Reasons To Include International Investments In Your Portfolio

The United States currently represents 60% of the global equity market.¹ This means investors with an extreme home bias are ignoring 40% of the equity universe. In truth, doing so over the last 14.5 years would have worked out for you, but markets are cyclical, so it’s unlikely this lasts forever. There’s also a long history of throne-swapping between U.S. and international stocks (see chart). Particularly in today’s challenging market environment, investors should think twice before giving ex-U.S. assets the cold shoulder.

The U.S. stock market doesn’t always dominate

The United States doesn’t always dominate the global equity market! When U.S. stocks are facing headwinds, international stocks may rise to the occasion. Sustained periods of outperformance by one region have been fairly common historically.

These bouts can be significant. For example, consider the ‘lost decade’ for U.S. stocks that started in the early 2000s. Between 2000 – 2009, the cumulative total return for the S&P 500 was negative 9.1% vs positive 30.7% for the MSCI All Country World Index ex U.S.

International stocks could outperform if U.S. stocks are struggling

The graphic above breaks down performance of the S&P 500 vs the MSCI EAFE. During periods when domestic stocks produced below-average returns, international equities did better, by over 2% on average. Further, during all rolling 10-year periods since 1971, the top performer was almost a coin toss: the U.S. only did better 56% of the time.

Since trying to time regime changes is very difficult in real time without the benefit of hindsight, there are reasons to consider allocating both U.S. and ex-U.S. equities to an asset allocation.

Ex-U.S. equity may be able to help reduce risk in a portfolio

Having international exposure in your portfolio in the early 2000s and throughout the Global Financial Crisis would have been a key ingredient in reducing overall risk and maintaining some level of investment return.

By way of example, consider this hypothetical 60/40 portfolio of stocks to bonds. The U.S. only portfolio includes the S&P 500 and Bloomberg Barclays U.S. Aggregate Bond index while the U.S. & international portfolio allocates 20% of the equity exposure to the MSCI All-Country World Index ex-U.S.

Other reasons to consider international assets in your portfolio

  • Different sector concentrations. The U.S. is fairly tech heavy. The S&P 500 is currently about 27% technology companies. Compare that to Europe at 7%. Exposure to other sectors like financials and commodities in emerging markets can add overall diversification.
  • Currency risk and return. At a high level, the relative strength of foreign currencies to the dollar has the potential to help or hurt returns. Asset managers can engage in different strategies to hedge or boost returns around foreign exchange rates, but the takeaway is that currency can be another layer of diversification.
  • Valuations. Valuations outside of the United States have been much cheaper to the long-run averages for quite some time. Especially relative to the U.S., international stocks look much more attractive on a valuation standpoint. Despite the selloff in 2022, the S&P 500 is only now just in line with the 20-year average P/E ratio.

The takeaway

Adding ex-U.S. stocks to your portfolio may be able to help reduce risk over the long-term. But there are downsides to be aware of. Most notably, international assets tend to be more volatile. These swings can be to the upside or the downside. And just as the unique elements of investing overseas (like foreign exchange rates or sector exposure) can help investors at times, they can also hurt U.S. investors in other circumstances.Quintex3-1-2-2-1-1-1-1-1-1-1-1-1-1

As with anything in investing, consider your personal risk tolerance, time horizon, and circumstances. Diversification isn’t a magic bullet, and if you do add international exposure to your portfolio, be sure to appropriately size the position to meet your needs.

I’m a Certified Financial Planner professional specializing in stock options and sudden wealth.

Source: Reasons To Include International Investments In Your Portfolio

International markets are generally divided into 2 categories:

  • Developed markets are located in countries that have established industries, widespread infrastructure, secure economies, and a relatively high standard of living.
    Examples of developed markets include the United Kingdom, Japan, Australia, Canada, and France.
  • Emerging markets are located in countries that have developing capital markets and less-stable economies. However, they’re considered to be in the process of transitioning into developed markets, and they may be experiencing rapid growth. Currently, emerging markets make up about 15% to 20% of international markets in total.
    Examples of emerging markets include India, China, Egypt, South Africa, Mexico, and Russia.

Not surprisingly, developed markets are similar to the United States when it comes to volatility levels and the range of potential returns. Emerging markets are more volatile than developed markets and have a wider range of potential outcomes. For that reason, we recommend that you don’t overweight your allocation to emerging markets.

