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5 Portfolio Moves For The Second Half

After a relatively calm few months, market volatility is back. In recent weeks, stocks have swung between ups and downs, as investors have attempted to digest the latest news out of Greece , the recent bear market in China and the growing likelihood that the Federal Reserve (Fed) will hold off on raising rates until after its September meeting. Some of this shouldn’t come as a surprise. At BlackRock, we have long been saying that the second half was likely to be characterized by more volatility, given increasing investor attention on the Fed’s next move. We also have long viewed China’s market as expensive. However, not everything has played to script, like some of the twists in Greece’s debt crisis and the possible delay of a Fed rate hike. That said, the big-picture economic themes we discussed in the beginning of the year still appear to be in place: slow but steady growth, low inflation and low rates. Even recent events in Greece and China aren’t likely to have a longer-term impact on the global economy or markets. Against this economic backdrop, we’re sticking with our basic market views. So, to help prepare your portfolio for the second half, investors can consider these five portfolio moves, as I write in the Mid-Year Update to The BlackRock List: What to Know and What to Do in 2015 . Favor stocks over bonds Stocks in general still look more attractively valued than bonds, but certain stock segments offer more value than others. We like international stocks over U.S. ones (more on that in the next bullet point). Meanwhile, within the U.S., we’re cautious on segments that will likely be most affected when interest rates go up, such as utilities. Greater value can be found in sectors positioned to benefit from economic growth, such as technology and financials. Consider more international equity exposure With the U.S. in the sixth year of a bull market, better value exists overseas, particularly in Europe and Japan. While it’s true that Europe is no longer cheap and faces political challenges, contagion from the situation in Greece is unlikely, and we still expect European equities to notch decent performance relative to pricier U.S. stocks. Europe and Japan should also continue to benefit from market-friendly central bank easing, while the U.S. is poised to raise rates soon. Within bonds, favor credit over duration. While bonds remain expensive, it’s important to have some exposure to fixed income. Given that rate volatility will likely remain elevated in coming months, investors may want to look to the high yield sector, which is typically less sensitive to rate movements than other fixed income sectors. We also like tax-exempt municipal bonds, which currently offer attractive yields. Look for tactical opportunities within fixed income Income seekers must keep in mind that rates around most of the world will remain low for some time despite any Fed action, so flexibility and selectivity are critical in fixed income asset allocation. Consider alternatives, but remain cautious on commodities Finally, in a slow-growth world where many traditional assets look pricey, you may want to consider casting a wider net toward alternative investments in an effort to optimize your portfolio’s results. Nontraditional asset classes such as infrastructure or real estate may be worth considering. Commodities, on the other hand, are likely to remain challenged, particularly if real rates continue to rise. The bottom line: As volatility continues, resist the temptation to abandon the markets. A better strategy for long-term investors would typically be to stay the course, assuming your portfolio is aligned properly. Source: BlackRock Original Post

Reversal Of Fortune For Gold & Silver Funds?

