The long-term, sustainable, highly diversified mindset of endowments also applies to individuals’ portfolios
Endowment funds are designed to be sustainable, multi-generational sources of money for charitable or nonprofit organizations — think universities and museums, for example. These entities establish foundations that are supported by donor contributions and are typically invested in very well-diversified portfolios across traditional and alternative asset classes. Although there are many types of endowments, they generally seek to provide ongoing financial benefits by earning interest on investments while preserving the principal. As in the wider world of investing, the endowment world turns on performance — outperformance can make heroes of investment committees and their financial advisors, while underperformance can mean unemployment.
What does this have to do with the rest of us and our portfolios? Actually, quite a bit.Read More
The pace of Federal Reserve rate hikes will affect the outlook for this asset class
New bond issuance in the US investment grade (IG) market has exploded in 2015 as companies look to finance mergers and acquisitions (M&A), and Invesco Fixed Income sees no signs of this trend slowing down through the end of the year. This has consistently weighed on US IG credit spreads this year, as investors sell their current holdings to make room for new bond issues. However, the US IG market is enforcing some discipline on issuers by demanding higher yields and wider spreads in order to get new bond deals done, which means valuations in the US IG market are becoming quite attractive relative to other fixed income asset classes, in our view. This may garner a pickup in demand for the asset class over the medium term.Read More
Unfamiliar with covered calls? These strategies may be just the ticket for navigating up-and-down markets
It has been some time since the US equity market has favored a covered call strategy. Because covered calls limit an investor’s upside profit potential, strong bull markets are not the optimal environment for this strategy. Rather, a covered call strategy has the potential to work best in markets that are moving sideways or along a gentle slope up or down—much like the choppy, sideways equity market we have seen in the US throughout much of 2015.
I believe now is the time for investors to learn more about this strategy, and talk to their advisors about whether a covered call strategy is right for them.Read More
A steepening crude oil futures curve paints a compelling picture for investors who are anticipating a rebound in oil prices
“Time to Buy Commodities,” blared one business headline a few weeks back, above a story detailing just how far commodities have tumbled. Indeed, I see several reasons why investors may want to consider increasing their exposure to the oil markets.Read More
Markets are calm—on the surface—but there may be more turmoil lurking underneath
The Chinese authorities have managed to calm markets for now with accommodative moves to keep the Chinese currency and local interest rates stable, following their surprise currency devaluation on Aug. 11. But Invesco Fixed Income believes there is more turmoil than meets the eye beneath the relatively calm surface of the markets.Read More
In a diversified portfolio, sometimes certain assets will sink. And that’s OK — the bigger risk lies in incorrectly timing the market.
It’s official: as of Aug. 21, the Dow Jones Industrial Average entered a correction, falling at least 10% from its latest peak.1 And at the same time, many investors took a hit to their stock portfolios as well. Does that mean investors were wrong to be invested in stocks on Aug. 21?
Not at all.
Stocks traditionally serve as the “growth engine” of a portfolio — offering investors the potential to grow their wealth through the market’s returns. That’s a critical role, and investors who abandon that potential, risk falling short of their financial goals.Read More