The Sapient Investor

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).

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).