Final trades: GE, Royal Caribbean, Illumina, Cisco & Invitation Homes from CNBC. ...
The below comes from my friend Peter Boockvar of The Boock Report and is reprinted with his permission. I thought it was perfectly succinct and aligned with how I feel about the situation. I am not in favor of corporate welfare and I understand the other side to some extent. But I am also a pragmatist and I think in the modern era, this is what you have to do. You have to play the game. There are giant corporations wringi...
Josh here – on today’s Talk Your Book, my friend Aaron Schumm stops by to talk about the $28 trillion opportunity independent financial advisors and RIAs aren’t paying enough attention to. That’s how much investor capital is currently invested in retirement plans, many of which are outdated, clunky or poorly managed. 401(k)’s have long been the province of brokerage firms and insurance compa...
As an employee of a company you may have access to a 401(k). A 401(k) is an employer-sponsored (offered) retirement plan that allows you to save money for retirement. Sometimes your employer may provide a match based on a percentage of your contributions.
Your employer may give you the option of saving to a pre-tax account or a Roth account. A pre-tax contribution means that your contributions are made to your account before federal and state taxes are applied to your paycheck. A Roth contribution means that taxes are taken first, then the contribution goes to your account. This is also known as an after-tax contribution.
If you make pre-tax contributions, you avoid tax now, but then are taxed when withdrawals are made in retirement. If you make Roth contributions now, you’re taxed today, but withdrawals in retirement are tax-free.
It can make a lot of sense to contribute to your Roth 401(k) for a few reasons.
Personally, I favor Roth contributions. I like the tax-free benefit of qualified distributions in retirement. It should be noted however, that any employer match to a Roth 401(k) will be made to a pre-tax account (as the employer is allowed a tax deduction for the matching contribution). Your employer match will not be Roth dollars.
This should not be a discouragement from saving to your Roth 401(k).
Final Trades: Occidental Petroleum, Alphabet, Roku & Pattern Energy from CNBC. ...
The feedback for this one is off the charts. The people want more Nick! Let’s say you had the ability of a god – you could determine the exact low point of the stock market each year], in real-time, and only put your cash in at that very moment. You might assume that this ability would guarantee you could outperform all other investors. And you’d be wrong. Now imagine the people who expect to only buy t...
I am diabetic.
This is one of those situations we’re dealt with in life that requires changes – and paying attention to a lot of stuff we never wanted to pay attention to. Like eating right, exercising, taking appropriate meds, and monitoring and adjusting. It’s a lifestyle change.
What I’ve continued to notice is that, even when I do most of the right things – I exercise regularly, walking for 45 minutes a day, stay away from sweets, take the right meds at the right times, and monitor things closely – I can still wind up with a high blood glucose level.
How can that be? Well, it turns out that just staying away from sweets and sugars isn’t the whole answer – I also need to refrain from most starchy foods and have more proteins and vegetables in my diet. Frustrating? You bet. Futile? Not completely – I just need to do ALL of the right things.
So what does all this have to do with financial stuff?
Most folks are or have been in a similar position with their investing and savings activities. We thought we were doing the right things. Turns out it was only some of the right things. We are putting money aside into our 401(k) and IRA plans, taking advantage of tax rules in our favor, spreading our money out among five, seven, nine different mutual funds, and well, keeping debt “in check”.
Unfortunately, saving and investing while just keeping debt in check isn’t the whole answer. If we’re not prepared for a financial downturn with emergency funds, the debt situation can sneak up and cause lots of problems with our personal cash flow. Lots of folks who work for the federal government experienced this problem recently. Lots of formerly “in check” debt is coming dangerously close to getting out of check.
Additionally, the idea of diversification needs to be better understood and applied. Just because you’ve spread out your money among umpteen different funds, it won’t help a bit if all of those funds are subject to the same economic factors correlated in their reaction to changes. To be properly diversified, a portfolio should include components that are not in any way related to one another. With this diversification, when an economic downturn affects the US domestic large-cap equity market, only that portion of our portfolio that is invested in large-caps is impacted.
The remainder of our portfolio, properly diversified into asset classes such as real estate, foreign and domestic bonds, foreign equity markets, commodities and other sized companies, will have reacted differently to the negative impact in the domestic large-cap equity market and the overall effect is lessened dramatically.
Granted, even the best diversification strategy would not have kept you from experiencing paper losses during the economic downturn we experienced late in 2018. Your overall result would have been much better than most folks (with concentrated positions) saw, and you would be much closer to “whole” at this stage. Frustrating? You bet. Futile? Of course not – we just need to continue to do ALL the right things.
