Connect with us

Investment

Investing lessons for everyone

Published

 on

I’ve worked at Morningstar for more than 25 years now and one of the best aspects of my current job is that I get to think about and work on a huge range of topics that have a real impact on people’s lives, from constructing sturdy retirement plans to coping with cognitive decline to paying for college. I’m constantly learning new things, and I love hearing from Morningstar users about their strategies and successes. I also like to hear what they’re worried about, because that helps me know what I should be working on.

As I reflect on the past 25 years and look forward, here are some of the key lessons I’ve learned:

Investing is overrated
I’m not saying you shouldn’t invest. You absolutely should. It’s essential. End of story. What I am saying, however, is that investing is the attention hog in many discussions about how to reach financial goals. It’s sexy, there’s often a current-events hook to explain why the market is behaving as it is, and hitting it big with an investment doesn’t usually require any sort of sacrifice. But ultimately, your boring pre-investing choices–like your savings rate and how you balance debt paydown with investing in the market–will have a bigger impact than your investment selections on whether you amass enough money to pay for retirement or college. (I call these types of pre-investment decisions your “primordial asset allocation.”) If your savings rate is high enough and you start early enough, that can make up for some lacklustre asset-allocation and investment-selection choices. The flip side is also true: If you haven’t saved enough, great investment picks probably won’t be enough to save you.

Less is so much more
In my early days as an analyst, I covered all kinds of funds: convertibles funds, technology-specific funds, funds that invested exclusively in zero-coupon bonds. It was a great crash course in how various investment types work. But the more I’ve learned about investing, the more minimalist I’ve become. If an investment type can help investors get the job done simply, cheaply, and without a lot of moving parts or oversight, I’m all over it. That’s why I increasingly recommend total market index funds, allocation funds, and target-date funds. (I like some well-diversified actively managed funds, too – and own them – but I’m super-picky.)

If investors build a well-diversified core portfolio using these kinds of building blocks, then more narrowly focused products – whether sector or region-specific equity funds or focused bond funds like emerging markets – are usually going to be redundant. I’m also attuned to the role of investor behaviour in all of this: Because more narrowly focused products will tend to be more volatile than broadly diversified core funds, there’s a greater likelihood that investors will mis-time their purchases and sales.

In addition to reducing complexity at the product level, I’m also an evangelist for eliminating complexity elsewhere in a portfolio. The fewer moving parts in your portfolio, the easier it will be to keep tabs on the real drivers of your financial results – your asset allocation and saving/spending rates, for example.

Beware the latest fad
In a related vein, I’ve seen enough to conclude that many new products that come to market don’t actually help improve investor outcomes. Rather, they’re an effort to help investment firms capitalise on what’s hot and generate fees on new assets.

One investment craze after another has hit the market over the past 25 years: technology sector funds, narrow commodities-tracking funds, and liquid alternatives, to name a few. A consistent theme behind new product mania is firms’ zeal to create products around an asset class that has performed exceptionally well in the recent past – and may not do so in the future. Investors should always ask: “What’s in it for them?” Oftentimes the upside looks better for the seller (them) than it does for you.

But some innovations are brilliant!
That’s not to say every new investment innovation is motivated by mercenary intentions, however. A small handful of the ones I’ve seen over my 25 years at Morningstar have hit the bull’s eye.

At the top of my list are target-date funds, which solve some of investors’ most vexing problems in an extremely low-cost way: They help them arrive at a sane stock/bond mix given their life stage, and change up the asset allocation to become more conservative as retirement approaches. The early results of actual investor outcomes in target-date fund – that is, investors’ ability to stay the course and benefit from compounding – are incredibly encouraging. I’d also put exchange-traded funds (ETFs) on my extremely short list of innovations that have benefited investors.

Get some help in retirement
Thanks to innovations like target-date funds and robo-advisers, the process of allocating assets during your working career has never been simpler. If investors are going to spend on advice and they’re on a tight budget, my bias is that they spend the money on good quality, holistic, financial planning guidance rather than investment advice, which can be obtained pretty cheaply through the aforementioned avenues.

