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Confessions of an Alleged Market Timer
Tweet Share on Facebook November 24, 2009 Comment (3)During the past year, mutual fund manager Stephen Shipman has regularly transformed his Quaker Small-Cap Tactical Allocation Fund. At one point in 2008, he had virtually the entire portfolio in cash, but at times this year he has been around 85 percent invested in the stock market.
[See 4 Small Caps With Room to Run.]
Traditionally, a swing that large in cash allocations has been considered a hallmark of market timing, a risky strategic gambit that involves weaving into the market during strong periods for stocks and pulling out in advance of perceived slowdowns. While market timing is generally taboo in the mutual fund world, a recent Wall Street Journal article says it's on the rise as managers look to "lure back investors still wary of stocks." In the story, Shipman's fund is featured as one of the banner examples of the renewed interest in market timing.
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How to Navigate a Slow-Growth Economy
Tweet Share on Facebook November 19, 2009 CommentAfter the dust clears from the furious rally in stock prices, what will happen next? It's the question in the back of every investor's mind, and the answer could be far from encouraging. The way many economists see it, the market is headed for a sustained period of slow growth as the tepid borrowing environment and sluggish employment prospects balance out the recent rash of enthusiasm.
For investors, this turning point in the market provides ample reasons for tempered expectations. But even amid a slowdown, there are a number of opportunities for solid returns. Here are some tips for navigating a slow-growth economy.
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Why Asia Once Again Favors Long-Term Investors
Tweet Share on Facebook November 19, 2009 CommentAfter months of favoring speculative gambits, the momentum of the Asian markets is returning once again to the hands of the long-term investor, says Robert Horrocks of Matthews International Capital Management. Citing a reduction in the valuation gaps between Asia and the rest of the world, Horrocks says investors should start focusing on fundamental earnings potential rather than on market timing.
[See Can Japan Stage a Comeback?]
In this shifting climate, Horrocks, the chief investment officer at Matthews, which runs 10 Asia funds, sees plenty of opportunities for investors with lengthy time horizons. In particular, he says that Asia is especially attractive for investors seeking dividends. Meanwhile, as the Asian economy continues to become more efficient, Horrocks foresees problems for the materials industry, but he remains optimistic about consumer staples, which over time will benefit from rising household incomes.
In a recent interview with U.S. News, Horrocks laid out his forecasts for the continent and talked about where investors can find long-term profits. Excerpts:
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Is 'Jones v. Harris Associates' a Referendum on Mutual Funds?
Tweet Share on Facebook November 18, 2009 CommentAs the Supreme Court mulls over mutual funds' fees, analysts have lined up to read between the lines. And while a decision in Jones v. Harris Associates is probably months away, there is no shortage of opinions about its implications.
On its surface, the question at the heart of the case is narrowly constructed: Should courts intervene when investors claim that asset managers' fees excessively favor certain clients? In particular, the plaintiffs are shareholders in the Oakmark funds, which are run by Harris Associates. The Oakmark shareholders say that at the time they filed the suit in 2004, they were being charged management fees nearly twice as high—0.88 percent vs. 0.45 percent—as those assigned to Harris's institutional clients.
Still, this veneer of simplicity hasn't prevented an outpouring of speculation as to how potential outcomes could affect the broader financial industry. With that in mind, U.S. News takes a look at three of the most common claims and examines how likely the suggested impacts are to materialize. This is the last article in a three-part series.
[See Part I: How the Supreme Court May Make Mutual Funds More Expensive and Part II: Why the Mutual Fund Case Isn't About Executive Pay.]
Claim: This case highlights the structural weaknesses of mutual funds. Disputes over mutual fund fees are hardly uncommon. Actually, the tendency of expenses to gradually erode returns is perhaps the biggest complaint that investors have about their funds. But while these discussions were previously relegated to dinner-table banter or buried in congressional bills, this case has propelled them into the national spotlight at a time when investors were already smarting from disastrous 2008 returns.
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Why Mutual Fund Case Isn't About Executive Pay
Tweet Share on Facebook November 17, 2009 CommentAs the Supreme Court mulls over mutual funds' fees, analysts have lined up to read between the lines. And while a decision in Jones v. Harris Associates is probably months away, there is no shortage of opinions about its implications.
On its surface, the question at the heart of the case is narrowly constructed: Should courts intervene when investors claim that asset managers' fees excessively favor certain clients? The plaintiffs are shareholders in the Oakmark funds, which are run by Harris Associates. The Oakmark shareholders say that at the time they filed the suit in 2004, they were being charged management fees nearly twice as high—0. 88 percent vs. 0.45 percent—as those assigned to Harris's institutional clients.
[See Retail Investors Get Their Day in High Court.]
Still, this veneer of simplicity hasn't prevented an outpouring of speculation about how potential outcomes could affect the broader financial industry. With that in mind, U.S. News takes a look at three of the most common claims and examines how likely the suggested impacts are to materialize. This is the second of three articles. The first appeared yesterday; the next will run tomorrow.
[See Part I: How the Supreme Court May Make Mutual Funds More Expensive.]