One last parallel with my health situation to our financial situations – continuous monitoring and adjusting is necessary, as is patience. As I mentioned before, I need to check my blood glucose level regularly and make adjustments to my diet and such to help ensure that I’m staying within manageable levels. Oftentimes it gets frustrating because I believe I’ve done all the right things and my level is still off. Then I’ll realize that maybe I didn’t exercise quite as much that particular day or perhaps I ate something I shouldn’t have. No matter, it’s passed by, the only thing that can be done is to resolve to do it right for the next day.
This is what we’ve got to do, now, in our financial lives. Continue doing all of the right things we were doing before, and make those changes and adjustments that we need to make (diversify appropriately, eliminate debt, have emergency funds, don’t buy more than you can really afford – of anything), and monitor the outcome. And be patient. Too many folks nearing retirement are looking at their account balances and figuring now is the time to make aggressive investment choices in order to “catch up”. There is another way to catch up, a much more assured way: put more money into a properly-diversified portfolio. Work a little longer than you expected. It’s not fun, and it’s not what you had in mind, but it’s necessary for you to be able to face retirement with a healthy source of income.
If you have additional ideas on this subject, I’d be happy to hear from you – leave a comment!
Final announcement by @ReformedBroker: Wealth / Stack, a brand new conference in partnership between Inside ETFs and Ritholtz Wealth Management is coming this fall in September. For advisors, by advisors. #InsideETFs #WealthStack pic.twitter.com/kGZ7iwGEei — Inside ETFs (@InsideETFs) February 13, 2019 Okay, I’ve been dying to announce this ever since we started planning it, and now the day has arrived. I just an...
2018 can be summed up in one word—volatility. To some, that word may have negative connotations. At BlackRock, we embrace volatility and look for opportunity. In our view, leveraged credit focused closed-end funds (“CEFs”) may present a opportunity for income investors seeking attractive yields.
Recent economic data confirms that the global growth is slowing, inflation remains moderate, and financial conditions have tightened. As a result, the Federal Reserve may be nearing its neutral policy rate. This Fed “pause” should benefit leveraged credit focused CEFs that have been adversely impacted by higher borrowing costs in addition to the confluence of geopolitical tensions, growth fears and overall negative market sentiment for risk assets.
Patience can pay with a long-term income strategy
In today’s fixed income landscape, we see opportunities to construct a much more efficient portfolio compared to a year ago to drive high income. Income can be an especially impactful force in some of these higher-risk asset classes, and price return appears considerably less important in today’s post-Quantitative Easing world (see Figure 1 below). Over a long enough time horizon, income can over-power the periodic draw-downs that credit markets may endure. When we look over a period of many years, we find that the vast majority of returns in major bond indices come from income, or coupon. Crucial to our philosophy in managing the portfolios is our prudent, disciplined, and steady approach to helping generate solid, reliable, and durable income over a longer-run investment window.
Investors with a greater risk tolerance may want to consider leveraged credit focused CEFs to achieve higher income with potential upside given attractive valuations. Within credit markets, we believe high yield fundamentals are improving with higher rated credits driving new issuance volume and interest coverage at post-crisis highs. Meanwhile, technical factors remain supportive as the high yield market has shrunk and valuations are looking more attractive following recent outflows. Similarly, emerging market debt valuations are starting to look attractive following significant underperformance in 2018 and the technical backdrop has become more supportive.
High income opportunities at a discount
Leveraged credit focused CEFs such as high yield and multi-sector strategies have experienced significant discount widening amid heavy tax loss selling at the end of 2018 (see figure 2 below). Current discounts are at levels much wider than their long-term averages, further increasing already attractive yields. For example, as of 1/31/2019, leveraged High Yield CEFs were yielding 7.8% on a net asset value (“NAV”) basis. However, given the average discount to NAV of 8.4%, the average yield on market price is currently 8.5% based on the Lipper High Yield Funds (Leveraged) category. We believe the combination of high income and potential capital appreciation from rising bond valuations, in addition to narrowing discounts, presents an attractive entry point for long-term investors with a higher risk tolerance.
