The Sapient Investor

The Fed is pulling out all the stops to provide ample liquidity. Stocks have responded. That is likely to continue.

Many investors may be surprised to learn just how much tax they will owe during their retirement years. Roth conversions can help reduce the tax bills.

Negative retail investor psychology has crushed the prices of closed-end funds. They are trading at unusually large discounts to NAV (net asset value). It’s an historic opportunity worth exploiting.

It’s tempting to let emotions influence your investment decisions. There is a lot of panicking going on right now. It’s times like these that allow those with sound investment disciplines to flourish.

The Fed funds futures market is indicating that a rate cut may lie ahead. In the past, this has been a very positive indicator for stocks.

It’s difficult to find real-world assets that do a good job of diversifying basic stock and bond risks and still provide an attractive level of return. Global macro funds seem to offer at least the potential to fit the bill. This article graphically illustrates the potential benefit of adding a global macro fund to a typical 60/40 stock/bond portfolio: an ending wealth level that is 33% higher after 20 years with no increase in risk (volatility).

The “quality” factor is one of the most common among the various “smart beta” factors popular today. This factor is very well-documented in the literature, and its long-term performance has been quite strong. Our research on tactical timing of factor exposures indicates that quality is likely to add considerably more return than average in the near term. Our favorite way to gain exposure to quality is through Invesco S&P 500 Quality ETF (SPHQ).

The model described in this article was designed to help a client time the selling down of his bitcoin position. Bitcoin is extremely volatile, highly speculative, and impossible to value in a traditional way, since it does not provide any cash flows (dividend or interest) or have any intrinsic value. However, there are a few factors that seem to have some predictive content over a one-month holding period.

Two international small cap ETFs have had their expected returns rise to the top of our 500-ETF universe: one focused on Europe and the other on Japan. We consider the long-term case for international small cap and then dig into why we believe now is the time to buy these two ETFs.

Taxes are usually a bigger drag on returns than expenses, though they are less visible and get less attention. How many of these 7 common mistakes are you making?

A recent article showed that among 7 major “smart beta” factors, momentum was the one with the highest risk-adjusted return in recent years. The ETF (exchange-traded fund) used to represent the momentum factor was iShares Edge MSCI USA Momentum Factor ETF (MTUM). Because of its low costs and tax efficiency, it is a very attractive way to invest in the momentum factor over the long-term. Currently, MTUM has characteristics, especially very strong upward revisions of EPS forecasts of its constituent stocks, that make now a particularly good time to initiate a position.

An earlier article discussed the basic considerations for investors contemplating an investment in municipal bond funds. National Muni Bond ETFs provide a low-cost and simple way to invest. However, municipal bond closed-end funds (CEFs) are sometimes a more attractive way to invest in the space when they are trading at an unusually large discount to the net asset values of their portfolios. Written specifically for Pennsylvania taxpayers, this article compares what we consider to be the most attractive Pennsylvania municipal bond mutual funds and CEFs to national ETFs and CEFs.

An earlier article discussed the basic considerations for investors contemplating an investment in municipal bond funds. National Muni Bond ETFs provide a low-cost and simple way to invest. However, municipal bond closed-end funds (CEFs) are sometimes a more attractive way to invest in the space when they are trading at an unusually large discount to the net asset values of their portfolios. Written specifically for New Jersey taxpayers, this article compares what we consider to be the most attractive New Jersey municipal bond mutual funds and CEFs to national ETFs and CEFs.

Several characteristics have provided consistent risk-adjusted excess return for country ETFs, including value-, momentum-, quality-, and sentiment-related factors. This article highlights a country ETF that is currently very attractive using an ETF selection model based upon such factors: iShares MSCI Sweden ETF (EWD).

There are many “smart beta” ETFs that claim to offer market-beating return potential. These funds are based upon academic research regarding characteristics or “factors” that have historically produced risk-adjusted excess return. Which ones should you use? And as important, when should you use them? This article seeks to help answer these important questions.

Does your wealth manager measure up? That is “the right question” according to the CFA Institute. But most people don’t even know that “CFA” stands for “Chartered Financial Analyst.” And they have no idea what that designation means or how a CFA Charterholder might stand out from among wealth managers with other credentials. This article will lay out why the CFA charter is widely considered the “gold standard” in the investments industry.

Several characteristics have provided consistent risk-adjusted excess return for sector and industry ETFs, including value-, momentum-, quality-, and sentiment-related factors. This article highlights an industry ETF that is currently very attractive using an ETF selection model based upon such factors: VanEck Vectors Semiconductor ETF (SMH).

April 15 may be behind us, but it’s not too soon to start planning ahead for 2019 taxes. Municipal bonds are attractive after-tax investments for those in higher tax brackets and do a better job of diversifying stock risk than corporate bonds. Although attractive national muni bond ETFs are available, closed-end municipal bond funds are currently selling at above-average discounts to NAV and may be an especially attractive way to invest in the space.

Keynes was a very successful investor as well as a renowned economist. Much of his success can be attributed to his willingness to depart from conventional wisdom even in the face of intense criticism and the risk of failure. Investors can learn something from him.

Many ETFs offer “liquid alternatives” of various kinds, but very few have provided meaningful returns that are uncorrelated with the stock market, which is the whole point of investing in alternatives. IQ Merger Arbitrage Index ETF (MNA) is an exception. MNA offers investors a relatively low-cost passively-managed fund that systematically harvests the merger arbitrage risk premium. The fund has had a low correlation with the S&P 500, low volatility, and an impressive return history. It was just named “Alternative ETF of the Year” at the 2019 Mutual Fund and ETF Industry Awards.