The document provides an overview and analysis of the DIAS Conservative Income Portfolio, which aims to preserve capital and deliver over 5% annual income. It describes the portfolio's composition, including a 56% allocation to equities focused on high-dividend sectors and a 28% allocation to fixed income, primarily through short-term bond ETFs. It explains that the portfolio's performance should not be compared to stock market indexes due to its unique strategy and composition. The goal of the portfolio is to preserve capital with no losses to principal each year.
Follow these simple rules and safeguard yourselves from investment blunder. The presentation is extremely simple and easy for anyone to comprehend. It will give you an idea whether you should invest directly or you need to approach a professional. Investment could be at stocks, gold, mutual fund, bonds, real estate, etc.
Follow these simple rules and safeguard yourselves from investment blunder. The presentation is extremely simple and easy for anyone to comprehend. It will give you an idea whether you should invest directly or you need to approach a professional. Investment could be at stocks, gold, mutual fund, bonds, real estate, etc.
Now you can learn the 12 golden rules of investing success. This is something that all most anyone can learn and apply to achieve greater financial security. Start with the basics and learn all the rules followed by successful investors. You can do this. The presentation is available for purchase from Scribd https://www.scribd.com/doc/241726833/The-12-Golden-Rules-of-Investing
James Montier of GMO with a solid piece on the prospect of US equities. The question is what is going to be the trigger for the reversion. In retrospect we will know…
Just starting out on your investment journey?
Or have you been investing for a while and need a refresher?
A smart investor takes the time to be clear on the basic principles of investing and uses these to improve investing skills over time and more importantly, to avoid the costly pitfalls. And a smart investor doesn't rely on good luck. Instead, they take the time to consider their investment goals. Then they develop a plan and choose investments that align with their needs and objectives.
This workshop will cover the following areas:
Taking control!
Your money and your life
Savings and investments
Risk and diversification
Investment strategies
Managed fund, shares and property
By attending this session you will gain a better understanding of the fundamental investment principles such as gearing, asset allocation, diversification, dollar cost averaging & compounding. You will leave with a deeper understanding of these concepts which can help you, as an investor, avoid making mistakes and losing substantial sums of money.
Giving you greater confidence, peace of mind and ultimately better financial outcomes
Nick Gahan
Senior Financial Advisor
Nick is passionate about holistic advice encompassing superannuation (including SMSFs), personal insurance, investments, estate planning, retirement planning and social security and ensuring his clients are receiving comprehensive advice.
The portfolio’s pro-cyclical bias was beneficial as we continued to see a shift in favor of cyclical stocks over defensive sectors. Over the past few years, we have seen a significant expansion in the universe of companies with the ability and willingness to pay a dividend. Given the speed with which stocks have advanced and the introduction of increased interest-rate volatility, I would describe my outlook for equities as cautious for the short term.
Insight Summit 2017: Intelligent Risk Taking - Active vs passive investing
Is factor investing a bubble? - René M. Stulz, Everett D. Reese Chair of Banking and Monetary Economics, Ohio State University
Presented at the third annual Insight Summit conference held on 7 November 2017 by London Business School’s AQR Asset Management Institute.
Now you can learn the 12 golden rules of investing success. This is something that all most anyone can learn and apply to achieve greater financial security. Start with the basics and learn all the rules followed by successful investors. You can do this. The presentation is available for purchase from Scribd https://www.scribd.com/doc/241726833/The-12-Golden-Rules-of-Investing
James Montier of GMO with a solid piece on the prospect of US equities. The question is what is going to be the trigger for the reversion. In retrospect we will know…
Just starting out on your investment journey?
Or have you been investing for a while and need a refresher?
A smart investor takes the time to be clear on the basic principles of investing and uses these to improve investing skills over time and more importantly, to avoid the costly pitfalls. And a smart investor doesn't rely on good luck. Instead, they take the time to consider their investment goals. Then they develop a plan and choose investments that align with their needs and objectives.
This workshop will cover the following areas:
Taking control!
Your money and your life
Savings and investments
Risk and diversification
Investment strategies
Managed fund, shares and property
By attending this session you will gain a better understanding of the fundamental investment principles such as gearing, asset allocation, diversification, dollar cost averaging & compounding. You will leave with a deeper understanding of these concepts which can help you, as an investor, avoid making mistakes and losing substantial sums of money.
Giving you greater confidence, peace of mind and ultimately better financial outcomes
Nick Gahan
Senior Financial Advisor
Nick is passionate about holistic advice encompassing superannuation (including SMSFs), personal insurance, investments, estate planning, retirement planning and social security and ensuring his clients are receiving comprehensive advice.
The portfolio’s pro-cyclical bias was beneficial as we continued to see a shift in favor of cyclical stocks over defensive sectors. Over the past few years, we have seen a significant expansion in the universe of companies with the ability and willingness to pay a dividend. Given the speed with which stocks have advanced and the introduction of increased interest-rate volatility, I would describe my outlook for equities as cautious for the short term.