Gold started off 2015 with a bang as it became even more of a safe haven as a result of an increase in currency volatility, uncertainty over Greece’s future in the eurozone and expected quantitative easing in Europe. However, the gains fizzled out as gold prices again dropped on strong U.S jobs. Following which, gold prices fell to new six-week lows as equities recovered on hopes that Greece would work out a deal with its creditors. The demand for yellow metal returned at the start of the second quarter on disappointing economic data and a firming dollar. A weaker dollar and geopolitical tensions emanating from the Saudi Arabia-led coalition’s attack on Houthi rebels helped gold move up. Again, early this month, rate hike expectations had dragged the price of gold to a six-week low. On the Comex division of the New York Mercantile Exchange, gold futures for June delivery had dropped to an intraday low of $1,168.40 a troy ounce, a level not seen since March 19. Thus, volatility cannot be ruled out and may continue so as the Fed keeps the guessing game alive on the timing of rate hikes and economic data continues to be mixed. On the other hand, silver has a high usage in industrial activities with about 50% of the total demand coming from industrial applications. With China, the biggest industrial fabricator after the U.S., faltering on manufacturing activities, silver might continue to suffer big time in the coming days. The white metal seems a more volatile option than the yellow metal, probably due to its low price point. As a result, silver prices are often hit harder than gold when things are against precious metal investing. Nonetheless for mutual funds, the Gold and Silver mutual funds from the Precious Metals category have been enjoying strong gains this year. A number of top Zacks ranked mutual funds from the sector have been able to reverse. Gold, Silver Price Forecast There are contradictory views about the course of gold and silver prices. In mid-April, expectations of rate hike had led to a group of analysts slashing the gold and silver prices this year. Separately, we also have bullish views. A poll conducted by Reuters having 38 analysts chopped the media forecast for gold to $1,209 an ounce in 2015 from a previous $1,234 an ounce projection. Median forecast for silver was down to $16.70 an ounce from a previous $17.20 forecast for 2015. Separately, Mitsubishi Materials Corporation believes investors may witness another decline in prices before the consolidation and recovery arrives. They believe gold will gain in the second quarter. Mitsubishi predicts gold prices may average $1,180 per ounce in the second quarter and $1,210 per ounce in 2015. Prices may also go up as much as $1,360 per ounce. While rates may be hiked in September or October, a further postponement will drive gold prices higher. Mutual Funds Reverse Losing Trend Precious metals mutual funds have been able to reverse losses so far this year. Against losses over the last 1, 3 and even 5-year periods, the following funds carry either a Zacks Mutual Fund Rank #1 (Strong Buy) or Zacks Mutual Fund Rank #2 (Buy) as we expect the funds to outperform its peers in the future. Remember, the goal of the Zacks Mutual Fund Rank is to guide investors to identify potential winners and losers. Unlike most of the fund-rating systems, the Zacks Mutual Fund Rank is not just focused on past performance, but the likely future success of the fund. U.S. Global Investors Gold & Precious Metals (MUTF: USERX ) seeks capital appreciation over the long run and protection from monetary instability and inflation. USERX invests a large share of its assets in equity and related securities of those companies whose primary operations are related to mining, fabrication, processing, marketing or distribution of precious metals including gold and silver among others. U.S. Global Investors Gold & Precious Metals currently carries a Zacks Mutual Fund Rank #2. USERX has gained 16.5% year to date, against losses of 10.3%, 16.5% and 14.8% over the last 1, 3 and 5-year periods. However, the annual expense ratio of 1.88% is higher than the category average of 1.40%. Fidelity Select Gold Portfolio (MUTF: FSAGX ) invests heavily in companies whose principal operations are related to gold as well as in gold bullion or coins. A maximum of 25% of its assets are invested in precious metals via a wholly owned subsidiary. FSAGX invests mostly in firms involved in exploration, mining, processing, or dealing in gold, or to a lesser degree, in silver and other precious metals. Fidelity Select Gold Portfolio currently carries a Zacks Mutual Fund Rank #1. FSAGX has gained 11.9% year to date, against losses of 13%, 18.2% and 15.3% over the last 1, 3 and 5-year periods. The annual expense ratio of 0.90% is lower than the category average of 1.40%. American Century Global Gold Investor (MUTF: BGEIX ) invests in securities of global companies whose operations are related to gold or other precious metals. Investments are made with the purpose of attaining growth in capital and dividends by investing mostly in companies which are involved in the processing, mining, fabricating and distributing gold or other precious metals. American Century Global Gold Investor currently carries a Zacks Mutual Fund Rank #1. BGEIX has gained 11.5% year to date, against losses of 13.6%, 17.9% and 15% over the last 1, 3 and 5-year periods. The annual expense ratio of 0.67% is lower than the category average of 1.40%. Gabelli Gold AAA (MUTF: GOLDX ) seeks growth of capital over the long term. GOLDX invests a lion’s share of its assets in companies involved in operations related to gold and gold bullion. It invests in value stocks of companies having impressive growth potential. Gabelli Gold AAA may invest a major share of its assets in foreign companies which also include developed and emerging economies. Gabelli Gold AAA currently carries a Zacks Mutual Fund Rank #2. GOLDX has gained 12.5% year to date, against losses of 9.2%, 14.6% and 12.2% over the last 1, 3 and 5-year periods. However, the annual expense ratio of 1.58% is higher than the category average of 1.40%. USAA Precious Metals and Minerals (MUTF: USAGX ) seeks protection against inflation and long-term capital growth. USAGX invests a majority of its assets in domestic and foreign companies with primary operations in the precious metals sector. USAA Precious Metals and Minerals currently carries a Zacks Mutual Fund Rank #2. USAGX has gained 11% year to date, against losses of 11.8%, 18.4% and 15.5% over the last 1, 3 and 5-year periods. The annual expense ratio of 1.24% is lower than the category average of 1.40%. Original Post

