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InvestWELL Report |
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April 5 , 2008
Dear Reader,
In March, the market took back some of the lost ground. However, it would be premature to say that the rebound is sustainable. In fact, a number of credible analysts are referring to the current stage as a bear market.
Our next InvestWELL Report will be released on May 3, 2008.
(following the Labor Report which is generally recognized as a "market mover").
Derek Polcyn,
President
Investment
Idea
Quiz
Our Results
Market Highlights
Behavioral Finance Indicators
Answer to the Quiz
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Question:
How can I take advantage of core-satellite investing?
Answer:
Core-satellite investing is not for beginners or risk-averse individuals. But as you gain greater knowledge over time (or have someone helping you), you become better suited to actively manage your portfolio.
Let us begin with the core. Core investments are based on one's investment profile and take into account personal situation, risk tolerance, etc. Core investments are typically different proportions of stocks/bonds/cash which are invested for a long-term, and rebalanced only periodically (e.g., once a year). The most typical core portfolio consists of 60% stocks and 40% bonds.
Core-satellite investing still uses a solid core as a base but adds an active element (i.e., the satellite) to complement the core. Thus, core-satellite investing combines the best of both worlds - a long-term solid core that relies on the market efficiency, and a satellite which takes active tactical bets aimed at adding value to the core.
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(Cumulative %)
Investment Strategy – MEMBER SECTION
InvestWELL Picksis doing quite well vs. the general market (as defined by S&P 500 index.) InvestWELL Picks has managed to outperform both in terms of actual returns as well as lower volatility.
Chart 1.
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- During the last month, the US equity market managed to recoup some of the recent losses (Chart 2 & 3) It is still an open question whether the US economy will slide into a recession and the equities will enter into a bear market.
3 Years and Last Month
Charts courtesy of StockCharts.com
- During the last month, the Canadian market mirrored its cousin south of the border with particular strength coming in the energy sector (Charts 4 & 5).
3 Years and Last Month
Charts courtesy of StockCharts.com
- Last month, the US economy lost 80K jobs while the unemployment rate went up from 4.8% to 5.1%. This is the 3rd straight monthly decline for the U.S. economy as the jobs in goods producing sectors are leaving the country and most likely not coming back.
- Last month, the Canadian economy added 15K new jobs, mostly part-time. The Canadian economy has had a very impressive performance despite the weakness south of the border. We do not believe that this type of divergence could continue for long.
- There were over 90,000 bankruptcy filings in March in the US, which is the highest since insolvency laws became more restrictive in October 2005. Rising bankruptcies, together with mounting foreclosures and fewer jobs, are further signs that the biggest housing slump in a generation is hurting consumers and businesses.
- Central banks and governments around the world have struggled to control a surge in the cost of credit. Banks and securities firms have posted $232 billion in asset write-downs and credit losses stemming from the collapse of the U.S. sub-prime mortgage market.
- The IMF said it has cut its 2008 outlook for world economic growth – a move that acknowledged housing and credit problems in the United States were exacting a heavy toll on the global economy. The IMF now expects global growth to slow to 3.7% this year, down from its earlier forecast of 4.1%.
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(see
explanation)
Here is a direct quote from the Behavioral Section in last month's Member newsletter:
"Overall, we believe the market is ready for a short-term upward thrust".
It turns out we were quite correct on the timing and the direction.
Charts 6 - 8: Advancing/Declining Line, AAII and Equity Put/Call Ratio
Charts courtesy of StockCharts.com
and DecisionPoint.com
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D is correct.
- Risk reduction with a lower correlation between core and satellite
- Return enhancement when the satellite adds extra return
- Benefits of portfolio diversification as the core uses passive investing and the satellite uses active investing
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Thank you for reading InvestWELL Report. This is a non-member version of InvestWELL Report.
Please sign up for our membership to receive the member version of the InvestWELL Report.
InvestWELLFinancial.com
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InvestWELL Financial’s first priority, as a provider of independent and unbiased financial information, is to educate our clients. Not only do we provide practical information about securities, but we also coach our clients to become successful independent investors. As such, InvestWELL Financial does not assume any responsibility whatsoever for the use of any information from the website or related publications. Although all sources of information are vetted and the information is believed to be reliable, it is not provided as investment advice. Past performance is not an indicator of future performance in securities. Each portfolio must be balanced and based on personal circumstances. High-risk investment decisions should be made in consultation with an investment professional.
InvestWELL receives no commission or benefit of any kind from the companies whose securities InvestWELL Financial showcases. We do not necessarily own shares in the showcased securities, but if we do, these shares would only form a very small part of widely-held and publicly distributed companies. There is no intention whatsoever of profiting in a manner where the price-impact of trading or holding of a security might arise. The website and related publications of InvestWELL Financial are intended to only be used for educational purposes.
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