When I was in high school, I was a self-professed “journalist” taking sports pictures and writing an occasional article for my local newspaper (I was also co-editor-in-chief of my high school newspaper, too, but that is a different story!) The editor of that local newspaper was Robert A. Long and he wrote a weekly column titled “Bob-a-longs”; a word that usually means to proceed in a disorganized way, but a clever self-deprecating play on his own name for a newspaper column!
Consequently, instead of writing a full-fledged column, he would simply list blurbs that he thought were interesting. So, in honor of Robert A. Long, here is my investment version of Bob-a-longs; somewhat unrelated things that caught my attention over the past few weeks that bear mentioning.
Every time the equity markets hit an all-time high, there is always someone who comes out with a forecast for a correction. Of course, occasionally one of those forecasts will be correct making that prognosticator a “market expert.” Don’t believe it!
Exchange-traded funds (ETFs) are wonderful vehicles and are the most efficient and inexpensive way to own broad (and narrow) slices of the markets. However, some ETFs are both inefficient and expensive, so beware! An often-overlooked aspect of the ETF vehicle is the bid/ask spread, i.e., the difference between what you buy and sell an ETF for. For long-term buy-and-hold accounts, this cost can be amortized over a long time horizon so can be minimal, but for actively traded accounts using thinly traded ETFs, this cost can become quite large.
Many employees of high-flying tech companies are fortunate to receive shares of company stock in either outright grants/options or at a discount to market price. Some of these stock perks can be large to start with, but add in some tremendous market appreciation and you have the makings of a pretty nice investment portfolio, albeit hyper-focused in one name! It always depends, but I usually recommend a conservative 20% cap on exposure to the stock of the company you work for. The road is littered with high-flying tech companies that hit the skids; I know it can’t happen to you, but just think about shareholders/retirees with positions in GE who saw huge volatility and huge writedowns in their market value.
When I meet someone new in a social setting and they ask what I do, I tell them I manage investments. Invariably, they then ask me to recommend a good investment. Of course, without knowing their financial situation there is no way I could recommend any one investment or even any single strategy. I could easily say that international and emerging market equities are historically “cheap” relative to U.S. equities, but those asset classes are also “risky” investments. I could also say that U.S. Treasuries are historically “rich” and probably not a good buy unless you need absolutely “guaranteed” return of principal at some future date. Then there are lots of things in the middle! It really does “depend”.