MarketWatch: Why China's Money Managers Lag

By SIMON CONSTABLE

Do Chinese money managers have what it takes to do the job?

If you count the ability to pick stocks and generate good returns for clients, then unfortunately most don’t, according to a forthcoming study obtained by MarketWatch.

What’s really needed to outperform for clients is either an MBA degree or a Chartered Financial Analyst (CFA) designation, says the report by Prof. Yi Fang of Jilin University, China and Prof. Haiping Wang of York University, Canada. See original story here.

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MarketWatch: Stock Investors Should Be Cheering a Drop In Oil Prices

By SIMON CONSTABLE

The bear market in crude oil prices should have stock investors elated, not disappointed. What’s more, there’s still time to make money.

Prices for Brent UK:LCOX4 the European benchmark, have tanked more than 20% from $115 a barrel on June 19 to less than $91 today, according to data from FactSet.

Cast off any ideas that the slump in the oil market is a reflection of slowing global growth. Apparently, that doesn’t matter.

How do I know? Last month I met with Professor Ben Jacobsen, head of financial markets at Edinburgh University Business School. He gave me a copy of a paper that he and two other economists wrote on the oil market. They based their research on close to three decades of market data. It was published in the Journal of Financial Economics in 2008 and authored by Gerben Driesprong and Benjamin Maat as well as Jacobsen. Read more here.

WSJ: Why Your Mutual Fund Will Fail, and Index Funds Rule

By SIMON CONSTABLE

The market volatility of recent days illustrates why that old mutual-fund disclaimer—“past performance is not indicative of future returns”—is more promise than warning. It’s also why most people should stick to dollar-cost averaging in index funds.

Dollar-cost averaging is simply the practice of investing a fixed amount on a regular schedule, regardless of where prices go. It’s essentially what you do in a 401(k) plan. Following this method, you tend to buy fewer shares when prices are high and more when prices are low, and are less prone to panic selling when prices dip. See original story here.

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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.

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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.

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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