Insight Summit 2017: Intelligent Risk Taking - Active vs passive investing
Is factor investing a bubble? - René M. Stulz, Everett D. Reese Chair of Banking and Monetary Economics, Ohio State University
Presented at the third annual Insight Summit conference held on 7 November 2017 by London Business School’s AQR Asset Management Institute.
why FIIS Selling ?
Which funds/stocks did investors choose?
-Add Units in SIP Folio
-3 SMART MOVES to take in this Market
-Domestic Institutional Investor's buying overpowered the selling
of FIIs and FPIs
Why Mutual Fund
Sahi Hai?How do you get the Retu
rns in
Mutual Funds?
What is Systematic
Investment Plan (SIP)
in Mutual Fund ?
Nifty started with a dull note at 16887, on 3rd October 2022 but closed at 18012
Osisko Development - Investor Presentation - June 24
Thought for the_week_-_259
1. This commentary is not intended as investment advice or an investment recommendation. It is solely the opinion or our investment managers
at the time of writing. Nothing in the commentary should be construed as a solicitation to buy or sell securities. Past performance is no
indication of future performance. Liquid securities, such as those held within DIAS portfolios, can fall in value. Global Financial Private
Capital is an SEC Registered Investment Adviser. All charts courtesy of Bloomberg.
Thought for the Week (259):
The DIAS Conservative Income Portfolio – Under the Hood
Synopsis
The Conservative Income (CI) portfolio consists of both fixed income and equity holdings designed to preserve the capital base and deliver 5%+ in annual income.
Due to CI’s unique composition, its performance should not be compared against the S&P 500, The Dow Jones Industrial Index, or any other proxy for the stock market.
We see no end in sight to the Fed’s zero interest rate policy, so now more than ever is the time to be invested in CI – the ideal weapon to use in this war against seniors and savers.
Let’s Look Under the Hood
Conservative Income (CI) is a very unique product, designed from the ground up to deliver 5%+ annual income by investing in low risk assets to preserve the capital base.
The long term returns for CI speak for themselves, but given the recent market volatility, we felt that it would be beneficial to look under the hood of CI to see what’s actually happening inside.
So let’s start at the top by taking a look at the chart below which illustrates the overall composition of CI across three asset classes.
The primary goal of CI is capital preservation, and this mandate requires us to only consider low risk securities in all asset allocation decisions. Currently we favor equities over fixed income, followed by a larger than normal cash balance for three key reasons:
2. This commentary is not intended as investment advice or an investment recommendation. It is solely the opinion or our investment managers
at the time of writing. Nothing in the commentary should be construed as a solicitation to buy or sell securities. Past performance is no
indication of future performance. Liquid securities, such as those held within DIAS portfolios, can fall in value. Global Financial Private
Capital is an SEC Registered Investment Adviser. All charts courtesy of Bloomberg.
1. Bonds Look Expensive: Bond prices are high and yields are low (although many have started to rebound). While we still see opportunities in bonds, we prefer the prices in equities.
2. Equities Offer Upside: We strongly believe that we are at the beginning of a secular bull market which could last well over a decade. The risk of owning equities is lower than years before, and additionally, some of the best low-risk yield opportunities exist in equities.
3. Patiently Waiting: Back in April, we began selling stocks that we felt were overvalued in anticipation of a correction given the market’s meteoric rise experienced in the first quarter of 2013. As stocks continue to go on sale, we are here waiting to buy.
Now that we have a broad overview of what’s inside CI, let’s dig deeper into both equities and bonds to see what we own and why.
Equity Exposure
A common question we have been asked lately is, “Why has CI underperformed the S&P 500 over the past few weeks?” To answer the question, we need to dig deeper inside that 56% slice in the pie chart above and compare it to the S&P 500.
The chart below shows the industry breakdown of the equity allocation within CI (blue bars) and the S&P 500 (red bars).
This comparison highlights some key differences between CI and the S&P 500:
Sector Weights are Different: CI is heavily concentrated in sectors known for income generation such as telecom, utilities, and energy. Furthermore, we have little to no exposure to financials, information technology, and consumer discretionary because these sectors offer very little opportunity for low risk income generation.
3. This commentary is not intended as investment advice or an investment recommendation. It is solely the opinion or our investment managers
at the time of writing. Nothing in the commentary should be construed as a solicitation to buy or sell securities. Past performance is no
indication of future performance. Liquid securities, such as those held within DIAS portfolios, can fall in value. Global Financial Private
Capital is an SEC Registered Investment Adviser. All charts courtesy of Bloomberg.
Stocks are Different: The stocks in CI look a lot like bonds (large revenues, clean balance sheets, steady and consistent dividends, etc.), and many of these stocks are not included in the S&P 500. For example, CI’s energy exposure is quite higher than the S&P 500 due to the use of MLPs to generate yield, and the S&P 500 does not contain a single MLP.
CI Changes More Frequently: Although not directly observable in this chart, we constantly add and remove stocks in CI. For example, we recently reduced our exposure to utilities by targeting stocks that appeared expensive. In contrast, changes to the S&P 500 occur infrequently.
To summarize, the composition of CI is vastly different than the S&P 500, both in sector weights and individual securities, simply because CI’s goal is to preserve capital and generate income.