How to choose an international investment

There are a few ways you can invest in foreign markets:

  • International funds invest only in foreign markets, excluding the United States.
  • Global or world funds provide exposure to both foreign and U.S. markets.
  • Regional funds invest primarily in a specific part of the world, like Europe or the Pacific region.
  • Developed markets funds focus on foreign countries with proven economies, like Japan, France, or the United Kingdom.
  • Emerging markets funds combine investments in countries that are considered to have “developing” economies, like India, Brazil, or China.

More contents:

Hydrogen Demonstrator project could bring an investment of £26 million into Bridgend County Borough Bridgend County Borough Council (Press Release)

Tunisia Investment Forum starts ANSAMED.info

19:23
19:21
15:24 Wed, 22 JunBitcoin SEC Crypto
05:43 Wed, 08 JunBitcoin SEC Crypto
11:02 Wed, 22 JunBitcoin NYSE Crypto
14:41 Wed, 22 Jun
13:38 Sat, 18 JunXeros Germany
11:13 Mon, 20 JunAustralia Gold Precious Metals
Thor Mining PLC commences new round of drilling at Ragged Range Proactive Investors (UK)11:30 Tue, 21 Jun

More Remote Working Apps:

https://quintexcapital.com/?ref=arminham     Quintex Capital

https://www.genesis-mining.com/a/2535466   Genesis Mining

 http://www.bevtraders.com/?ref=arminham   BevTraders

https://www.litefinance.com/?uid=929237543  LiteTrading

https://jvz8.com/c/202927/369164  prime stocks

  https://jvz3.com/c/202927/361015  content gorilla

  https://jvz8.com/c/202927/366443  stock rush  

 https://jvz1.com/c/202927/373449  forrk   

https://jvz3.com/c/202927/194909  keysearch  

 https://jvz4.com/c/202927/296191  gluten free   

https://jvz1.com/c/202927/286851  diet fitness diabetes  

https://jvz8.com/c/202927/213027  writing job  

 https://jvz6.com/c/202927/108695  postradamus

https://jvz1.com/c/202927/372094  stoodaio

 https://jvz4.com/c/202927/358049  profile mate  

 https://jvz6.com/c/202927/279944  senuke  

 https://jvz8.com/c/202927/54245   asin   

https://jvz8.com/c/202927/370227  appimize

 https://jvz8.com/c/202927/376524  super backdrop

 https://jvz6.com/c/202927/302715  audiencetoolkit

 https://jvz1.com/c/202927/375487  4brandcommercial

https://jvz2.com/c/202927/375358  talkingfaces

 https://jvz6.com/c/202927/375706  socifeed

 https://jvz2.com/c/202927/184902  gaming jobs

 https://jvz6.com/c/202927/88118   backlinkindexer

 https://jvz1.com/c/202927/376361  powrsuite  

https://jvz3.com/c/202927/370472  tubeserp  

https://jvz4.com/c/202927/343405  PR Rage  

https://jvz6.com/c/202927/371547  design beast  

https://jvz3.com/c/202927/376879  commission smasher

 https://jvz2.com/c/202927/376925  MT4Code System

https://jvz6.com/c/202927/375959  viral dash

https://jvz1.com/c/202927/376527  coursova

 https://jvz4.com/c/202927/144349  fanpage

https://jvz1.com/c/202927/376877  forex expert  

https://jvz6.com/c/202927/374258  appointomatic

https://jvz2.com/c/202927/377003  woocommerce

https://jvz6.com/c/202927/377005  domainname

 https://jvz8.com/c/202927/376842  maxslides

https://jvz8.com/c/202927/376381  ada leadz

https://jvz2.com/c/202927/333637  eyeslick

https://jvz1.com/c/202927/376986  creaitecontentcreator

https://jvz4.com/c/202927/376095  vidcentric

https://jvz1.com/c/202927/374965  studioninja

https://jvz6.com/c/202927/374934  marketingblocks

https://jvz3.com/c/202927/372682  clipsreel  

https://jvz2.com/c/202927/372916  VideoEnginePro

https://jvz1.com/c/202927/144577  BarclaysForexExpert

https://jvz8.com/c/202927/370806  Clientfinda

https://jvz3.com/c/202927/375550  Talkingfaces

https://jvz1.com/c/202927/370769  IMSyndicator

https://jvz6.com/c/202927/283867  SqribbleEbook

https://jvz8.com/c/202927/376524  superbackdrop

https://jvz8.com/c/202927/376849  VirtualReel

