This is how a typical investor’s roller-coaster ride goes:
It starts with optimism. Then excitement. Thrill. Finally, euphoria. The top of the market, the point of maximum risk.
Then - as the market begins sinking and sinking - come anxiety and denial. Next, fear and desperation. Then panic. Finally, despondency. “How could I have been so wrong?” Yet that’s the time of maximum opportunity. (Someone has called it “the puke point.”)
Then comes hope... relief... and optimism. And the roller-coaster ride resumes.
Descrbing that roller-coaster ride was Mark Ukrainskyj, CFA, chairman of the investment committee of the American Economic Planning Group, one of the biggest money management firms in New Jersey (in Watchung). He was speaking the other day before a group of sophisticated investors, so naturally they asked him sharp questions. Such as: Where is the stock market now?
His answer: maybe in anxiety and denial. As for fixed-income investments, there the key emotion seems to be fear. International stocks? Perhaps the chief emotions there are excitement and euphoria.
Not that he thinks that foreign stocks are poised to plummet. China really is a powerhouse. When people say “China has 1 billion people,” he said, they are rounding off. China really has 1.3 billion people. The population of the U.S. “is just a rounding error.”
Ukranskyj doesn’t invest his clients’ money in individual stocks, but hands everything over to good money managers. Who? Some of the Usual Suspects. Excelsior Value & Restructuring. Julius Baer International. The Marsico funds. Royce Opportunity. Growth Fund of America. Turner Emerging Growth. Artisan International. But also some rather unfamiliar names.
He drops a manager if he or she drastically changes investment styles - from value to growth, for example. “But tweaking the style is ok.”
If the manager underperforms, “We give him some time before he’s asked to leave. It depends on how long he underperforms and the degree of underperformance.”
When does he rebalance? When a client’s asset allocation departs 10% or 20% from the client’s model. If the model calls for 40% in stocks, he generally begins trimming back when the client is 44% or 45% in stocks.
Yes, he follows individual stocks, just to keep himself informed. “I know just enough to be dangerous,” he quipped. (A great quote.)
Some other comments:
* His taxable fixed-income portfolio is 50% short-term bonds, 25% TIPS, and 25% global sovereign debt.
* Based on purchasing power parity, the dollar should go back up. Today, New York City sells almost everything cheaper than any other place in the world.Ă‚ But prices in the U.S. could also go up to make things even.
* Recently he boosted his exposure to international managers - from 18% to 25%-- as well as his investment in U.S. large caps. “We’re underweight small caps.”
* How does he feel about betting on everyone’s current favorites - foreign and large-caps? “Worried. But I’d rather be ahead of the big money rather than behind.”
New clients are asked to define their goals and their needs. Then an appropriate asset allocation is arrived at, and a portfolio of (ideally) non-correlated or negatively correlated investments is set up. Besides stocks and bonds, the firm invests in REITs, commodities, and funds of hedge funds. The company has more than $600 million under management.
It starts with optimism. Then excitement. Thrill. Finally, euphoria. The top of the market, the point of maximum risk.
Then - as the market begins sinking and sinking - come anxiety and denial. Next, fear and desperation. Then panic. Finally, despondency. “How could I have been so wrong?” Yet that’s the time of maximum opportunity. (Someone has called it “the puke point.”)
Then comes hope... relief... and optimism. And the roller-coaster ride resumes.
Descrbing that roller-coaster ride was Mark Ukrainskyj, CFA, chairman of the investment committee of the American Economic Planning Group, one of the biggest money management firms in New Jersey (in Watchung). He was speaking the other day before a group of sophisticated investors, so naturally they asked him sharp questions. Such as: Where is the stock market now?
His answer: maybe in anxiety and denial. As for fixed-income investments, there the key emotion seems to be fear. International stocks? Perhaps the chief emotions there are excitement and euphoria.
Not that he thinks that foreign stocks are poised to plummet. China really is a powerhouse. When people say “China has 1 billion people,” he said, they are rounding off. China really has 1.3 billion people. The population of the U.S. “is just a rounding error.”
Ukranskyj doesn’t invest his clients’ money in individual stocks, but hands everything over to good money managers. Who? Some of the Usual Suspects. Excelsior Value & Restructuring. Julius Baer International. The Marsico funds. Royce Opportunity. Growth Fund of America. Turner Emerging Growth. Artisan International. But also some rather unfamiliar names.
He drops a manager if he or she drastically changes investment styles - from value to growth, for example. “But tweaking the style is ok.”
If the manager underperforms, “We give him some time before he’s asked to leave. It depends on how long he underperforms and the degree of underperformance.”
When does he rebalance? When a client’s asset allocation departs 10% or 20% from the client’s model. If the model calls for 40% in stocks, he generally begins trimming back when the client is 44% or 45% in stocks.
Yes, he follows individual stocks, just to keep himself informed. “I know just enough to be dangerous,” he quipped. (A great quote.)
Some other comments:
* His taxable fixed-income portfolio is 50% short-term bonds, 25% TIPS, and 25% global sovereign debt.
* Based on purchasing power parity, the dollar should go back up. Today, New York City sells almost everything cheaper than any other place in the world.Ă‚ But prices in the U.S. could also go up to make things even.
* Recently he boosted his exposure to international managers - from 18% to 25%-- as well as his investment in U.S. large caps. “We’re underweight small caps.”
* How does he feel about betting on everyone’s current favorites - foreign and large-caps? “Worried. But I’d rather be ahead of the big money rather than behind.”
New clients are asked to define their goals and their needs. Then an appropriate asset allocation is arrived at, and a portfolio of (ideally) non-correlated or negatively correlated investments is set up. Besides stocks and bonds, the firm invests in REITs, commodities, and funds of hedge funds. The company has more than $600 million under management.
