Here Are 5 Ways To Prepare Your Bond Portfolio For Rising Interest Rates
The Bond Market Isn't A Monolith, There Are 5 Strategies That Could Help In A Rising-Rate Environment (AllianceBernstein)
The 10-year U.S. Treasury Yield jumped in May and June, but AllianceBernstein's Douglas Peebles writes that investors should reposition their portfolios instead of panicking. He writes that higher rates lie ahead even if the Fed is keeping short-term rates lower for some time. "The good news: the bond market isn’t a monolith. There are a lot of ways to reduce a portfolio’s sensitivity, or “beta,” to interest rates while staying true to investment goals," he writes.
Peebles suggests five strategies to help portfolios as in a rising-rate environment. 1. "Go global" though there is a risk from currency fluctuations. 2. "Access credit sectors… Investors who are particularly conscious of interest-rate risk might consider high-yield bonds with lower duration, which indicates less interest-rate sensitivity." 3. "Tap into muni bonds." 4. "Inflation-protection strategies with lower duration." 5. "Leave the index behind."
Massachusetts Sends Subpoenas To 15 Brokerages For Information On Sales Of Alternative Investments To Seniors (Investment News)
Massachusetts sent subpoenas to 15 brokerages asking for information on sales practices of alternative investments to seniors in the state. Morgan Stanley, UBS, Merrill Lynch, Charles Schwab and LPL Financial are among those that are being investigated. The firms are required to respond by July 24. These firms aren't necessarily accused of wrongdoing, according to Investment News.
A History Of Stock Market Corrections (Dr Ed's Blog)
In the current bull market we have had three corrections i.e. declines of 10% or more. In a new blog post Ed Yardeni gives us a brief history of stock market corrections.
"During bull markets, corrections aren't necessarily frequent occurrences. Indeed, there was only one correction during the previous bull market, but only if the start date is pegged at October 9, 2002 rather than March 11, 2003. Between the bear market of 1987 and 2000-2003, there were just two corrections. Between the bear markets of 1980-1982 and 1987, there was only one." This chart shows corrections from 2000 - 2009.
Investors Must Invest Based On Their Needs, Not Their Desires (Vanguard)
It's easy for investors to get caught up in all the noise that surrounds investing. Especially when by and sell calls around the market intensify.
At times like this it's important for advisors to remind client's of their goals, according to Vanguard's Colleen Jaconetti.
"We believe it is better to select an asset allocation based on each client's required, not desired, return—the return necessary to achieve his or her long-term goals—which is often meaningfully less than the desired return. Basing asset allocation decisions on the desired return, rather than the required return, may result in selecting an asset allocation that is skewed, sometimes quite heavily and unnecessarily, toward higher-risk assets."
It Is Important For Advisors To Discuss End-Of-Life Plans With Their Clients (The Wall Street Journal)
It's important for advisors to discuss "end-of-life plans" with their clients, writes Beth C. Gamel of Pillar Financial Advisors in The Wall Street Journal. While the subject is sensitive advisors should have the discussions to avoid problems later on.
"Often I approach this part of the conversation by asking the client if they have considered what they'd like their final arrangements to be. I use that term because for some people it means picking out a plot or saying they want to be cremated. It provides a segue to then say that another important element is to clarify what you want done if you are in a state where your family will have to make a decision about the continuation of your life."