https://jvz2.com/c/202927/369837  MarketPresso

https://jvz1.com/c/202927/342854  voiceBuddy

https://jvz6.com/c/202927/377211  tubeTargeter

https://jvz6.com/c/202927/377557  InstantWebsiteBundle

https://jvz6.com/c/202927/368736  soronity

https://jvz2.com/c/202927/337292  DFY Suite 3.0 Agency+ information

https://jvz8.com/c/202927/291061  VideoRobot Enterprise

https://jvz8.com/c/202927/327447  Klippyo Kreators

https://jvz8.com/c/202927/324615  ChatterPal Commercial

https://jvz8.com/c/202927/299907  WP GDPR Fix Elite Unltd Sites

https://jvz8.com/c/202927/328172  EngagerMate

https://jvz3.com/c/202927/342585  VidSnatcher Commercial

https://jvz3.com/c/202927/292919  myMailIt

https://jvz3.com/c/202927/320972  Storymate Luxury Edition

https://jvz2.com/c/202927/320466  iTraffic X – Platinum Edition

https://jvz2.com/c/202927/330783  Content Gorilla One-time

https://jvz2.com/c/202927/301402  Push Button Traffic 3.0 – Brand New

https://jvz2.com/c/202927/321987  SociCake Commercial

https://jvz2.com/c/202927/289944  The Internet Marketing

 https://jvz2.com/c/202927/297271  Designa Suite License

https://jvz2.com/c/202927/310335  XFUNNELS FE Commercial 

https://jvz2.com/c/202927/291955  ShopABot

https://jvz2.com/c/202927/312692  Inboxr

https://jvz2.com/c/202927/343635  MediaCloudPro 2.0 – Agency

 https://jvz2.com/c/202927/353558  MyTrafficJacker 2.0 Pro+

https://jvz2.com/c/202927/365061  AIWA Commercial

https://jvz2.com/c/202927/357201  Toon Video Maker Premium

https://jvz2.com/c/202927/351754  Steven Alvey’s Signature Series

https://jvz2.com/c/202927/344541  Fade To Black

https://jvz2.com/c/202927/290487  Adsense Machine

https://jvz2.com/c/202927/315596  Diddly Pay’s DLCM DFY Club

https://jvz2.com/c/202927/355249  CourseReel Professional

https://jvz2.com/c/202927/309649  SociJam System

https://jvz2.com/c/202927/263380  360Apps Certification

 https://jvz2.com/c/202927/359468  LocalAgencyBox

https://jvz2.com/c/202927/377557  Instant Website Bundle

https://jvz2.com/c/202927/377194  GMB Magic Content

https://jvz2.com/c/202927/376962  PlayerNeos VR

https://jvz8.com/c/202927/381812/  BrandElevate Bundle information

https://jvz4.com/c/202927/381807/ BrandElevate Ultimate

https://jvz2.com/c/202927/381556/ WowBackgraounds Plus

https://jvz4.com/c/202927/381689/  Your3DPal Ultimate

https://jvz2.com/c/202927/380877/  BigAudio Club Fast Pass

https://jvz3.com/c/202927/379998/ Podcast Masterclass

https://jvz3.com/c/202927/366537/  VideoGameSuite Exclusive

https://jvz8.com/c/202927/381148/ AffiliateMatic

https://jvzoo.com/c/202927/381179  YTSuite Advanced

https://jvz1.com/c/202927/381749/  Xinemax 2.0 Commercial

https://jvzoo.com/c/202927/382455  Living An Intentional Life

https://jvzoo.com/c/202927/381812  BrandElevate Bundle

https://jvzoo.com/c/202927/381935 Ezy MultiStores

https://jvz2.com/c/202927/381194/  DFY Suite 4.0 Agency

https://jvzoo.com/c/202927/381761  ReVideo

https://jvz4.com/c/202927/381976/  AppOwls Bundle

https://jvz8.com/c/202927/381950/  TrafficForU

https://jvz3.com/c/202927/381615/  WOW Backgrounds 2.0

https://jvz4.com/c/202927/381560   ALL-in-One HD Stock Bundle

https://jvz6.com/c/202927/382326/   Viddeyo Bundle

https://jvz8.com/c/202927/381617/  The Forex Joustar

How Much Liquidity Does Your Portfolio Need During Ages 30, 40, 50, 60+

The global market’s volatility and increasing inflation is likely a cause for concern as you manage your portfolio.  With these challenges, it’s advisable to incorporate liquidity into your planning.

Liquidity is described as the amount of cash you can readily access, or how quickly you can convert assets to cash. The need for liquidity can vary depending on your age and risk tolerance, and short and long term financial goals. We’ve asked financial experts for their advice about how to plan your liquidity strategy as you age.

