Three smart money moves for 2013

Updated 09 January 2013
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Three smart money moves for 2013

CHICAGO: Using the non-courageous power of hindsight, it’s easy to look back on the previous year and see where the “smart” and “dumb” money flowed.
The direction of money last year tells a well-worn tale: When fear dominates, money moves into safer vehicles such as bonds and money-market funds.
After 2008, you can hardly blame anyone for still wanting to avoid volatility. But those who retreated mostly to fixed-income have missed the better part of a bull market that’s been running since 2009.
Although the S&P 500 index ended up about 13 percent in 2012, most investor funds flowed away from stocks during 2012. Investors redeemed money from stock funds for the 19th straight month through November, 2012, according to Lipper Research, a division of Thomson-Reuters. Nearly $ 4 billion was pulled out of US stock funds in the week ending January 2.
Bond and money-market funds were more like mirages and less like oases last year. In November, for example, some $ 95 billion was added to fixed-income, while $ 14 billion was redeemed from stock and mixed-equity funds. The Nasdaq Index climbed more than 1 percent in November, its best showing for that month in three years.
I know Washington will throw investors into a lot of pot-holes on the way to negotiating debt ceiling and budget issues. But it’s still a good time to buy stocks.
The employment recovery is still on track, with more than 150,000 jobs added last month, the Labor Department reported recently. Gains are also being posted in personal income, housing and corporate earnings. If you can ignore the relentless noise from Capitol Hill, it’ll be possible to make some more intelligent money decisions.

Here are three ways to ensure that you’re making smart money moves this year:

1) Invest broadly on a regular basis. One way to avoid the herd mentality is to stay focused and buy fixed-dollar amounts monthly in all investment styles and company sizes — if you can afford to take the risk. You can invest in a broad range of stocks through funds like the Fidelity Spartan Total Market Index fund (FSTMX) or the Vanguard 500 Index fund (VFINX).

2) Invest cheaply. If you’re going to buy individual stocks, make sure that they have dividend reinvestment plans, which allow you to buy new shares and reinvest dividends without paying brokerage fees.
Since the beginning of 2009 through the end of 2012, the S&P 500 index has returned more than 77 percent, if you include reinvested dividends. That’s about a 16 percent annualized return. Even if you adjust for inflation, it’s still a 13 percent annualized gain.
By contrast, the Vanguard Total Bond Market ETF (BND), a proxy for US bonds, returned about 5.6 percent over the past five years through the end of 2012.

3) Invest passively. If there was any measurable smart-money movement in 2012, it was into exchange-traded funds, which gained net inflows for 12 straight months. The lion’s share of this money went into low-cost index ETFs, which track specific markets and sectors rather than relying upon money managers to pick securities. All told, more than $ 150 billion was shifted into ETFs during the year, the biggest surge since 2008.
A key reason ETFs are gaining assets is that they charge rock-bottom annual fees and hold passive portfolios of large baskets of securities. There are no timing errors, almost no turnover costs and you get near-index returns.
If you’re investing in stocks — or any other securities for that matter — choose ETFs that charge 0.10 percent annually or less.
Actively managed funds are yesterday’s game and you’re not likely to get last year’s performance. Most of these funds don’t beat indexes over time. If they do, it’s mostly due to luck.
— The author is a Reuters columnist and
the opinions expressed are his own .


Wealthy Gulf individuals feel more confident about regional prospects

Updated 25 April 2018
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Wealthy Gulf individuals feel more confident about regional prospects

  • “Factors like the region’s stability, attractive investment opportunities and low-tax environment are seen as the main drivers behind the growing confidence in the region’s economy.”
  • Among the most optimistic were respondents in the UAE, with 57 percent of those surveyed saying they thought the overall outlook was improving.

DUBAI: Survey finds growing optimism on region’s economies, but Saudi investors remain wary.

Wealthy individuals in the Gulf are more optimistic over the future of the region and the global economy compared with last year, and are increasing likely to invest in their own countries and other emerging markets in Asia than in western economies. These are among the main findings of an annual survey by Dubai-based Emirates Investment Bank (EIB), released on Tuesday, of the sentiment among high net worth individuals (HNWIs) in the region. 

After two years of falling confidence, some 60 percent of regional HNWIs now believe things will improve or stay the same. Fewer are pessimistic about both regional and global economic prospects than last year, while nearly 80 percent of respondents said they would prefer to invest in Gulf assets, rather than looking abroad.

The recovering oil price was a big reason for the increasing feel-good factor in the Gulf, according to Khalid Sifri, EIB’s chief executive officer, who added: “Factors like the region’s stability, attractive investment opportunities and low-tax environment are seen as the main drivers behind the growing confidence in the region’s economy.”

After falling below $30 per barrel in early 2016, oil has subsequently recovered to a three-and-a-half-year high, breaching the $75 a barrel mark yesterday for the first time since November 2014.

However, the overall optimism of the survey masks some concerns among regional HNWIs; in Saudi Arabia, 48 percent of respondents said that they saw the regional economic situation improving or staying the same, against 52 percent who felt it was likely to worsen in 2018.The survey was conducted last November and December, when investor sentiment in the Kingdom was affected by the high-profile anti-corruption campaign undertaken against some prominent business people accused of financial wrong-doing. “It may have been affected by that. We shall see what the situation is at the end of this year,” Sifri said. 

Respondents from Kuwait were even more pessimistic. None of the respondents from the country felt that things were going to improve on the investment front this year, while 54 percent said they would worsen. Among the most optimistic were respondents in the UAE, with 57 percent of those surveyed saying they thought the overall outlook was improving. On the long-term global outlook, a total of 78 percent of those surveyed across the region were optimistic about prospects over the next five years, with most citing positive economic and political stability as the reason, along with a smaller number who said oil price stabilization would benefit the world economy. The oil price recovery was the biggest reason for regional optimism. 

The geopolitics of the region was claimed as a big factor in deciding investment decisions, but Saudis were less concerned than others. Only 29 percent in the Kingdom said they were influenced by geo-political events, compared with 83 percent in Qatar and 85 percent in the UAE. 

Oil prices, economic reforms and the introduction of VAT were also factors influencing investment, as was the election of Donald Trump as president of the USA. There has been a big shift in global investor orientation outside the GCC. Nearly half of regional wealthy investors (47 percent) are now looking to Asia, 38 percent to the wider Middle East and North Africa, some 34 percent to Europe and only 17 percent to North America. The survey was conducted among 100 HNWIs with $2 million or more in investable assets.