Since the start of this decade the rate of growth of what was perceived to be
low risk assets at many banks, was significantly higher than the rate of growth of capital, a trend that played a great part in the collapse of many financial institutions.
Not exact matches
Looking
at a simple
asset allocation, a theoretical allocation to long - dated U.S. bonds (+20 years) fluctuates from as
low as 3 % to as high as 25 % based on changes to the
risk model, i.e. correlation of different
asset classes.
With market volatility hitting multi-decade
lows, junk bond yields also
at record
lows, the median price / revenue ratio of S&P 500 constituents
at a record high well - beyond 2000 levels, and the most strenuously overvalued, overbought, overbullish syndromes we define, I'm increasingly concerned about the potential for an abrupt «air pocket» in the prices of risky
assets that could attend even a modest upward shift in
risk premiums.
«The biggest challenge is delevering, but it presents the opportunity of borrowing
at a
lower rate of interest,» Gross said, noting that investors must be sure that the
assets they're buying this year are creditworthy and present
low risk exposure.
And did that do anything in the first place, other than to boost
risk assets and «encourage» policymakers in Congress to spend
at Fed - influenced
low interest rates?
Before the end of April, when the market started its gut - wrenching descent, «the combination of return generation and
risk diversification was part of a broader virtuous circle for fixed income, which also included significant inflows to the
asset class and direct support from central banks,» El - Erian writes
at the start of his viewpoint, noting that in addition to delivering solid returns with
lower volatility relative to stocks, the inclusion of fixed income in diversified
asset allocations also helped to reduce overall portfolio
risk.
We have a saying that «when the CBOE Volatility Index1 (VIX Index) is
low it's time to go» — the VIX is often referred to as the fear index or fear gauge, and when it's
at low levels, we think it could be a prudent time to move a little more out of
risk assets.
This is evident in a number of developments, including: increased demand for higher -
risk assets; the increase in «carry trades» — a form of gearing where funds are borrowed short - term
at low interest rates and invested in higher - yielding
assets, often in other countries; growth in alternative investment vehicles such as hedge funds; and growth in alternative investment strategies such as selling embedded options (see Box A).
In particular, the organization raised concerns about leveraged trading of cryptocurrencies, though it acknowledged that the
low correlation between cryptocurrencies and other
assets «suggests that the
risk of spillovers from idiosyncratic price moves in crypto
assets to the wider market may be limited
at this point.»
Our return expectations across most
asset classes are
at post-crisis
lows, but we believe investors are getting compensated for taking on
risk in equities, selected credit / emerging markets (EM) and alternatives.
This, in turn, propels valuations of
risk assets higher,
at the expense of
lower projected returns in the future.
It is not the banks that are so much
at risk, though some will have to collapse conduits and bring
asset back onto their balance sheets,
lowering capital ratios.
Investments within the portfolio are actively managed in an attempt to ensure we are in the right
assets at the right time to maximise returns while maintaining a
low risk profile.
From that perspective, I again say that if you as an investor can't sleep
at night with funds off the beaten path or if you don't want to do the work to monitor funds off the beaten path, then focus your attention on
asset - allocation,
risk and time horizon, and construct a portfolio of
low - cost index funds.
Successful income investing involves putting together a collection of
assets that generates the highest possible income
at the
lowest possible
risk.
The essence of our investment philosophy is that capital markets work in the long run; a portfolio's
risk is defined by its allocation among
asset classes; and that security selection is a matter of constructing portfolios with specific expected return /
risk characteristics
at the
lowest cost.
A traditional static indexing approach leaves an investor overweight the riskiest
assets at the riskiest times and underweight those
low risk higher yielding
assets when their returns are likely to be highest.
Winning means keeping your clients happy by realizing
low risk and great returns, slowly growing
assets under management, while
at the same time, not wasting / losing time and money trying to manage money.
Based on the stated
low risk of not achieving an 11 % return in the long run, should someone leverage up
at low rates, esp if against an
asset of value they own (e.g. Remorgatage their house — central London flats bought for # 200k now worth a million)?
With proper
asset allocation, it's possible to
lower the amount of
risk in your portfolio while still maintaining a decent return, which should help you get better sleep
at night!
Moderate growth / income investors who have been emulating my tactical
asset allocation
at Pacific Park Financial, Inc., understand why we will continue to maintain our
lower risk profile of 50 % equity (mostly large - cap domestic), 25 % bond (mostly investment grade) and 25 % cash / cash equivalents.
The irony here is that it did survive, with much of its equity intact & a relatively
low -
risk balance sheet, and yet... it has still ended up trading
at a deplorable discount to Net
Asset Value (NAV)!
But to obtain this
lower interest rate, the loan must be secured by your
assets, usually home equity, putting your home
at risk if you fail to meet obligations.
Without getting into the theory, let's look
at a simple (but unrealistic) example of how combining risky
assets can
lower the
risk of a portfolio.
Most advisors recommend using a combination of risky and
risk - free
assets, or
at least using
low risk assets (like high quality short - term bond funds) to reduce the
risk of your portfolio to a level that's appropriate for you.
USD JPY Tumbles as Return of
Risk Aversion Rocks the Markets The USD JPY reversed its four day rally as traders sought safety in
lower yielding
assets following an announcement by President Obama to curb trading
at financial institutions.
