Top Five Articles from December: Millennials, Damodaran, and Global Equity Allocation
You know your client’s portfolio is properly diversified when there is always a portion of it you hate. Right now, that hateful piece of the equity allocation is global stocks. But using global equities as part of a diversified portfolio still makes sense.
When it comes to valuing stocks, the most reliable valuations come from imaginative number crunchers and disciplined storytellers, says Aswath Damodaran. And too often pure “numbers” people drift off into what he calls “spreadsheet nirvana.” Similarly, investors who focus purely on the narrative of a potential investment run the risk of quickly “veering from reality to fantasy.” Damodaran urged investment managers to bridge the gap between numbers and narratives, insisting that the best valuations are not just “a collection of numbers, but a story connected to numbers.”
What do the US shale oil play and London real estate have in common? A lot, it turns out. And if oil prices keep falling, the London (and for that matter Paris) property bubble(s) will burst. So, if you want to avoid the carnage or short real estate bubbles, builders, or banks in Europe, focus on the US energy sector and OPEC. Many investors are blinded by too narrow a focus, something I call micro-macro bias.
Some of the stuff that Wall Street does is markedly less useful than a potato if you’d like to generate serious investment returns. I’ve done some work and found four investments that are commonly used despite being markedly less useful than the noble spud.
Every generation has unique attitudes, values, and quirks that distinguish it from its parent generation. Two of the most distinguishing features of millennials are increasingly high levels of education and technological prowess. These new attitudes are remarkably reflected in how millennials use money.
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All posts are the opinion of the author. As such, they should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute or the author’s employer.
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