WSJ: What Is Momentum Investing

By SIMON CONSTABLE 

You may hear money managers talk about momentum investing. But what exactly does it mean?

In strictest terms, a momentum investor buys stocks that have been going up in value and sells those that have been falling, says Vineer Bhansali, manager of Pimco Trends Managed Futures Strategy fund. He makes investment decisions based at least partly on momentum across asset classes, not just stocks. See original story here.

Photo by No-w-ay in collaboration with H. Caps, 

CC BY-SA 4.0, via Wikimedia Commons

WSJ: What is Sentiment and Why Does it Matter?

By SIMON CONSTABLE

This summer you've likely heard people talk about market sentiment, but what does it actually mean and why is it considered important?

Sentiment tells you how bullish or bearish investors are on the market. Most often people mean the stock market, although sentiment can be looked at for any asset class. See original story here.

Photo by Zhuo Cheng you on Unsplash

Barron's: How to Simplify Your Commodities Exposure

By SIMON CONSTABLE

Investors have long known that adding a dash of commodities to their portfolios can be beneficial to their wealth. The only problem has been implementing this strategy.

It's difficult to know which commodities are a good bet, and broad commodities-focused indexes are inadequate. Investors also worry that futures prices don't always track the spot market. But veteran economist David Ranson, at Cambria, Calif.-based HC Wainwright & Co. Economics, might have a solution to all these potential problems: investing in just four commodities. See original story here.

Photo by Markus Winkler on Unsplash

MarketWatch: CEOs Play the Fool with Stock Option Pay

By SIMON CONSTABLE

Just because you run a large and sophisticated public corporation doesn’t mean you can’t be played for a fool when it comes to executive pay.

It’s hard not to draw such a conclusion after reading a recently published study of CEO pay which cited extreme naiveté, confusion and knee-jerk decision-making.

Academics Kelly Shue and Richard Townsend of the University of Chicago and Dartmouth College, respectively, studied executive pay at corporations in the S&P 500 between 1992 and 2010. What they found is somewhere between jaw-dropping and staggering. Read more here.

Xcore082, CC BY-SA 3.0, 

via Wikimedia Commons

WSJ: Why the Time Horizon Matters in Investing

By SIMON CONSTABLE

When it comes to investing, we sometimes forget about the clock. Or as the pros call it, the investment time horizon.

That's unfortunate, because "it's incredibly important," says Cody Willard, an investor in Alto, N.M.

The time horizon is a guide investors use to decide how long to hold an investment. You should make the decision "before you move any money around," says Mr. Willard.

For traders, time horizons can be short—sometimes a matter of hours or days. But for most investors, they are much longer.

A trader may make a bet based on economic data due out a week from now. When the news breaks, the trade is either successful or it isn't. Either way, the position should be closed out.

Failure to close a position within a predetermined time is one of the biggest mistakes a trader can make, says Mr. Willard. That's when a losing trade gets turned into an "investment," he says.

For retirement planning, time frames are necessarily longer. A 30-year-old man should have a time horizon of at least 50 years. Even if you retire at 65, you need to consider that you'll likely be living into your 80s, so your assets will need to be invested for a long time.

Over such a long period, the relative volatility of stocks versus bonds or cash doesn't matter since there is plenty of time for the price to recover.

See original story here.

Barron's: How Fidelity Looks at Tech Stocks

By SIMON CONSTABLE

Some people grow up wanting to be stockpickers. Not so Gavin Baker, manager of the $11 billion Fidelity OTC Portfolio fund.

His work at Fidelity, his home since 1999, is a far cry from Baker's original aspirations. He'd envisioned working the winter ski business and spending the off-season rock-climbing and selling photographs. But then dad intervened. According to Baker, his father said, "Since we've paid your way through college, please take one professional internship of any kind." See original post here.

WSJ: Why Tighter Credit Spreads Matter

By SIMON CONSTABLE

Lately we've been hearing that credit spreads are tightening. What are they, and why do they matter?

A spread measures how much more a business pays to borrow money than the government does.

At any given time, different companies pay different spreads for their debt, depending on factors including the maturity of the debt and the health of the company. But overall, spreads have shrunk in recent years.

It was 1.4 percentage points at the end of June, a fraction of its peak of eight percentage points in December 2008.Consider a BofA Merrill Lynch index that measures the interest rates paid by companies whose debt is rated BBB—neither the highest nor lowest quality. The weighted average spread for all the debt in the index is around its lowest level since the financial crisis, notes Jeremy Hill, managing partner at New York-based research firm Old Blackheath Cos.

Mr. Hill says tighter spreads are a result of the extraordinary efforts by central banks around the world to encourage economic growth by keeping borrowing costs low for companies and individuals. "Monetary policy is vastly different than it was 10 years ago," he says.

For investors, the lower spreads mean less of a reward for venturing into corporate debt rather than buying safer Treasurys. But, Mr. Hill notes, that hasn't stemmed demand for corporate bonds, because "investors are yield-hungry."

He adds that the credit risk of buying corporate debt has declined, in part because the lower cost of borrowing means there is less risk of companies failing to pay the interest owed.

See original story here.