FINANCIAL ADVISOR INSIGHTS: 'Passive Investing Has Reached A Watershed Moment'

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'Passive Investing Has Reached A Watershed Moment' (Investment News)

The California Public Employees' Retirement System (CalPERS), the second largest pension fund in the country, is considering moving to a passive portfolio. Moreover, brokerages are also promoting passive ETFs. At a time when returns are low, many investors are looking to cut down on costs.

"Investors' preference is clearly shifting, though. Active management's market share was down to 72% as of the end of last month, and passive funds clearly have all the momentum now.

"As investors have gotten back into stocks this year, they have done so largely through passive funds. Passive funds took in $65 billion in the first two months of the year, while active funds took in $40 billion."

Another Way For Advisors To Look At Risk (CFA Institute)

Advisors often try to steer clients away from risk and focus on the long-term, according to Aaron Klein at the CFA Institute. But this isn't necessarily the best strategy he says.

"I have a very contrarian view on such thinking. The very best advisers are embracing the opposite approach: They’re using risk to make better investing decisions in the first place, and they’re ensuring that their clients are invested within the bounds of their risk tolerance. I call it being a “risk-aware adviser.

"…Imagine if we quantified a client’s risk tolerance and a comfort zone for the portfolio over a relatable period of time (I’ve found six months to be the best). We could then build a portfolio with a high mathematical probability of staying within that comfort zone.

"Is this stacking the deck? Absolutely. And that’s exactly what clients are paying their advisers to do: help them grow their assets when the markets are up while protecting their downside risk when the markets drop."

40 Years Of Long-Term US Dollar Cycles (Deutsche Bank)

Shareholder Fraud Lawsuit Against Pitney Bowes Is Dismissed (Thomson Reuters News & Insight)

A Connecticut Judge dismissed a shareholder fraud lawsuit against Pitney Bowes that accused it of withholding problems in its business from shareholders in 2007. The problems caused the company to miss its forecasts for the first time in seven years. "A company need not be prescient, it need only be aware of its business environment and warn of factors and circumstances present in its business environment which could affect the company's results," Judge Vanessa Bryant wrote.

Corporate Profit Margins Could Grow For A While (Credit Suisse)

Corporate profit margins are near all-time highs. But these have been beefed up at the expense of the American worker that faces low wages and high unemployment.