Major govern the country is like watching Edward Scissorhands try to make balloon animals” (Simon Hoggart) is much more interesting than saying that you are very displeased with the inept manner in which John Major is running Great Britain (in the 90’s). Because, well, sometimes you just need to say something ridiculous to cut through the mundane. In general, I spend most of my down time reading articles and opinions about two things: finance and fantasy football. Musings on the interconnectivity between two very different things as I did while thinking about colorful analogies, I came to the realization that fantasy football and investing contain many common themes. I’ve been reading Matthew Berry’s Love/Hate (and everything else he writes – Thanks for all you do, TMR!) religiously for years on ESPN, so a few of these will reference some well-known nuggets of wisdom that he frequently drops. Unfortunately, 2015 fantasy football is ending for the year. Perhaps you brought home the bacon this year with a fantasy championship. Perhaps you drafted Eddie Lacy (the Kinder Morgan (NYSE: KMI ) of 2015) and never recovered. Hopefully these things will help with your drafting next year. I know they’ve been helpful to keep in mind while building my portfolio. Without further ado, here are eight lessons fantasy football teaches the investor: 1: Tune Out The Noise Perhaps the most important virtue of a stock picker is discipline. If you don’t have the conviction to stick with your analysis of a company in the face of setbacks, musings, downgrades, and Jim Cramer, you will hamstring yourself for future earnings. Similarly in fantasy football, there is always a lot of noise when it comes to matchups or weather. While these are important considerations, sometimes people will bench a stud because of a matchup (Julio Jones vs. Josh Norman last week), or other such things. You can’t let the overabundance of available information make you doubt yourself. This leads us straight to #2 … 2: Start Your Studs Everyone wants to make money fast. The allure of penny stocks is watching those big percentage gains during heady bull markets. The flip side of the coin is the important part: without concrete earnings prospects and realistic business models, penny stocks are 99.9% of the time just a roulette spin. Investing has risk involved, but long-term gains mean taking on educated risk based on strong fundamentals or viable prospects. Companies with long history of earnings growth and (as a bonus) uninterrupted dividends are your stock “studs”. Your studs are your guys that you can rely on to achieve above-average points week in and week out. When the playoffs come around, the most commonly given advice is “start your studs.” Those guys got you there, and you need to rely on them to continue to perform. Bortles, while not a high draft pick, was a stud, currently 5th among QBs in fantasy points and total yards, and behind only Cam Newton and Tom Brady in touchdowns. What’s in a name, anyway? 3: Don’t Overpay For A Name (click to enlarge) A name brand doesn’t guarantee safety by any means. I think a lot of investors learned that from Kinder Morgan this year, as the largest energy infrastructure and third-biggest outright energy company in the North America saw its stock price lose 61% in six months. Make sure you are doing your thorough due diligence and don’t get caught up in a name. I hate posting the picture above. As a Green Bay native exiled to D.C., putting Aaron Rodgers under that title wounds me to the bowels of my heart. The fact is, the Packer passing game has been a sore disappointment for awhile now, and playing Rodgers in your fantasy playoffs likely ended them prematurely for you. I know it did for my team Davante’s Inferno (on a related note I wish Davante Adams could catch footballs). 4: “Prove It” They say “Buy the rumor, sell the news”. This is the opposite of what a long-term investor ought to do. Realizing short-term gains in this manner can’t hold a candle to unlocking long-time value form a great company that grows earnings. As an added negative, if you buy the rumor and the news contradicts it, you’ll find yourself in a losing position very quickly. Buying and selling frequently is a great way to erode capital. In fantasy football, it’s good to give a player coming off an injury or big-game-out-of-nowhere a week on your bench to prove he is legit. Bishop Sankey, a popular sleeper last year who disappointed, scored 21 points in Week 1. He was likely picked up and immediately started by many. In Week 2 he scored a measly 4 points; in fact, the entire rest of the year combined he has 25 points. Alshon Jeffery (using a Bear to make up for the Rodgers above) never recovered from his injuries this year, and was a huge disappointment when he played. 5: Coaching Matters Every company has a CEO, a CFO, and a slew of other executives that guide the company according to the path they have in mind and the over the obstacles that arise. How those executives view the company and the emphasis that they place on the paths of revenue available to the company has a huge impact on future earnings. In addition, how they determine the best value to shareholders (i.e. buybacks, dividends, M&A, etc.) will impact you directly. A coaching change can have a huge impact on a franchise. With Andy Reid in town in Kansas City, you know that when Jamaal Charles goes down with an injury, he’ll plug in the next guy as a workhorse. Some coaches place more emphasis on certain positions (or the other side of the ball, even), so it is an overlooked point of vast import to know the head coach’s mindset when drafting members or claiming waivers for your fantasy football team. 6: Waivers = The “Bargain Bin” Stocks, like football players, have “floors” and “ceilings”, downside and upside. A well-balanced portfolio, accounting for risk appetite (usually correlated to one’s age), will contain some stocks that have “breakout” opportunities. Favorable macroeconomic tailwinds, business cycle gyrations, and friendly legislation can all raise the ceiling for a stock’s projected capital appreciation. Unfavorable elements can lower the floor, making downside movement more risky. The waiver wire makes or breaks championships. David Johnson was 2% drafted at the beginning of the year, was the player with the highest representation on ESPN championship teams (42.2% owned as reported by Keith Lipscomb). Waivers are where the bargains are; Waiver pickups can swing from a low ceiling, low floor to high ceiling high floor with just one injury to a key starter. 7: Diversify Your Positions Diversification is Investing 101. Spread your investments among different sectors/cap size companies/asset classes in order to maximize return and minimize risk. Some would say that if you can be disciplined while stocks are tanking over-diversification is “di-worsification”, leading to sluggish returns over time. Still, fear is a powerful agent, so having some green among the red can be a huge comfort, and can help one avoid panic-selling. In my opinion, a team should have a blend of top-tier players spread across different positions. I believe having one stud QB, RB, and WR is better than having three stud WRs in a standard league. For instance, taking two RBs in the first/second pick is generally viewed as a “safe play” on draft day. This year that would have absolutely killed you. 8: Buy Low, Sell High (click to enlarge) The most obvious advice in history, buy low/sell high is still the most important. Understanding valuations and being able to part with a stock you have come to love (because of how good to you it has been) is hard to do. Similarly, buying an unloved stock beaten down by news or rumors can be hard, as no one wants to try and catch a falling knife. Being able to judge what “low” and “high” mean in so many unique circumstances is a consummate skill. Every player that is lighting it up will normalize to the mean. Brady was a fantastic draft pick: a Hall of Fame quarterback with a Hall of Fame coach who was ticked off at bureaucratic debate and punishments levied. He had fire in his eyes, and that came out on the field. There came a time where his perceived value was higher than his average output, and that was the time to trade him away for someone with a lower perceived value but higher average value. It’s important to be active in your management, just as it is in stocks. Conclusion Lessons can be crossover between many different media. These eight lessons form a great platform of basic directives for investing, and as a bonus you have some things to think about for fantasy football next year as well! I hope everyone enjoyed the lighthearted article; its important change gears a bit at times. Please let me know how you liked it in the comments. Thanks to Seeking Alpha for letting me go nerdy on two different levels simultaneously.