Claim: This is a case about executive compensation. Ever since the Supreme Court agreed to hear Jones v. Harris Associates, onlookers have been quick to link it to the heated public debate about executive compensation. In fact, coverage of the case has consistently couched the proceedings in the context of the uproar over the lifestyles of the heads of struggling companies like American International Group and General Motors.
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How the Supreme Court May Make Mutual Funds More Expensive
Tweet Share on Facebook November 16, 2009 CommentAs the Supreme Court mulls over mutual funds' fees, analysts have lined up to read between the lines. And while a decision in Jones v. Harris Associates is probably months away, there is no shortage of opinions about its implications.
On its surface, the question at the heart of the case is narrowly constructed: Should courts intervene when investors claim that asset managers' fees excessively favor certain clients? The plaintiffs are shareholders in the Oakmark funds, which are run by Harris Associates. The Oakmark shareholders say that at the time they filed the suit in 2004, they were being charged management fees nearly twice as high—0.88 percent vs. 0.45 percent—as those assigned to Harris's institutional clients.
[See Retail Investors Get Their Day in High Court.]
Still, this veneer of simplicity hasn't prevented an outpouring of speculation as to how potential outcomes could affect the broader financial industry. With that in mind, U.S. News takes a look at three of the most common claims and examines how likely the suggested impacts are to materialize. This is the first of three articles. The next two will appear Tuesday and Wednesday.
Claim: The Supreme Court's decision could inadvertently make funds more expensive to own. In jumping in to referee a tense dispute in the Seventh U.S. Circuit Court of Appeals, the Supreme Court could create a new rubric for evaluating mutual fund fee disputes. If that happens, some fear it would trigger a wave of litigation as mutual funds and investors spar in court to test the standard's limits. This, in turn, could drive up expense ratios over time as funds pay to defend themselves, which would be an ironic twist of events for the plaintiffs in this case, who are seeking lower fees.
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ETFs: A Simple Solution for Small Investors
Tweet Share on Facebook November 12, 2009 CommentFor those without a lot of cash—or just starting out—exchange-traded funds offer a simple, low-cost way to invest and gain instant diversification.
ETFs look like mutual funds, yet behave in some ways like stocks. Similar to index mutual funds, most basic ETFs are passive investments that don't require a manager and therefore don't charge high fees (in many cases, ETF expenses are lower than those of index funds). Investors can also buy as little as one share of an ETF, whereas mutual funds often require minimum investments of $1,000 and up. Like index funds, ETFs mirror an index, but they can be traded all day on an exchange like stocks. Another plus: Since they track a particular index, investors can easily find out what stocks (or bonds) they hold.
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The Great Rebalancing Debate
Tweet Share on Facebook November 11, 2009 Comment (6)When is it appropriate to rebalance a portfolio? This question, a close companion of the ever-popular "How high is too high?" dilemma, has plagued investors for years, largely because there is no right answer. But if you're open to suggestions, a relatively new Website wants to send them directly to your inbox—for a fee.
[See A New Way to Invest?]
MarketRiders, which launched in May after a test run that began in early 2008, has been touting its ability to boost clients' returns on exchange-traded funds by helping them optimize asset allocation. In a recent release, the company says its rebalancing strategy gave investors in one of its bond-heavy model portfolios the chance to more than double their returns—from 2.37 percent to 5.05 percent—during the turbulent 12-month stretch that wrapped up at the end of September.
[Also see 5 Steps to Set Up a Retirement ETF Portfolio.]
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Study Shows Increases in Mutual Fund Fees
Tweet Share on Facebook November 10, 2009 Comment (1)In a double whammy for investors, stock funds became marginally more expensive to own even as their value plummeted during the bottoming out of the market, according to new data from Lipper. Specifically, stock funds' expense ratios increased by an average of 5.2 basis points, or .052 percent, between Nov. 1, 2008, and June 30, 2009. During that eight-month window, annual fees for sector-specific funds rose at disproportionately high levels compared with other types of stock funds. Meanwhile, reduced fees for money market funds and relatively steady charges for fixed-income funds helped balance out some of these increases.
[See Study Shows Investors Pass Over Expense Ratios.]
The Lipper study examines funds whose fiscal years wrapped up between Nov. 1, 2008, and Jan. 1, 2009. For nearly 1,500 of those funds, Lipper compared how their expense ratios changed from their annual reports at the end of fiscal year 2009 to their semiannual reports, which came out between April 30 and June 30 of this year. After throwing out outliers on either end of the spectrum, analysts arrived at the final numbers. In identifying the fee increases, Lipper pinpointed a trend that is common during downturns: As funds' asset bases shrink, each individual investor becomes responsible for a larger portion of the operating costs.
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Survey Shows Investment Advisers Feel Closest to American Funds
Tweet Share on Facebook November 6, 2009 CommentFeeling overwhelmed by mailings from your mutual funds? According to a new study, your investment adviser may have the same complaint. In a nod to quality over quantity, Cogent Research has found that fund providers don't need to overload advisers' inboxes in order to earn their appreciation.
According to the Massachusetts-based research group, advisers—who serve as the middlemen between providers and investors—feel the most connected to American Funds. Cogent also found that American reaches out to advisers less frequently than the industry average. On the other hand, John Hancock and Evergreen topped the charts for frequency of contacts but didn't crack the top-10 list of fund families to which advisers felt the closest.
