Asset Allocation

9 years ago, Warren Buffett made a $500,000 bet that a simple index fund would outperform an actively managed hedge fund run by expert investors and it did for one or more of the 3 reasons outlined in this insightful article.

I think the pros outweigh the cons overall regarding indexing but it’s always a good idea to consider the risks involved when any idea becomes so popular so allow me to play Devil’s Advocate on index funds.

Like casino gamblers, most small resource stock buyers motivated by one or two wins continue to play the game until the ‘House’ has their money. Here’s a few common mistakes retail investors make speculating in junior resource stocks.

You also have to remember that we always live in uncertain times. Asset allocation is how you manage your money without knowing what the future holds. Asset allocation is for long-term people. Here's a financial advisor’s guide to asset allocation:

You'll get a good return from the stock market -- in nominal terms -- in coming years but in real terms, it's unsustainable and unrealistic. Oil, gold, and agriculture are going to be the biggest winners when the dollar starts its slide. Words: 825

Over the longer term, some of history's top strategists actually say that inflation is a big reason to buy stocks – not to avoid them. Foremost among them is Warren Buffett. His inflation research goes way back. In 1977 – just before the U.S. was about to enter into one of the worst inflationary climates in history – in a column for Fortune magazine he said, “stocks are probably still the best of all the poor alternatives in an era of inflation – at least they are if you buy in at appropriate prices.” Words: 664

Inflation expectations have been on the rise since before the U.S. election, but markets are now more convinced of higher inflation to come due to President-elect Trump’s talk of fiscal stimulus and tax cuts. Measured by break-evens in the Treasury Inflation Protected Securities (TIPS) market, inflation expectations for the next 10 years rose to 1.93%, the highest level since the summer of 2015. The long decline in inflation seems to be turning, as the CPI climbed 1.6% year-over-year, the most in two years. This changing environment has piqued investor interest in TIPS, and in turn, TIPS ETFs.

We see attractiveness in using TIPS as an alternative for core Treasury allocations in fixed income portfolios. Here's why.

The potential for greater bond market volatility ahead associated with central bank policy uncertainties, and paltry expected returns, should make investors wanting to own government bonds for their perceived "safe" value think twice.

The chaos that will arise as trillions of dollars, yen, yuan and euros, etc. try to crowd through the fire exits as the asset bubbles pop will be monumental, and the...spikes in small asset class prices as the hot money floods in will be equally monumental. Word count: 348