Liquid emergency savings for unforeseen life events

According to financial experts, you should have about six months of liquid living expenses set aside in an emergency fund, if you encounter a job loss, experience a medical emergency or have a sudden expense like a car repair.

“At any age we recommend an emergency fund in cash or cash investments to cover roughly six-month expenditures.”

“At any age we recommend an emergency fund in cash or cash investments to cover roughly six-month expenditures,” says Rob Williams, CFP®, CRPC®, managing director, financial planning, retirement income and wealth management, Schwab Center for Financial Research. “They can cover a one-time surprise expense or tide you over if you have an illness, change jobs, or have another expense, to help avoid the need to sell investments.”

How your age factors in on your liquidity path

According to Williams, investors aged 30 to their early 60s and still working and who do not need money from their portfolio soon could start with around 5% of their portfolio in cash and cash investments, based on the time horizon and risk tolerance.

And, for investors nearing retirement, when they may need to start tapping their portfolio, or another goal, such as paying for a child’s education, may want to hold a higher proportion in cash and cash investments in their portfolio, Williams says.

“We suggest, generally, that investors hold the next year of money that they may need to withdraw from a portfolio, to pay for a goal or expense in cash or cash investments.”

“We suggest, generally, that investors hold the next year of money they may need to withdraw from a portfolio, to pay for a goal or expense, in cash or cash investments,” Williams explains. “This is a good guideline, to determine how much you might want to hold based not just on your age, but your goals as well.”

How goals can influence your decade-by-decade liquidity decisions

John Pilkington, CFP, senior financial advisor with Vanguard Personal Advisor Services, also recommends setting aside 3-6 months’ worth of expenses in an emergency fund, and, given an individual’s or couple’s lifestyle and financial goals, he advises to consider how liquid reserves fit into a broader financial plan.

“For example, if someone is in their early 40s and is planning a significant purchase, such as a vacation property, in the near future, they will have significantly higher liquidity needs than someone of the same age who is only saving for longer term goals,” he says.

Other factors that can impact your need for liquidity could be financing a child’s education or creating a retirement plan.

“Typically, those in their 30s and 40s have competing financial goals – think paying down a mortgage, student loans, saving for children’s future college expenses, saving for retirement – and therefore have a higher need for liquidity should they need to tap funds amid planning other financial obligations,” Pilkington says.

As he mentioned,  a challenge that many in these 30s to 40s decades face is the ability to create liquid reserves, as their competing goals are co-existing among higher debt burdens.

“This audience can benefit from looking at alternative sources of liquidity – such as a home equity line of credit, tapping a Roth IRA, or a personal loan,” adds Pilkington.

Source: How much liquidity does your portfolio need during ages 30, 40, 50, 60+ ? | Fox Business

.

Critics:

Liquidity becomes even more critical to consider in the context of an investor’s financial goals. For most, goals can be described most simply as certain amounts of money needed at particular points in time. However, when the time comes, investors will likely need to fund their goals in the form of cash, rather than in the form of financial securities or art.

Of course, exceptions exist for example, a charitable donation of stock or repurposing a piece of real estate investment property to serve as a retirement home. Your financial advisor has the tools and resources to incorporate your financial goals into your long-term plan. To illustrate this, consider a goal of funding a child’s university education. For most, this involves multiple payments of cash over the course of a few years at some point in the future.

When the tuition due-date nears, the portfolio of securities would likely need to become less risky, more stable, more liquid, and more accessible in order to ensure the tuition payment clears. The graph below depicts a hypothetical example of how the cash required over the child’s age increases as he approaches his college education years – requiring strategic planning for liquidity needs.

Especially in the case of relatively large financial goals such as funding higher-education, the chances that your goals become a reality can be improved by starting early, having a long-term focus, and putting a plan in place with your financial advisor.

More contents:

Liquidity – Dictionary Definition of Liquidity”. About.com Education. Archived from the original on 17 April 2015. Retrieved 27 May 2015.

Keynes, John Maynard. A Treatise on Money. Vol. 2. p. 67.

TradeLive”. TradeLive.in. Archived from the original on 26 December 2017. Retrieved 27 May 2015.

The Performance of Liquidity in the Subprime Mortgage Crisis” (PDF). New Political Economy. 15 (1): 71-89. doi:10.1080/13563460903553624. S2CID 153899413.

Mifid ushers in a new era of trading”. Financial Times. Retrieved 27 May 2015.

Understanding Financial Liquidity”. Investopedia.com. Investopedia US. Archived from the original on 3 May 2018. Retrieved 11 August 2014.

