Hot Off the Web- August 3, 2008
To prevent being wiped out completely financially The New York Times’ Joseph Treaster suggests that “Umbrella coverage for preventing your ruin” . Umbrella coverage, an extension of home and automobile policies, is a suggested insurance policy for people “which takes care of their liability for the lawsuits and medical bills of the auto accident victim” and “which also pays for lawyers and other legal expenses”. Many people either don’t have this coverage or don’t have enough.
WSJ’s Jason Zweig writes in “What to do when your fancy ETF goes RIP” about the coming shakeout/consolidation in ETFs. Of almost 800 ETFs about 200 have less than $10M and 350 have less than $50M of assets, and are most likely losing money for their sponsors. Zweig suggests: avoid ETFs with small asset base, avoid fringe/narrow ETFs and if your ETF is shutting down wait until the fund is redeemed to save transaction costs. Stick with large funds, from large sponsors and broad indexes.
Jonathan Chevreau discusses Larry Swedroe’s new book “The Only Guide to Alternative Investments” in his Financial Post article “A guide through the good, bad and ugly assets” . Swedroe’s top good alternatives include real estate (REITs), real return bonds (TIPs), international and emerging markets stocks. Some of his bad ones are variable annuities and hedge funds, while ugly ones are structured investments (e.g. principal protected notes), leveraged funds. He also comments on the intentional complexity of many of these “products” which he advises you to stay away from.
In “10 signs the stock market may have bottomed” Jon Chevreau enumerates Russ MacKay’s list why we may be near the bottom of this market. The list includes: already 10 months old, extreme pessimism, commodity sell-off… (This is a good list, even if many items are not necessarily currently valid and the list neither necessary not sufficient for a market bottom- besides who knows how to call the bottom of the market?)
Jon Burton in WSJ’s “Getting advice in a rough market” lists some of the things you should expect from your advisor during market swoons. Included in his list are: (1) having set your expectations in advance for rough markets, having adequate cash reserves and getting you into a well diversified portfolio, (2) regular communication (at least monthly letters), (3) disciplined decisions (pre-specified rebalancing rules) and (4) flexibility (perhaps use the rough markets as an opportunity for portfolio restructuring).
In Financial Post’s “Safe, secure GICs have downsides” the Greenard brothers suggest that among the downsides of GICs is that more often than not, not much is left after inflation and taxes, so with your “safe” investment you end up with eroded purchasing power.
And finally, in “Seven essential websites for becoming a better investor” the Globe and Mail’s Larry MacDonald suggests websites that you might be interested in if you are looking investment and personal-finance topics. (Of course this is a list in addition to RetirementAction.com .)