Political Risk Goes Global

Political risk—the idea that political changes can affect the value of investments—used to be a concern primarily related to emerging markets. There are still plenty of political risks emanating from emerging markets, such as Russia’s military adventurism and China’s territorial disputes in the South China Sea. But in recent years developed markets haven’t been spared as political risk has reared its head around the globe.

The Pros and Cons of “Investing in What You Know”

“Invest in what you know” is a classic finance adage. It was the mantra of famed investor Peter Lynch, and is an approach followed by Warren Buffett. Indeed the general idea of investing in what you know makes a lot of sense and can help you avoid pitfalls that often bedevil investors. But taken too far even this seemingly common-sense philosophy can be counterproductive.

How Rising Interest Rates Affect Bond Funds

The odds of an interest rate rise seem to be increasing. After the October jobs report revealed that the US economy added 271,000 jobs that month and the unemployment rate fell to 5%, predictions that the Federal Reserve would raise interest rates proliferated. Prices in futures markets currently imply that there’s almost a 75% chance that the Fed will hike interest rates in December.

The Recent Success of Growth Stocks

There’s been a recent divergence in the US stock market. Growth stocks (which are faster-growing companies that tend to have high stock prices relative to the fundamentals of their businesses) have done better than value stocks (which are slower-growing companies that tend to have low stock prices relative to the fundamentals of their businesses) by a sizable amount.

Topics: Value Growth

Do Commodities Deserve a Place in Your Portfolio?

One of the bedrock principles of wealth management is diversification. Proper diversification can mean lower overall risk without lowering your portfolio’s potential returns. So alternative asset classes like commodities, which refer to everything from crude oil to wheat to gold, would seem to be a key tool in achieving this venerated idea of a fully diversified portfolio.

The Latest Projections for the Global Economy

The world is struggling economically. In its latest World Economic Outlook, the International Monetary Fund (IMF) projected that the global economy would grow by about 3% this year. In early 2014, by contrast, it was projecting that global growth in 2015 would be almost 4%. Most of this decline was related to emerging markets.

Topics: Economy

6 Graphs that Explain Financial Markets in Q3

The third quarter of 2015 was an intense one for investors as China’s wild market gyrations continued and stock markets around the world fell. Here are six graphs that explain the key movements in financial markets during the past three months.

Brazil’s Stock Market Struggles Continue

Stock markets around the world have been battered in recent months, but Brazil’s has been hit the hardest. Since the start of July Brazilian stocks have lost more than one-third of their value. This slump is the continuation of a larger trend in which Brazilian stocks have underperformed emerging markets for years, and they have lost about two-thirds of their value since the start of 2010. Is there anything that can turn around the country’s fortunes?

Do You Have the Right Amount of Cash in Your Portfolio?

Cash—such as money stowed away in bank accounts and money market funds—isn’t the most glamorous investment. Its value doesn’t fluctuate on a daily basis like stocks do, and (especially in the low interest rate environment of the last few years) it doesn’t grow much over time. Yet having the right amount of cash is an important factor in achieving your financial goals.

Topics: Cash

Don’t Fret Too Much About the Fed

Janet Yellen, the chair of the Federal Reserve, has said that the Fed is likely to raise its benchmark interest rate sometime this year. Such a move would be the first rate rise since 2006. Whether the change occurs as early as the Fed’s meeting next week or later in the year is still a matter of speculation, but either way higher interest rates could affect your portfolio. So how much should you fret about the Fed’s potential move? The answer is “probably not too much.”

Topics: Fed