Wide Moat ETF Gets An International Counterpart

Summary Popular economic moat ETF strategy goes international. Highlight the new market Vectors Morningstar International Moat ETF. A closer look at the economic moat strategy. The popular Market Vectors Wide Moat ETF (NYSEARCA: MOAT ) got an international equivalent today with the debut of the Market Vectors Morningstar International Moat ETF (NYSEARCA: MOTI ). MOTI tracks the Global ex-US Moat Focus Index (MGEUMFUN), “a rules-based, equal-weighted index intended to offer exposure to 50 attractively priced companies outside the U.S. with sustainable competitive advantages according to Morningstar’s equity research team,” according to Market Vectors . Like its U.S.-focused counterpart, MOTI uses Morningstar’s proprietary methodology to identify companies with long-term advantages, which allows companies to earn sustainable excess economic profits , as measured by the return on invested capital relative to the company’s cost of capital. The new ETF features exposure to 16 countries, including four emerging markets. However, MOTI’s geographic lineup is heavily tilted toward developed markets. India, China, Mexico and Chile – MOTI’s four emerging markets exposure – combine for just over a quarter of the new ETF’s weight. Conversely, Australia alone is 21.1% of MOTI’s weight. Home to 51 stocks, MOTI’s lineup is roughly two and a half times the size of MOAT’s. However, MOTI applies the same equal-weight methodology. MOAT’s 21 holdings have weights ranging from 4.64% to 6%, whereas MOTI’s holdings range in size from 1.15% to 2.32%. Four of MOTI’s top 10 holdings are Indian stocks, making the country the most represented among MOTI’s top 10 lineup. ” MOAT resonated with investors and with much of the world’s investable opportunities outside the United States, we’re launching MOTI as a means to capture moat-based opportunities abroad,” said Brandon Rakszawski, product manager at Van Eck Global, in a statement. “Morningstar is a leader in equity research and we look forward to offering investors the ability to access its analysts’ best ideas through an investible ETF.” At the sector level, MOTI is heavily allocated to financial services names with that sector commanding nearly 49% of the ETF’s weight. Materials at almost 12% is the only other sector to garner a double-digit allocation. Consumer discretionary and staples names combine for just over 15% of MOTI’s weight, according to Market Vectors data. Familiar individual names in MOTI’s lineup include State Bank of India, Unilever (NYSE: UN ), America Movil (NYSE: AMX ), Westpac Banking (NYSE: WBK ), Nestle ( OTCPK:NSRGY ), Potash Corp. (NYSE: POT ), HSBC (NYSE: HSBC ) and all of Canada’s major banks. MOAT’s methodology has clearly been embraced by investors. The ETF has swelled to nearly $881 million in assets under management in just over three years of trading. MOTI’s annual expense ratio is 0.56%. MOTI Sector Weights Chart Courtesy: Market Vectors 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. I have no business relationship with any company whose stock is mentioned in this article.