Why Stocks Are Rising: It’s The Liquidity, Stupid!”. Yahoo Finance. Archived from the original on 1 June 2013. Retrieved 11 August 2014.

Liquidity: Finance in motion or evaporation”, lecture by Michael Mainelli at Gresham College, 5 September 2007 (available for download as an audio or video file, as well as a text file)

The role of time-critical liquidity in financial markets by David Marshall and Robert Steigerwald (Federal Reserve Bank of Chicago)

Financial market utilities and the challenge of just-in-time liquidity

More Remote Working Apps:

https://quintexcapital.com/?ref=arminham     Quintex Capital

https://www.genesis-mining.com/a/2535466   Genesis Mining

 http://www.bevtraders.com/?ref=arminham   BevTraders

https://www.litefinance.com/?uid=929237543  LiteTrading

https://jvz8.com/c/202927/369164  prime stocks

  https://jvz3.com/c/202927/361015  content gorilla

  https://jvz8.com/c/202927/366443  stock rush  

 https://jvz1.com/c/202927/373449  forrk   

https://jvz3.com/c/202927/194909  keysearch  

 https://jvz4.com/c/202927/296191  gluten free   

https://jvz1.com/c/202927/286851  diet fitness diabetes  

https://jvz8.com/c/202927/213027  writing job  

 https://jvz6.com/c/202927/108695  postradamus

https://jvz1.com/c/202927/372094  stoodaio

 https://jvz4.com/c/202927/358049  profile mate  

 https://jvz6.com/c/202927/279944  senuke  

 https://jvz8.com/c/202927/54245   asin   

https://jvz8.com/c/202927/370227  appimize

 https://jvz8.com/c/202927/376524  super backdrop

 https://jvz6.com/c/202927/302715  audiencetoolkit

 https://jvz1.com/c/202927/375487  4brandcommercial

https://jvz2.com/c/202927/375358  talkingfaces

 https://jvz6.com/c/202927/375706  socifeed

 https://jvz2.com/c/202927/184902  gaming jobs

 https://jvz6.com/c/202927/88118   backlink indexer  https://jvz1.com/c/202927/376361  powrsuite  

https://jvz3.com/c/202927/370472  tubeserp  

https://jvz4.com/c/202927/343405  PR Rage  

https://jvz6.com/c/202927/371547  design beast  

https://jvz3.com/c/202927/376879  commission smasher

 https://jvz2.com/c/202927/376925  MT4Code System

https://jvz6.com/c/202927/375959  viral dash

https://jvz1.com/c/202927/376527  coursova

 https://jvz4.com/c/202927/144349  fanpage

https://jvz1.com/c/202927/376877  forex expert  

https://jvz6.com/c/202927/374258  appointomatic

https://jvz2.com/c/202927/377003  woocommerce

https://jvz6.com/c/202927/377005  domainname

 https://jvz8.com/c/202927/376842  maxslides

https://jvz8.com/c/202927/376381  ada leadz

https://jvz2.com/c/202927/333637  eyeslick

https://jvz1.com/c/202927/376986  creaitecontentcreator

https://jvz4.com/c/202927/376095  vidcentric

https://jvz1.com/c/202927/374965  studioninja

https://jvz6.com/c/202927/374934  marketingblocks https://jvz3.com/c/202927/372682  clipsreel  

https://jvz2.com/c/202927/372916  VideoEnginePro

https://jvz1.com/c/202927/144577  BarclaysForexExpert

https://jvz8.com/c/202927/370806  Clientfinda

https://jvz3.com/c/202927/375550  Talkingfaces

https://jvz1.com/c/202927/370769  IMSyndicator

https://jvz6.com/c/202927/283867  SqribbleEbook

https://jvz8.com/c/202927/376524  superbackdrop

https://jvz8.com/c/202927/376849  VirtualReel

https://jvz2.com/c/202927/369837  MarketPresso

https://jvz1.com/c/202927/342854  voiceBuddy

https://jvz6.com/c/202927/377211  tubeTargeter

https://jvz6.com/c/202927/377557  InstantWebsiteBundle

https://jvz6.com/c/202927/368736  soronity

https://jvz2.com/c/202927/337292  DFY Suite 3.0 Agency+ information

https://jvz8.com/c/202927/291061  VideoRobot Enterprise

https://jvz8.com/c/202927/327447  Klippyo Kreators

https://jvz8.com/c/202927/324615  ChatterPal Commercial

https://jvz8.com/c/202927/299907  WP GDPR Fix Elite Unltd Sites

https://jvz8.com/c/202927/328172  EngagerMate

https://jvz3.com/c/202927/342585  VidSnatcher Commercial

https://jvz3.com/c/202927/292919  myMailIt

https://jvz3.com/c/202927/320972  Storymate Luxury Edition

https://jvz2.com/c/202927/320466  iTraffic X – Platinum Edition

https://jvz2.com/c/202927/330783  Content Gorilla One-time

https://jvz2.com/c/202927/301402  Push Button Traffic 3.0 – Brand New

https://jvz2.com/c/202927/321987  SociCake Commercial https://jvz2.com/c/202927/289944  The Internet Marketing