Now you may ask yourself why we don’t just take the 56% allocation to equities in CI and buy an index fund that mirrors the S&P 500, thus saving the time and trouble of active management. There are two key reasons that active management of equities is absolutely critical for CI:
1. Dividend Yield: If we simply used an index fund for the S&P 500, we would only achieve a 2.1% yield. The mandate of CI is to deliver 5%+ so we would not be able to achieve this goal.
2. Too Risky: The primary goal of CI is to preserve the capital base and the S&P 500 carries too much risk to capital preservation. We only select stocks that have “bond-like” characteristics.
Fixed Income Exposure
Over the last three years, we have dramatically reduced our fixed income exposure from approximately 70% down to 28% today. This mix shift has been a direct result of our concern over an imminent correction in the bond market given that yields had fallen to levels that we felt were unsustainable.
However, that’s not to say that you should not own bonds. A balanced and diversified portfolio warrants some exposure to bonds and we feel that there is still opportunity in select, low-risk subsectors:
High Yield: The higher the coupon rate of a bond, the more money the investor receives each pay period that can then be reinvested at higher rates. Hence, higher coupon bonds are less impacted by rising interest rates.
Short Maturity: In rising interest rate environments, the faster investors can get their money back to reinvest at higher rates, the better. Hence, short maturity bonds are also less impacted by rising interest rates.
Minimal Default Risk: Default risk is a primary concern for firms that pay higher yields, however we do not believe that the Fed will raise interest rates until the economy is stronger. Any improvement in the overall economy should only improve company fundamentals and reduce default risk even further.
NOTE: We have had no exposure to Treasuries for the last 18 months because although many investors deem these government backed securities to be “riskless”, we felt that there was substantial risk in these assets. The recent sell-off confirmed our fears.
Lastly, it’s important to understand how we maintain exposure to fixed income assets. We use exchange traded funds (ETFs) instead of holding physical bonds for three key reasons:
1. Customization: ETFs allow us to play out our themes in a very cost efficient manner. For example, our preference for high yield and short maturity bonds can be achieved by buying 2 separate ETFs specifically tailored to these criteria.
4. This commentary is not intended as investment advice or an investment recommendation. It is solely the opinion or our investment managers
at the time of writing. Nothing in the commentary should be construed as a solicitation to buy or sell securities. Past performance is no
indication of future performance. Liquid securities, such as those held within DIAS portfolios, can fall in value. Global Financial Private
Capital is an SEC Registered Investment Adviser. All charts courtesy of Bloomberg.
2. Flexibility/Liquidity: ETFs are very easy to buy and sell which lowers the risk of ownership and affords us the flexibility to effortlessly manage changes to asset allocation.
3. Diversification: A single ETF can hold several hundred bonds so you gain immediate diversification to prevent any substantial loss from a single default.
The Benchmark is Zero
Hopefully we have explained why CI occasionally reacts differently than the S&P 500 and other popular benchmarks. Subsequently, these indices are inappropriate benchmarks for CI.
For example, imagine if a portfolio manager who invested in small cap growth stocks was measured against the S&P 500, and one year he returned 15% when the S&P 500 was up 12%. Here, the manager appears to have delivered stellar returns, but small cap stocks don’t exist in the S&P 500 so it’s a lot like comparing a minivan to a sports car.
Let’s assume that during this same year, the Russell 2000 Growth Index, a popular benchmark for small cap managers, returned 20%. Given that this index more closely resembles the stocks that our manager would buy, we now see that our manager materially underperformed an index of similar holdings.
Well if we can’t use the S&P 500 or any other index out there because CI is so unique in its composition, then how do we evaluate its performance?
The answer is actually quite straightforward when we go back and look at the goal of CI – preserve capital and deliver 5%+ in annual income. Capital is preserved when there are no losses to the principal and therefore, the benchmark for CI is 0% each year.
NOTE: Hopefully it goes without saying that we do attempt to deliver some capital appreciation as long as we can manage the risk accordingly to ensure that the capital base is preserved over the long run.
Time Horizon is Critical
The idea behind CI and the way it is constructed requires an investor to be patient and maintain a long- term investment horizon. Due to the equity component, cyclicality will cause movement in the capital base in the short term. Furthermore, we continually adjust the composition of CI in anticipation of market changes and often times these changes take time to play out.
Simply put, measuring CI over any time period less than a year is inappropriate and we strongly recommend that investors view returns over an 18 month period at the very minimum.
CI is Your Best Weapon
The Fed’s zero interest rate policy (ZIRP) appears to be going nowhere for at least another four years, and as a result, the war on seniors and savers continues.
Traditional income producing securities simply will not help you win this war. Keeping your cash in a bank generates no income. Government bonds barely meet inflation and tie up your principal for decades in the face of rising rates (yes one day in the distant future we will see interest rates rise). Equities offer plenty of dividend yield, but finding stocks with “bond-like” characteristics gets more difficult by the day.
The bottom line is that active management is absolutely critical in times like these, and to win this war, you need a weapon like CI – one that delivers 5%+ annual income and capital preservation.