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A Simple Guide To Investing In 2014
Photo Credit: Forbes Business

A Simple Guide To Investing In 2014

Jan 6 2014, 11:37am CST | by

The New Year has barely arrived, and yet 2014 is already shaping up to be an exciting one if you have any economic interest in the markets. As we begin to think about how to deal with 2014 from an...

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29 weeks ago

A Simple Guide To Investing In 2014

Jan 6 2014, 11:37am CST | by

The New Year has barely arrived, and yet 2014 is already shaping up to be an exciting one if you have any economic interest in the markets. As we begin to think about how to deal with 2014 from an investment perspective, think of these current concerns:

A new Federal Reserve Chairperson this year that has signaled a market friendly style; a stock market with very strong performance that is bound to raise concerns about future returns; and  there’s also the never-ending debate about whether the U.S. economy is really getting better at a consistent clip.

We all know that it is absolutely impossible to predict what will happen this year to interest rates, stock prices and your portfolio. (Let’s have a show of hands for those of you that foresaw that the S&P 500 would close out at 32%.) But one thing we will find interesting, if not unprecedented: I think there will definitely be a significant change of sentiment as 2014 moves into full gear.

Investors that sat on the much-referenced “sidelines” with their cash last year woke up January 1 very disappointed that they did not participate in a great rally. As a result, I don’t think they will remain inactive for the bulk of this year.

So let’s take a look at how an optimist or a latecomer to the market might view the year’s investment opportunities.

Stocks:  Sure, there are people that consider today’s market overvalued by P/E measures. But those comments tend to be generalizations about the popular indexes such as the S&P 500, not individual stocks. When I look at my portfolio of about 25 stocks, there are still several stocks that analysts’ estimate earnings growth of 20% or more for the coming year. I’d say that’s a pretty attractive prospect, especially if most of these stocks are trading at a forward P/E of around 20.

So you have to take the valuation hype on a case-by-case basis. That’s how you can make money in stocks this year: finding the stocks whose earnings growth rate is in line with its P/E multiple.

Two stocks I like that fall in this category are HSN and Las Vegas Sands. 

HSN’s Home Shopping Network segment is the main contributor to the company’s revenue, and the company continues to improve operating margins as we enter 2014. Likewise, Las Vegas Sands’ gaming market, targeted at China so far, is exploring expansion possibilities in Japan. It looks promising because Japan may permit casinos as it plans to host the 2020 Olympics.

Special Offer: Where should you invest in 2014? Download the new free report 12 Stocks To Buy For 2014 for ideas from top Forbes advisors.

Bonds: Almost everybody these days is thinking that bonds are finished. I’ve been a writer of this column for over two years, and by now you should guess how I respond to the so-called “consensus thinking”—especially when it concerns market matters.

Just because interest rates are most likely to move higher than lower in the current environment, one should not simply mass exit the asset class—especially if everyone (including the proverbial “shoeshine kid”) is chanting that mantra. The fact that everybody is aware of bonds is unusual. Bonds are hardly ever discussed in the general media, since stocks are normally far more interesting for some reason. This is another reason to be careful about changing the fixed-income component of your portfolio in response to the majority opinion, because atypical crowd awareness can signal a behavioral malfunction in logic.

To ground yourself, there are several Web sites that have models showing how certain laddered bond portfolios will fare when rates move up. My firm has a simulator that allows one to stress test a portfolio based on a rising rate scenario, for example. In general all the quant models show that, given a slowly rising rate scenario, a laddered account should do just fine as long as you don’t cash out, and keep investing that coupon income. So let the new Fed Chairperson arrive with all the press fanfare about expectations—it shouldn’t really matter to a long-term investor that much!

Alternatives: Have you noticed the current spin on the underperforming hedge funds out there?  It used to be that hedge funds were marketed as exclusive, best of breed managers that offered the potential for stunning returns, with a certain air of exclusivity. But most hedge funds have underperformed recently. How do those managers explain this? I guess most of us simply did not understand the managers’ objectives of targeting “low volatility.”  I wasn’t aware of that until last year, and I’m not sure that many other investors were, either.

