Investopedia
The Investor Connection Summit with Morningstar discusses ways investors can adjust their portfolios to succeed in the current market environment, where there has been a decline in both equity and bond markets. Through several panels and discussions, the speakers suggest using options such as cash, short-term liquid cash alternatives, and high-yield bonds, focusing on long-term goals, managing one's behavior, and maintaining an appropriate asset allocation. They also discuss diversifying internationally and using low-cost index funds and models. Notably, the speakers recommend putting money on autopilot and making regular contributions on an ongoing basis to dollar cost average in, and offering target date funds for retirement savings.
In this section of the video, Caleb Silver, the editor-in-chief of Investopedia, introduces the Investor Connection Summit with Morningstar, a collaboration aimed at addressing some of the most pressing concerns faced by individual investors today. The event features experts from Morningstar and Investopedia, who will be participating in various panels and conversations. The first panel discusses the current market situation, where investors are facing a simultaneous decline in both the equity and bond markets, leaving them worried and uncertain about the future. The panelists provide insights on navigating this environment and offer solutions to reset portfolios for success.
In this section, the speakers discuss how to adjust portfolios in response to the current market environment. With interest rates the highest they've been since 2005-2006, there are options for investors such as cash, short-term liquid cash alternatives, and high-yield bonds. The speakers caution against following recent trends and instead advise focusing on long-term goals, managing one's own behavior, and maintaining an appropriate asset allocation. They also discuss the importance of being tax-efficient and of having a well-articulated investment goal.
In this section, the speakers discuss the current investing environment and the need for investors to adjust their playbooks. They state that investors have been buying the dip in equities and that much of the investment flow is going into fixed income and short-term assets, with dividend-paying stocks proving popular in this inflationary environment. With the regime shift of the past six months, the speakers caution against over-diversification and advise investors to broaden what they buy the dip in, as not every growth stock is worth purchasing. The speakers also touch on the importance of simplifying portfolios and knowing what investors own to avoid guessing value propositions in a down market draft.
In this section, the speakers discuss the trend towards more stable and responsible flows into index funds, which they attribute to investors outsourcing decision-making to automatic plans such as target-date funds and financial advisors. They also note that trends have shifted towards passive investing with more people using index funds and models strategically, as opposed to chasing performance. The use of low-cost index funds is emphasized as a factor contributing to positive fund performance, and the speakers touch on the limitation of passive investing in the face of rising interest rates and stock price repricing.
In this section, the speakers discuss the dynamics of the current market and the role of different types of investors. Despite the recent volatility caused by hedge funds and commodity trading advisors selling, the market has not been worse due to individual and corporate investors stepping in to deploy capital. The speakers note that the role of retail investors has grown significantly, reaching up to 30% of trading volume during the pandemic, and as such, they are as important as hedge fund flows in determining where the market might be headed. The speakers recommend that individuals in their 50s approaching retirement consider de-risking their portfolio a little by adding fixed-income investments for stability and flexibility.
In this section, the discussion focuses on different age groups and how they should be thinking about investments. For those in their 20s and 30s, who are in the long-term, wealth-building phase, Calkins advises being Equity-heavy rather than hunkering down in cash, particularly now that the entry point for investors is much better. However, investors should remember that goals beyond retirement, such as paying for a home or education, may warrant a lower-risk portfolio. Looking outside the stock market, Giraldo says 'buy things when it feels terrible to do so.' She explains how investing in downturn years historically earns more positive returns. Investors should consider private Equity and Venture Capital, Private Real Estate, or Apartments for higher returns while waiting out the volatility. Finally, looking outside the US maybe another option for investment opportunities.
In this section, the speakers discuss the benefits of investing internationally, despite the current economic climate. The strong dollar has resulted in lower overseas performance and earnings, but the combination of lower prices, higher dividend yields, and undervalued stocks means now may be a good time to diversify overseas. The panelists remind investors to be mindful of geopolitical and currency risks, but also suggest looking for tactical trades in emerging markets and considering the potential for growth in digital transformation, healthcare innovation, and sustainability in these regions.
In this section, the speakers discuss the key indicators to watch for the remainder of the year. They all agree that inflation is the most important factor to monitor, specifically the month-over-month change in core inflation. The Fed is likely to react if inflation continues to accelerate, leading to a potential pivot and a better outcome for markets. The speakers also address the housing market and the potential state of stasis that could occur with mortgage rates staying low. Lastly, they answer questions from the audience, including one about the percentage of the equity market represented by retail investors. They estimate it to be around 15 trillion in domestic equity funds.
In this section, the speakers discuss the percentage of assets invested in the US equity market held by retail investors and the impact of zero commissions on day-to-day trading. While it's difficult to give a precise percentage, within the overall fund amounts, some of those are institutional monies, and the Federal Reserve has more accurate numbers on household assets versus others. The decision to not invest is still a decision, and retail investors, in particular, don't have to do anything as investing is not their job. However, the speakers suggest putting money on autopilot and making regular contributions on an ongoing basis to dollar cost average in. They advise removing the emotional element from the equation and investing in ETFs or index funds as there is a variety of ways to choose from at Morningstar.
In this section, the hosts discuss tools for investors that were not available five to ten years ago, as well as ways to screen for objectives within a portfolio. They mention Morningstar's database of 30,000 U.S. funds, which are rated individually rather than by multiple share classes. They also discuss the best approach for a beginner investor, and recommend a hard-to-beat target date fund for retirement savings. Despite occasional criticism, target date funds perform well compared to other types of funds and come highly recommended.
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