Kaizen Wealth Management » asset allocation

Do hedge funds hedge?

Kaizen Wealth Managment — Fri, 04 Jun 2010 16:02:11 +0000

…the experience of the Great Recession

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Source: Vanguard | 06/03/2010

The recent Great Recession provides a unique opportunity to examine the experience of hedge fund investors. Many investors believe that hedge fund managers have the flexibility to avoid the disastrous consequences of extreme market events. However, during the turmoil of the past few years, most hedge fund categories, on average, did not provide significant diversification beyond that of a 60/40 portfolio of stocks and bonds.

Foreign Intrigue

Kaizen Wealth Managment — Wed, 17 Feb 2010 23:33:52 +0000

U.S. Stocks with Heavy Foreign Exposure: Company Listed followed by its % of Sales Outside North America

Colgate-Palmolive 81
Avon Products 77
Coca-Cola 74
Autodesk 72
Aflac 72
Merck & Co. 70
Waters 70
Caterpillar 66
Nike 66
3M 64
Pfizer 58
Proctor & Gamble 57

You may be surprised by how big your foreign exposure is, or how small your domestic exposure is, when looking at your portfolio of individual securities, or what securities your mutual funds may hold.

Opportunities in International Investing

Kaizen Wealth Managment — Mon, 21 Dec 2009 16:40:25 +0000

More and more, we are finding it easier to justify our higher allocations to international equities. Roughly 55% of the investable equity universe, by market cap, is outside of the U.S. Also, world GDP has outpaced the U.S. GDP every year this decade; moreover, emerging markets have seen average GDP growth since 2000 of 5.9% – compared to 1.8% for the developed economies. International investing may also be a hedge against a weaker domestic currency.

source: J.P.Morgan Asset Management

Two-Thirds Don’t Have a Financial Plan

Kaizen Wealth Managment — Fri, 25 Sep 2009 15:56:50 +0000

Despite increasing pressure to slash debt and rebuild retirement funds, nearly two-thirds of consumers do not have a written financial plan, according to the 2009 National Consumer Survey on Personal Finance.

The survey, released today by the Certified Financial Planner Board of Standards, found that 64% of respondents do not have a written financial plan in place.

“Those in the know who are using financial planning are finding it a valuable experience,” Eleanor Blayney, consumer advocate for the CFP Board, said in an interview. “There are just too many people who are not using it.”

We couldn’t agree more.

Now May Be a Good Time to Transfer Your Old 401K Plan(s)

Kaizen Wealth Managment — Thu, 25 Jun 2009 21:25:11 +0000

Leaving your money in an old, forgotten 401(k) could be a losing proposition. Hidden fees, limited investment options and a likely unbalanced asset allocation can plague your retirement plan(s). If you are like many people, you’ve had many jobs over your career and left retirement-plan assets scattered about.

Consolidating these plans and investments can help:

rebalance your asset allocation
expand your investment choices
ease reporting and review of your complete retirement plan
continue your tax-deferred growth

We (Still) Believe in Modern Portfolio Theory

Kaizen Wealth Managment — Thu, 18 Jun 2009 14:54:47 +0000

There has been a lot of talk about the demise of Modern Portfolio Theory. We still believe in Modern Portfolio Theory.

Modern portfolio theory is concerned with controlling risk (risk management) for the whole portfolio by allocation among asset classes that in themselves may be volatile (and correspondingly have higher returns), but whose returns are uncorrelated or have low correlations with each other. Simply put, risk is managed by investing in asset classes that are not expected to go down (or up) at the same time or to the same degree. In effect, this means that the addition of higher-return, more volatile asset classes to a portfolio will not necessarily increase the volatility (risk) of the portfolio as a whole, if the asset classes are uncorrelated or have low correlations.

Modern portfolio theory employs mathematical models to analyze expected returns, volatility, and correlations of individual asset classes. Many sophisticated techniques and investment vehicles can be used to help manage investment risk within desired parameters and, hopefully, to enhance returns.