I want to clarify that I own an ETF that holds gold stocks. I also own one of the ETFs that tracks the price of bullion. Together, they account for 3% of my investments, so this is by no means a big bet
On gold, you have to ask yourself why you want to own it before deciding on a fund vs. an ETF that tracks that bullion itself. Gold stocks, because they're stocks, can run into headwinds that the metal doesn't have--there might be production problems, or a general market downdraft, for instance. If your purpose is insurance against Armageddon--and you'd want to limit that to a slice of a slice of your portfolio--then an ETF that tracks the metal itself might do.
Thanks, Anne. Some clear, concise advice.
Anne's points re gold are valid. The case for the stocks is that there's been a major divergence in performance over the past year and a half or so. Bullion is up, the stocks are down
Another important point, Manny. Thanks.
Alright, let's go ahead and take our question from Jeff S. about earnings season.
We also have a question from wreckon95
Re 4th Q earnings, this just in from ThomsonReuters: "5% of the S&P 500 companies have reported Q4 2012 EPS. Of the 26 in the S&P 500 that have reported earnings to date for Q4 2012, 65.4% have reported earnings above analyst expectations, 15.4% reported earnings in line with analyst expectations and 19.2% reported earnings below analyst expectations. In a typical quarter (since 1994), 62% of companies beat estimates, 17% match and 21% miss estimates. Over the past four quarters, 65% of companies beat estimates, 10% matched and 25% missed estimates." In short, the quarter so far looks slightly better than average. But it's still early.
Yes--the 4th quarter should be a lot better than the last one. For the year, think analysts are expecting about 4% growth overall. One thing you want to watch for this season: revenues. Companies in recent years have been squeezing earnings out by increasing productivity. That lemon's been squeezed about dry, so you want to look for companies actually able to sell more widgets--or whatever they make/do. Revenues were sorely lacking last quarter.
Thanks for sharing, Manny. That should at least gift the markets a bit of a boost.
Great point, Anne. Thanks.
To wreckon95, I consulted with our education writer, Jane Clark, on your question. She says 529s allow you to invest more; ESA's (Coverdells) give you more choices. You have to see which issue is more important for you
Thanks for checking on that, Manny!
I meant 4% earnings growth for 2012. For 2013, even though estimates have been coming down a bit, analysts still see 7% growth, on average-and 7% is about the long-term historical average for earnings growth--so not gangbusters, but decent.
Alright, we have time for just one more question
And thanks, Anne. It will be interesting to see how those estimates pan out
AGDAX is AllianceBernstein High Income. We've not written about this fund before. Morningstar calls it a multisector fund but a quick look at the holdings suggests that most of the assets are in junk bonds. That's an area that should hold up relatively well in an environment of rising rates (although the fund's small exposure to Treasury bonds would be hurt). I hardly know what to say about the other fund. Remember when I was talking about simple investing earlier? Judging from this fund's name-- EV Tax-Advantaged Bond&Option Common--it is the epitome of complex investing. It's a closed-end fund (they're complex to start with). It may well be leveraged. It uses options. It may turn out to be a great fund, but it would take a rocket scientist to anticipate how it would perform in different environments. And I'm guessing it was a rocket scientist--or an Eaton Vance marketer--who created it
I'm not familiar with those funds in particular, but I did come across some interesting data from Bank of America/Merrill Lynch recently. With 10-year Treasury bonds yielding about 1.9%, it would take a yield increase of 0.39% before you'd breakeven--that is, the income you get can no longer make up for the price decrease (since rates and prices move inversely.) So a yeild of 2.29% on ten-years would mean trouble. There's more flexibility for rate increases in investment grade corporate bonds and high-yeld corporates.
Thanks, Manny. No need to try to be rocket scientists here ;)
When investing in a bond or bond fund, look for the duration or average duration. That will give you an estimate of how much the fund would lose if rates rose by one percentage point. That's sort of what Anne's getting at.
And very interesting, Anne. Those are some good numbers to keep in mind.
Thanks for clarifying, Manny
Alright, time to let you guys get back to work!
Thank you all for a lively discussion here today
Nice chatting with everyone
And a special thanks to Manny and Anne for sharing your expertise
Stay on the lookout for more chats every week on live.kiplinger.com. Next Thursday at Noon ET, the editors of Kiplinger’s Retirement Report will be taking questions about how to maximize Social Security.
Enjoy the rest of your afternoon, all!
As you weigh your investment strategy for the coming year, you may be wondering, with the economy still sputtering, corporate earnings faltering and sales at many companies sinking, can the stock market's stealth rally continue? What market sectors in particular should you consider this year? And what about opportunities for income? With little room for interest rates to fall further, where can you find decent yield? Investing editors Manny Schiffres and Anne Kates Smith took these questions and more during a live chat on January 10. You can read the transcript below.
On gold, you have to ask yourself why you want to own it before deciding on a fund vs. an ETF that tracks that bullion itself. Gold stocks, because they're stocks, can run into headwinds that the metal doesn't have--there might be production problems, or a general market downdraft, for instance. If your purpose is insurance against Armageddon--and you'd want to limit that to a slice of a slice of your portfolio--then an ETF that tracks the metal itself might do.