But accumulation (saving for retirement) is a walk in the park compared with decumulation (investing – and spending! – through retirement). Even though I’ve tried to address the nitty-gritty of portfolio decumulation through the intuitive framework of “bucketing”, it’s still not simple.

Most people approaching and in retirement could benefit from another set of eyes on their plans, to help ensure that their withdrawal rate system is sustainable, that they’re being tax-efficient with their withdrawals, and so on. Having a financial adviser who knows what’s going on in your financial life and portfolio is also the gold standard for helping ensure that nothing falls through the cracks if you become incapacitated or die.

While the traditional investment advice model requires investors to pay a percentage of their assets year in year out, soon-to-retire and retired investors who are confident in their abilities can pay for advice on an hourly or per-engagement basis. That will be more economical than paying for ongoing advice or oversight; the downside is that the hourly or per-engagement advisor won’t be looking over your portfolio unless you ask for help. So, it’s a trade-off.

Talk about the hard stuff
On a panel at an investment conference, I referenced my personal situation as the adult child of two parents who struggled with cognitive decline toward the end of their lives. In so many ways, my parents had everything at the end of their lives: My sisters and I adored them and saw them often, they had enough money, and they stayed in their home until very close to the end. Yet I can sum up those last years in two words (forgive my language here): They sucked. We seemed to lurch from one crisis to the next; it was a physically and emotionally taxing experience for all of us. And it cost an arm and a leg.

After the panel, it was as if the floodgates had opened. Everywhere I went at the conference (even in the bathroom!), people stopped to share their own stories of struggling with the care of loved ones. It was obviously cathartic for them. We talked about the financial aspect of care but also the hard decisions that often come fast and furious later in life. My experience at that conference illuminated for me the value of simply sharing our experiences with one another. So many times, financial matters are about much more than finance. I’ve been thrilled to share my thoughts with readers all of these years, and I’m so grateful for all that you’ve all shared with me.

Christine Benz is director of personal finance at Morningstar

Source link

Continue Reading

Investment

Micron Urges Government Investment with R&D Spend – The Next Platform

Published

 on



Over the last twenty years, memory has risen from 10% of the semiconductor market to almost 30%, a trend that is expected to continue, propelled by compute at the edge all the way up to datacenter. To meet these demands, memory giant, Micron, has announced it will make $150 billion in internal investments, ranging from manufacturing and fab facilities to R&D to support new materials and memory technologies.

The nature of the announcement serves two purposes. The first is obvious, Micron is putting a stake in the ground around its bullish view for edge to datacenter growth and their role as a primary component maker. The second is only slightly less obvious: to compel the U.S. to match funds or continue new investment strategies to support U.S. fabs and semiconductor R&D.

While $150 billion is a sizable investment, the fab component of Micron’s plans will gobble up a significant fraction. While no fab is created equally, consider TSMC’s investments in new facilities, which are upwards of $9 billion. Such investments can take two to three years to yield but the time is certainly right. Gartner, for instance, estimates the costs for leading-edge semiconductor facilities to increase between 7-10%.

While DRAM and NAND are less expensive than leading edge technologies, Micron will need to choose carefully as it sets its plans in motion. Luckily, there is ample government support building in the U.S. for all homegrown semiconductor industry, although it is unclear how federal investments, including the $52 billion CHIPS Act, will augment Micron’s own ambitions.

Micron is seeking the attention of government with its broad R&D and manufacturing investment, pointing to the creation of “tens of thousands” of new jobs and “significant economic growth.” In a statement, Micron explained that memory manufacturing costs are 35-45% higher than in lower-end semiconductor markets, “making funding to support new semiconductor manufacturing capacity and a refundable investment tax credit critical to potential expansion of U.S. manufacturing as part of Micron’s targeted investment.”

“The growth of the data economy is driving increased customer demand for memory and storage,” said Executive Vice President of Global Operations Manish Bhatia. “Leading-edge memory manufacturing at scale requires production of advanced semiconductor technology that is pushing the laws of physics, and our markets demand cost-competitive operations. Sustained government support is essential for Micron to ensure a resilient supply chain and reinforce technology leadership for the long term.”