By corollary, does that also mean any hedge fund that has beaten the S&P 500 by a large margin has missed its investment objective? I think you get my point. Leave it to the experts to vet and recommend alternative strategies, because it’s a very fragmented market that deserves full-time scrutiny in order to be approved in your portfolio.

As we engage the first full trading days of 2014, I’m optimistic that those with a rational, disciplined investment plan will be quite satisfied in eleven months—regardless of what the Fed does along the way.

Source: Forbes Business

 
Update
10

7 weeks ago

RM47mil KWSG contributions still unclaimed

Jun 9 2014 7:54am CDT | Source: Business Times Malaysia

KUALA LUMPUR: About RM47 million of contributions in the Teachers Provident Fund (KWSG) still remain unclaimed, the Dewan ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
9

7 weeks ago

Gold shop lost almost RM1mil

Jun 9 2014 3:50am CDT | Source: Business Times Malaysia

KANGAR: A gold shop owner lost almost RM1 million after after the safe on in his shop was broken into by ro ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
8

7 weeks ago

Motion to debate MAS losses in Dewan Rakyat rejected

Jun 9 2014 3:39am CDT | Source: Business Times Malaysia

KUALA LUMPUR: AN emergency motion to debate the losses incurred by Malaysia Airlines last year, amounting to RM1.2 billion was rejecte ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
7

7 weeks ago

MH370 Tragedy: Hisham: RM27.6 mil spent on 1st phase of SAR

Jun 9 2014 2:11am CDT | Source: Business Times Malaysia

KUALA LUMPUR: Malaysia spent some RM27.6 million in its first phase of the search operations for missing Malaysia Airline flight MH370, said Acting Transport Minister ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
6

7 weeks ago

9.1m litres of diesel seized in a month

Jun 8 2014 1:11am CDT | Source: Business Times Malaysia

PUTRAJAYA: The Domestic Trade, Cooperatives, and Consumerism ministry has seized some 9.1 million litres of diesel and property worth RM58 million since mounting ‘Operasi Diesel Selatan’ in ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
5

7 weeks ago

Girl, 9, awarded RM2.78m compensation for medical negligence

Jun 6 2014 4:56am CDT | Source: Business Times Malaysia

KUALA LUMPUR: A nine-year-old girl who suffered brain damage during her birth at a government hospital was awarded over RM2.78 million in ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
4

8 weeks ago

Malaysia's total trade in April up 12pc

Jun 5 2014 11:52pm CDT | Source: Business Times Malaysia

KUALA LUMPUR: Malaysia's total trade in April 2014 rose by 12 per cent from a year ago to RM123.86 billion due to growing trading activities, International Trade and Industry Minister Datuk Seri Mustapa Moham ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
3

8 weeks ago

Works Ministry to spend RM20m for upgrading works at 50 accident black spots

Jun 4 2014 11:35pm CDT | Source: Business Times Malaysia

JOHOR BARU: The Works Ministry will implement upgrading works at 50 accident prone locations in the country that have been identified this year invo ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
2

8 weeks ago

Najib launches loan scheme for Ramadan traders

Jun 4 2014 10:24pm CDT | Source: Business Times Malaysia

PUTRAJAYA: Prime Minister Datuk Seri Najib Razak today launches RM45 million Ramadan Bazaar S ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
1

8 weeks ago

Residents bring up objection against Kidex to Suhakam

Jun 4 2014 4:49am CDT | Source: Business Times Malaysia

PETALING JAYA: A group of 20 Petaling Jaya residents held a meeting with the Human Rights Commission of Malaysia (Suhakam) over their objection against the proposed RM2.2 billion Kinrara Damansara Skyway (Kidex) ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 

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