Municipal securities continue to provide yields in excess of Treasuries, despite their tax-favored status. For tax-exempt accounts, we continue to see opportunities in corporate debt, both investment grade and the highest quality non-investment grade, as well as in select international sovereign debt issues.
Successful investing is often seen as the ability to consistently and accurately make predictions about the economy, markets and specific securities. In reality, success comes less from predicting the future with blinding accuracy and more from selecting securities and vehicles that perform well when an investment thesis proves correct and perform OK when the thesis proves wrong.
Multiple constraints limit the use of leverage, the nature of the assets that can be leveraged and the acceptable levels of total portfolio and asset-specific risks. These constraints can make leverage efficient for only a narrow set of portfolios. Leverage is also subject to concerns such as unanticipated capital calls and illiquidity spirals.
Investors must be aware of the liquidity risk inherent in each asset class, establish a methodology to monitor and measure the liquidity risk premium of each asset class, and factor that into decisions about the appropriate mix of liquid and illiquid investments needed to serve their particular situation.
While diversification remains the cornerstone of modern portfolio theory, many diversifying investments followed the direction of the equity markets when they collapsed during the recent financial crisis. This led many investors to suspect that their asset allocation frameworks needed refining. An analysis suggests these investors may be right.
We recently have taken an increasing interest in housing and housing-related investment opportunities. While we cannot state with certainty when the recovery will come, we see a road towards redemption and investment opportunities while the market gradually improves.
This historical study suggests that monthly rebalancing appears to have minimal or no benefit in terms of end-of-year portfolio values except in years of high volatility. A look at rebalancing a 60/40 portfolio either monthly or annually from 1960 through 2009 showed an average annual difference between the two strategies of only 8 basis points.
While both exchange-traded funds and index separately managed accounts offer the comparatively low fees and superior pretax returns common to nearly all forms of indexing, the authors say that only SMAs can deliver sizeable return benefits to the taxable accounts of wealthy investors.
This comparison of ultra-short duration fixed income funds with money market and short-term bond funds helps investors understand the nuances of ultra-short duration funds and, thus, make an informed decision of whether to include these investments in their portfolios.
Master limited partnerships offer daily liquidity, simplified tax reporting, and in some cases, the transformation of unrelated business taxable income to other income. This paper examines not only the benefits but also the implications and costs of master limited partnerships to help individuals make informed investment decisions.