 https://jvz2.com/c/202927/297271  Designa Suite License

https://jvz2.com/c/202927/310335  XFUNNELS FE Commercial 

https://jvz2.com/c/202927/291955  ShopABot

https://jvz2.com/c/202927/312692  Inboxr

https://jvz2.com/c/202927/343635  MediaCloudPro 2.0 – Agency

 https://jvz2.com/c/202927/353558  MyTrafficJacker 2.0 Pro+

https://jvz2.com/c/202927/365061  AIWA Commercial

https://jvz2.com/c/202927/357201  Toon Video Maker Premium

https://jvz2.com/c/202927/351754  Steven Alvey’s Signature Series

https://jvz2.com/c/202927/344541  Fade To Black

https://jvz2.com/c/202927/290487  Adsense Machine

https://jvz2.com/c/202927/315596  Diddly Pay’s DLCM DFY Club

https://jvz2.com/c/202927/355249  CourseReel Professional

https://jvz2.com/c/202927/309649  SociJam System

https://jvz2.com/c/202927/263380  360Apps Certification

 https://jvz2.com/c/202927/359468  LocalAgencyBox

https://jvz2.com/c/202927/377557  Instant Website Bundle

https://jvz2.com/c/202927/377194  GMB Magic Content

https://jvz2.com/c/202927/376962  PlayerNeos VR

One In Three Children With Disabilities Experience Violence

Children with disabilities twice as likely to experience any form of violence (physical, emotional, sexual, neglect) than children without disabilities.

Children with disabilities experience a high burden of all forms of violence, according to a systematic review and meta-analysis published online March 17 in The Lancet Child & Adolescent Health.

Zuyi Fang, Ph.D., from the School of Social Development and Public Policy at Beijing Normal University, and colleagues conducted a systematic literature review to estimate violence against children with disabilities. Ninety-eight studies (involving 16.8 million children) were included in the analysis.

The researchers found that the overall prevalence of violence against children with disabilities was 31.7 percent, and the overall odds of children with disabilities experiencing violence was higher than for children without disabilities (odds ratio, 2.08). The estimates varied by the type of violence, disability, and perpetrator.

While there was a high degree of heterogeneity across most estimates, sensitivity analysis suggested a high degree of certainty for these estimates. The included studies were, on average, of medium quality. There was particular vulnerability to experiencing violence among children in economically disadvantaged contexts.

“Our findings reveal unacceptable and alarming rates of violence against children with disabilities that cannot be ignored,” a coauthor said in a statement. “We must urgently invest in services and support that address the factors that place children with disabilities at heightened risk of violence and abuse, including caregiver stress, social isolation, and poverty.”

Screenshot 2022-03-28 at 20-56-37 image.jpg (WEBP Image 210 × 219 pixels)

By: Physician’s Briefing Staff

Source: https://consumer.healthday.com

.

Pros And Cons Of Rebalancing Stock Market Investments

An asset allocation balances investment risk and return by specifying a particular mix of investments based on the investor’s risk tolerance. For example, an investor might decide to invest 60% of their portfolio in stocks, 30% in bonds and 10% in cash. Investment risk tends to increase as the return on investment increases. Investors can manage the risk of their investment portfolio by combining high-risk investments with low-risk investments.

As the investments change in value, however, the mix of investments may drift away from the original asset allocation. This creates a need to rebalance the investment portfolio by selling some investments and buying others. Otherwise, the growth in value of riskier investments might yield more risk than the investor is willing to tolerate.

Advantages of Rebalancing

Part of the purpose of an asset allocation is to dilute the impact of each asset class by limiting both the upside and downside impact of the investments. But, when a particular investment grows in value faster than the other investments, you are exposed to more risk than you originally intended. Rebalancing your portfolio returns your investments to your original risk tolerance and reduces the risk that your portfolio will drop in value.

Rebalancing a portfolio also improves diversification. When one stock grows significantly in value, the portfolio becomes weighted more heavily toward that stock, magnifying the impact of that stock on overall portfolio performance.