Micron CEO, Sanjay Mehrotra says the company will “look forward to working with governments around the world, including in the U.S. where CHIPS funding and the FABS Act would open the door to new industry investments, as we consider sites to support future expansion.” The subtext there is that the U.S. is only one country in the running, among others making investments.

Increasing government support will likely align with fabs and facilities but Micron says it’s working on next generation technologies set to keep pace with growing demand.

This is part of the company’s 2030-era plan for memory technology. Micron sees edge and cloud deployments expanding but also points to AI as the leading workload across deployment types. The company’s senior VP and GM for Compute and Networking, former Intel HPC lead, Raj Hazra, says that by 2025, 75% of all organizations will have moved beyond the AI experimentation stage into production.

To support this more practically, Micron has set forth some ambitious near-term targets, including reaching for 40% improvements in memory densities over existing DRAM, double SSD read throughput speeds over current 1TB SSDs, 15% power reductions over existing DRAM and 15% better performance for mixed workloads over existing NAND.

Adblock test (Why?)



Source link

Continue Reading

Investment

Walmart allowing some shoppers to buy bitcoin at Coinstar kiosks

Published

 on

Walmart Inc said on Thursday customers at some of its U.S. stores will be able to purchase bitcoin using ATM-like machines installed by  Coinstar.

Coinstar, known for its machines that can exchange physical coins for cash, has partnered with digital currency exchange CoinMe to let customers buy bitcoin at some of its kiosks.

There are 200 Coinstar kiosks located inside Walmart stores across the United States that will allow customers to buy bitcoin, a Walmart spokesperson said.

Walmart was subject to a cryptocurrency hoax in September when a fake press release was published announcing a partnership between the world’s largest retailer and litecoin. The news had briefly sent prices of the little known cryptocurrency surging.

 

(Reporting by Uday Sampath in Bengaluru; Editing by Devika Syamnath)

Continue Reading

Investment

Here’s What Makes Intuit (INTU) A Meaningful Investment – Yahoo Finance

Published

 on


Cooper Investors, an investment management firm, published its “Cooper Investors Global Equities Fund (Hedged)” third quarter 2021 investor letter – a copy of which can be downloaded here. For the rolling three months to one year, the Fund returned 5.7% and 28.24% respectively, while its benchmark, by comparison, returned -0.42% and 26.57% over the same period. You can take a look at the fund’s top 5 holdings to have an idea about their best picks for 2021.

Cooper Investors, in its Q3 2021 investor letter, mentioned Intuit Inc. (NASDAQ: INTU) and discussed its stance on the firm. Intuit Inc. is a Mountain View, California-based software company with a $156.4 billion market capitalization. INTU delivered a 50.80% return since the beginning of the year, while its 12-month returns are up by 72.12%. The stock closed at $572.80 per share on October 19, 2021.

Here is what Cooper Investors has to say about Intuit Inc. in its Q3 2021 investor letter:

“The other meaningful deal during the quarter was Intuit’s acquisition of Mailchimp for $12bn. Intuit has reinvented itself over the last decade and thrived with a leadership position in QuickBooks Online, the financial accounting software for small businesses (effectively the ‘Xero of the US’). We originally invested in Intuit in February 2020, excited by the QuickBooks prospects.

Management have executed exceptionally well on the opportunity set which has seen the shares double since our initial purchase. However, the company has now conducted two meaningful deals in Mailchimp and Credit Karma worth a combined US$20bn over the last 12 months. The investment proposition has shifted from a focus on QuickBooks to now being a financial and small business software conglomerate. We continue to very much admire the company, but with Intuit now trading on 50x forward earnings we no longer see such attractive latency on offer, nor the rewards for the level of execution risk and thus we have exited the position.”

Software

Software

Based on our calculations, Intuit Inc. (NASDAQ: INTU) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. INTU was in 66 hedge fund portfolios at the end of the first half of 2021, compared to 68 funds in the previous quarter. Intuit Inc. (NASDAQ: INTU) delivered an 11.34% return in the past 3 months.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest-growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage.

Disclosure: None. This article is originally published at Insider Monkey.

Adblock test (Why?)



Source link

Continue Reading

Trending