Not all discounts are equal–use z-scores to identify potential value traps
When evaluating a CEF’s discount, we believe investors should not only focus on the absolute level, but also where the CEF is trading relative to its history. Historical data has shown that while discounts fluctuate, they eventually trend back to their norm. A useful tool to identify relative value opportunities is the Z-Score, which is a statistical measure that calculates the distance (measured in standard deviations) of a CEF’s current discount from its average discount over a stated time period. For example, a 3 year Z-score of -2 means that the CEF’s current premium/discount is 2 standard deviations lower (wider discount) than the CEF’s average discount over the 3 year period. Below we provide Z-scores and yield for some of BlackRock’s credit focused CEFs:
Stephen Minar, is a Director on the Closed-End Funds team at BlackRock.This material is for informational purposes only and is not intended to be relied upon as research or investment or tax advice, and is not a recommendation, offer or solicitation to purchase or sell any securities or to adopt any investment strategy, nor shall any securities be offered or sold to any person in any jurisdiction in which an offer, solicitation, purchase or sale would be unlawful under the securities laws of such jurisdiction. Common shares for the BlackRock closed-end funds (the “Funds”) are only available for purchase and sale at current market price on a stock exchange. For more information regarding any of the Funds, please call BlackRock at 800-882-0052 or refer to www.blackrock.com. Carefully consider the Funds' investment objectives, risk factors, and charges and expenses before investing. This and other information can be found in the Funds' prospectuses which may be obtained by visiting the SEC Edgar database. Read the prospectus carefully before investing. There is no assurance that a Fund will achieve its investment objective. Investing in a Fund involves numerous risks, including investment risks and the possible loss of principal amount invested. The Funds are not complete investment programs and you may lose money investing in a Fund. An investment in a Fund may not be appropriate for all investors. Performance results reflect past performance and are no guarantee of future results. Current performance may be lower or higher than the performance data quoted. All returns assume reinvestment of all dividends and/or distributions at the price of the Fund on the ex-dividend date. The dividend yield, market value and net asset value of a Fund's shares will fluctuate with market conditions. Closed-end funds may trade at a premium to NAV but often trade at a discount. The amounts and sources of Fund distributions reported in any notices to shareholders are only estimates and are not being provided for tax reporting purposes. The actual amounts and sources of the amounts for tax reporting purposes will depend upon a Fund's investment experience during the remainder of its fiscal year and may be subject to change based on tax regulations. A Fund will send a Form 1099-DIV for the calendar year that will tell shareholders how to report these distributions for federal income tax purposes. Some Funds make distributions of ordinary income and capital gains at calendar year end. Those distributions temporarily cause extraordinarily high yields. There is no assurance that a Fund will repeat that yield in the future. Subsequent monthly distributions that do not include ordinary income or capital gains in the form of dividends will likely be lower. Some investors may be subject to the alternative minimum tax (AMT). The Funds are actively managed and their characteristics will vary. Stock and bond values fluctuate in price so the value of your investment can go down depending on market conditions. International investing involves special risks including, but not limited to political risks, currency fluctuations, illiquidity and volatility. These risks may be heightened for investments in emerging markets. Fixed income risks include interest-rate and credit risk. Typically, when interest rates rise, there is a corresponding decline in bond values. Credit risk refers to the possibility that the bond issuer will not be able to make principal and interest payments. Principal of mortgage- or asset-backed securities normally may be prepaid at any time, reducing the yield and market value of those securities. Obligations of U.S. government agencies are supported by varying degrees of credit but generally are not backed by the full faith and credit of the US government. Non-investment-grade debt securities (high-yield/junk bonds) may be subject to greater market fluctuations, risk of default or loss of income and principal than higher rated securities. Investments in emerging markets may be considered speculative and are more likely to experience hyperinflation and currency devaluations, which adversely affect returns. In addition, many emerging securities markets have lower trading volumes and less liquidity. A Fund may use derivatives to hedge its investments or to seek to enhance returns. Derivatives entail risks relating to liquidity, leverage and credit that may reduce returns and increase volatility. Refer to a Fund’s prospectus for more information. 55 E 52nd St, New York, NY 10055. Prepared by BlackRock Investments, LLC © 2019 BlackRock, Inc. All Rights reserved. BLACKROCK is a registered trademark of BlackRock, Inc. or its subsidiaries in the United States and elsewhere. All other trademarks are those of their respective owners. WAH0219U-737892-1/1
I’m in the heart of the action this week at Inside ETFs, which brings together something like 2500 people from all over the country who are interested in funds, fintech, wealth management, financial advice, markets, investing, etc. It all goes down at the Diplomat Hotel in Hollywood, Florida. The attendees are almost all professionals and the days are filled with big names on stage, either on panels or giving presen...