For example, suppose you invested $10,000 in Tesla TSLA , Inc. (TSLA) on April 1, 2020, when it was about $100 a share, and $10,000 in Intel Corporation INTC (INTC) when it was about $50 a share. (Figures are rounded to simplify this example.) You would own 100 shares of TSLA and 200 shares of INTC. On April 1, 2021, TSLA reached about $688 a share and INTC reached about $65 a share. Your TSLA shares would be worth $68,800 and your INTC shares would be worth $13,000. Your investment in TSLA would have grown from half of your portfolio to more than 80% of your portfolio.

Rebalancing also avoids the potential for emotions to interfere with your buy and sell decisions. It is hard to follow the advice to buy low and sell high when it means selling winners to buy losers. There can also be some resistance to selling a stock with a lot of gains in a taxable account. (This is why rebalancing is easier in retirement plan accounts, where the investor doesn’t have to pay taxes on capital gains.)

Rebalancing is also a natural consequence of investment glide paths that change the asset allocation over time, such as target date funds. These investment glide paths reduce the risk mix of a portfolio as the target date approaches. An example of a linear glide path is the old rule of thumb that the percentage invested in stocks should be 100 minus your age. It reduces the risk mix of the portfolio as retirement age approaches. Implementing an investment glide path requires rebalancing the portfolio periodically.

Disadvantages of Rebalancing

But, why would you sell investments that are doing well to buy investments that aren’t doing well?

Continuing the previous example, by November 1, 2021, TSLA stock had risen to $1,145 a share and INTC stock had dropped to about $49 a share. If you had rebalanced your portfolio on April 1, 2021, your portfolio would be worth $98,899 on November 1, 2021, about a fifth less than the $124,300 it would have been worth if you hadn’t rebalanced. The portfolio is worth more than the $81,800 the portfolio was worth back in April, but not as much as it might have been worth without rebalancing.

Rebalancing is an uninformed strategy that assumes that high-flying investments have nowhere to go but down or, at best, have no room for further growth. In the case of TSLA stock, it assumes that the investment will drop in value because it has come so far so fast. It argues that rebalancing the portfolio is necessary to protect it from a decrease in value.

But, past performance does not predict future results. Rebalancing is just as guilty of basing investment decisions on past performance as momentum plays, whether the rebalancing occurs on a schedule or upon a specified level of divergence from the target asset allocation. It is a pessimistic form of market timing, which is often less effective than remaining invested.

Rebalancing assumes that stocks are more likely to decrease in value when their value has increased, which is not necessarily true. It also assumes that low-performing investments are hidden gems that will increase in value, without any evidence to support the assumption. When an investment has been demonstrating lackluster performance, there is no reason to expect that it won’t continue to demonstrate poor performance. Sometimes, a stock is a low performer for a reason, in which case rebalancing is unlikely to improve the results.

Rebalancing also conflicts with other common strategies, such as buy-and-hold and harvesting losses to offset capital gains.

The decision to rebalance should be forward-looking, based on expectations about where the stock and bond markets will head in the future. You should sell an investment when your reasons for buying the investment are no longer valid, not because the investment is performing as expected.

For example, selling stocks now to buy bonds is problematic because bonds are likely to decrease in value when the Federal Reserve Board increases interest rates. Interest rates and bond prices usually move in opposite directions. Selling an investment that is expected to increase in value to buy one that is expected to decrease in value is a recipe for losing money.

Returning to the INTC and TSLA example, both stocks are affected by demand for their products exceeding supply, but there is no reason to expect INTC to outperform TSLA. Certainly, the market dominance of Tesla vehicles has eliminated an incentive for Tesla to add certain features that consumers want, such as heads-up displays (HUD) and digital rear-view mirrors. But, Tesla does not face a shortage of demand for its vehicles. Both INTC and TSLA are limited by how quickly they can ramp up production capacity to meet demand.

Rebalancing works well when an investment is volatile, going up and down frequently, especially when the gains and losses are out of sync with other investments. Rebalancing does not work well when one investment consistently outperforms the other investments.

Rebalancing may not be necessary if you have a long investment time horizon, which gives you time to recover from short-term losses.

Rebalancing also increases costs due to transaction charges from buying and selling frequently. In addition to incurring more fees, rebalancing also yields higher taxes from realizing capital gains.

A possible alternative to rebalancing based on percentages is to rebalance based on the original amount invested in each asset class, perhaps adjusted for inflation. That way, the original amount invested retains the same risk profile and can act as a safety net. Gains beyond the original investment are just icing on the cake.