Fed Statement Does Nothing to Stop Demand for Higher
Risk Assets The Fed FOMC committee decided to leave interest rates at historically low levels and issued a statement that said nothing to deter demand for higher risk ass
Risk Assets The Fed FOMC committee decided to leave interest rates at historically low levels and issued a statement that said nothing to deter demand for higher risk a
Assets The Fed FOMC committee decided to leave interest rates
at historically
low levels and issued a statement that said nothing to deter demand for higher
risk ass
risk assetsassets.
Low P / B stocks tend to be securities where the market thinks the
assets are overvalued
at historic cost, or there is some
risk due to the size of the liabilities.
My conclusion was that TFG trades
at a discount because of it's egregious fee structure a — i.e. if you have the same underlying
risk on two bonds and someone «steals» 20 % of your coupon then that bond should naturally trade
at a discount... I chose to invest in CIFU as it consistently pays out 50 % of all free cash as dividend and reinvests the other 50 % in similar
asset and its running at much lower cost base and REALLY is a pure play (i.e. no Asset Management assets)-- adding to that ISA eligible and CIFU stands out from my perspec
asset and its running
at much
lower cost base and REALLY is a pure play (i.e. no
Asset Management assets)-- adding to that ISA eligible and CIFU stands out from my perspec
Asset Management
assets)-- adding to that ISA eligible and CIFU stands out from my perspective.
1) Start saving early by setting realistic goals 2) Ensure the
asset allocation in your portfolio remains in sync with your level of
risk aversion and overall investment objectives 3) Keep costs and taxes to a minimum by avoiding most high turnover actively managed mutual funds and opting for tax - deferred savings whenever possible (not only do their investments grow tax - sheltered but for most people their MTR
at retirement would be
lower than it is during their working years) 4) Balance your portfolio
at least annually (some individuals may choose to do so semi-annually) 5) Hammer away
at your debt first — for example, when it comes to contributing to an RRSP or TFSA vs. paying down your mortgage, ideally you should do both.
At the end of October, the fund was 91.3 % long and 35.3 % short, using leverage to invest more than 100 % of
assets, but
lowering risk by investing both long and short.
And that is to basically ignore the noise — or
at least don't act on it — and instead create a broadly diversified mix of
low - cost index funds or ETFs that reflects your investing goals and tolerance for
risk (which you can gauge by completing this
risk tolerance -
asset allocation questionnaire).
This is particularly absurd when you consider the
low risk nature of the current balance sheet — most
assets are in cash /» deposits» / bonds, and debt can be repaid
at a moment's notice.
Some
assets with very little
risk will earn a very little bit more than short term treasuries, but overall there's nowhere to hide — the time value of money is extremely
low at short horizons.
If the optimizer thinks adding a particular
asset provides a diversification benefit, which could potentially lead to
lower overall portfolio
risk, without
lowering the return significantly, the program will choose to use this
asset at the exclusion of others.
•
Asset allocation is the only non-derivative technique you can use to reduce
risk (
lower overall portfolio volatility), increase income, and get better returns, all
at the same time.
Let's assume that the goal of diversification is to reduce our
risk by taking on new, uncorrelated
risks in order to seek equitylike returns
at bondlike
risk — our industry's holy grail — rather than merely to invest some of our money in
low - volatility markets.8 Most would suggest that other risky
assets should serve this purpose — if they offer an uncorrelated
risk premium (e.g., if that
risk premium is related to
risk, not to beta).
Another potential change would be to better balance damage and suppression costs to
lower the overall costs of fire — in effect, devoting more resources away from suppression and toward the protection of
assets at risk.
These
low prices have placed some existing generation
assets at financial
risk and altered incentives for new investment.
For existing
assets, our research can highlight which ones are more
at risk of becoming stranded under a
lower demand scenario — for example one that restricts anthropogenic warming to 2 °C.
Further analysis has identified the fossil fuel reserves and resources
at risk of becoming economically «stranded
assets» due to a
low - carbon energy transition.
It contains a number of tropes that may be familiar to the well - versed in oil and gas climate disclosures — for example narrowing the scope of stranded
assets, and characterising the energy sector impacts of a
low carbon transition as gradual and well - signposted, thereby depriving investors of an assessment of the volumes and capex
at risk should the company misread the pace of the transition.
The new trustees now faced a classic dilemma;
at the point where funds available were
lowest, they had to decide whether to proceed with a case against the original trustees with all the inherent
risks that entailed in terms of adverse costs if they lost or, not take action but
risk a future claim by the trust's beneficiaries for failing to carry out their duties in properly preserving the trust's
assets.
The officials
at IRDAI have deployed
risk - based capital method for evaluating solvency margins for establishing autonomic health insurance firms, and discovered that only 100 % of liabilities, excluding
assets are needed to create solvency - and this is
lower than the150 % margin as per the industry standards.
The bottom line: Congress is ignoring the needs of America's working - class families and small businesses, and by undermining the nation's longstanding support for homeownership and threatening to
lower the value of the largest
asset held by most American families, this tax reform plan will put millions of homeowners
at risk.»
Alan Brymer is the Managing Director of Key Elements Capital, a boutique value - add real estate investment firm focused on acquiring, improving, and operating multifamily
assets at a
low basis while providing otherwise unobtainable real estate investment opportunities with reduced
risk to clients.