Follow me on Twitter. Check out my website or some of my other work here.

I am Publisher of PrivateStudentLoans.guru, a free web site about borrowing to pay for college. I am an expert on student financial aid, the FAFSA,

Source: Pros And Cons Of Rebalancing Stock Market Investments

.

Related Contents:

“Portfolio Rebalancing Calculator”. Archived from the original on 2013-04-11.

See Irish Collective Asset-management Vehicles Act 2015 (Original Act available here)

China Power Crunch Hits GDP Growth

SHANGHAI — China’s economic growth continued to decelerate in the third quarter, as gross domestic product came in at 4.9%, softened by the country’s zero-tolerance COVID measures and energy shortages.

The year-on-year GDP growth rate, published on Monday by the National Bureau of Statistics for the three-month period through September, was below the median 5% expansion forecast by 29 economists in a Nikkei poll released earlier this month.

The figure slid from 7.9% for the April-to-June quarter, weighed down by high commodity prices amid uncertainty kindled by the China Evergrande Group’s debt crisis, which is piling risk onto the property and banking sectors.

The reading also reflects weak overall activity, including in manufacturing and consumer spending. Retail sales of consumer goods, a barometer of household spending, edged up by 4.4% in September, compared to 2.5% in August, but was still well below the double-digit growth that had continued till June.

Certain factors have persuaded economists to be cautious, at least for the near term. Rising coal prices are hitting the profitability of electricity providers, making the utilities reluctant to generate power. As it prioritizes supplying power to sectors that touch everyday life, the government is capping supplies to the steel, cement and other energy-intensive industries. The result has been less production and more inflation.

The statistics office last week announced that the producer price index for manufactured goods in September rose by 10.7% from a year earlier, the strongest surge in the past 25 years, as far back as comparable data goes.

The government forecasts China’s economy to grow 6% for all of 2021, the International Monetary Fund projects 8% and the Asian Development Bank 8.1%.

The economy expanded 9.8% in the first nine months of the year, largely driven by trade as both exports and imports jumped nearly 23% in yuan terms.

Service sector growth of 19.3%, led by software and information technology services, also stoked the nine-month expansion.

The statistics office said GDP grew 0.2% in the third quarter from the previous three months, which the U.K.’s Capital Economics noted is the second lowest since China began revealing such data in 2010.

Growth lost more steam in September as industrial production slid to 3.1% from 5.3% in August, while the official manufacturing Purchasing Managers’ Index fell to 49.6. It slipped below 50 — which the statistics office says “reflects the overall economy is in recession” — for the first time since February 2020.

Meanwhile, officials have been playing down the country’s power crunch and worries over the Evergrande crisis.

“The energy supply shortage is temporary, and its impact on the economy is controllable,” Fu Lingxuan, the National Bureau of Statistics’ spokesperson told reporters on Monday, citing recent measures to boost coal supply.

Zou Lan, head of financial markets at the country’s central bank, said Evergrande had “blindly diversified and expanded business,” urging the property group to offload assets to raise funds to pay off debts.

“The risk exposure of individual financial institutions to Evergrande is not big and the spillover effect for the financial sector is controllable,” Zou said on Friday.

While fallout from the power shortages and concerns over the property market may have eased from September, their impact on China’s broader economy should not be underestimated and will be a major downside risk in the fourth quarter, warned Shanghai-based Yue Su, principal economist at The Economist Intelligence Unit.

“The slowdown in the property sector will affect the activities of firms in areas such as construction contracting, building materials and home furnishing,” said Su, adding that energy-intensive industries will face rising costs as well.

Hong Kong-based Tommy Wu of Oxford Economics said policymakers are likely to take more steps to shore up growth, including ensuring ample liquidity in the interbank market, accelerating infrastructure development and relaxing some aspects of overall credit and real estate policies.

And not all economists agree with China’s official data.

Julian Evans-Pritchard of U.K.-based Capital Economics said the research firm’s in-house measure, the China Activity Proxy, tracked a sharp 3.9% quarter-on-quarter contraction in the third quarter, compared to a 3.0% expansion in the previous quarter.

“For now, the blow from the deepening property downturn is being softened by very strong exports,” said Evans-Pritchard. “But over the coming year, foreign demand is likely to drop back as global consumption patterns normalize coming out of the pandemic and backlogs of orders are gradually cleared.”

The benchmark Shanghai Composite Index dropped as much as 0.92% on Monday morning, before closing for the midday break down 0.35%.

By:

Source: China power crunch hits GDP growth – Nikkei Asia

.

Related Contents:

%d bloggers like this: