What we’re reading (2/10)
“Why Investors Are Piling Into Funds That Promise Not To Beat The Stock Market” (Wall Street Journal). “The prospect of getting most of the market’s upside, less of the downside and big steady dividends along the way sounds like an investing paradise. No wonder the JPMorgan fund took in $12.9 billion in new money last year—the biggest annual haul for any actively managed ETF ever. Three covered-call funds from Global X, linked to the Nasdaq-100, S&P 500 and Russell 2000 indexes respectively, attracted a combined $5.2 billion in 2022. So far in 2023, approximately $3 billion more has flowed into these four funds alone.”
“Risk And Regret” (Morgan Housel). “Daniel Kahneman once said an important part of becoming a good investor is having a well-calibrated sense of your future regret. You need to accurately understand how you’ll feel if things turn out differently than you hoped. Maybe regret is the best definition of risk.”
“For More Certainty In Your Retirement Portfolio, Consider Annuities” (New York Times). “With interest rates on the rise, many annuities have become even more attractive. Consumers poured money into both simple annuities that work much like bank certificates of deposit, as well as more complicated products that offer a cushion against stock market losses. Paycheck annuities — which provide a guaranteed stream of income for life — also made something of a comeback.”
“Is It Risk-On Again?” (The Capital Spectator). “This year’s rebound in asset prices around the world suggests that investor sentiment is shifting to risk-on after a year of playing defense. Trying to divine the future for pricing is always precarious, especially in the near term. But there’s no charge for looking at proxies of key market trends through various ETF pairs. As we’ll see, certain slices of markets are predicting a new bull run, but it’s still early to ring the all-clear signal, according to a broad measure of US stocks relative to US bonds, which is arguably a more reliable indicator. But let’s start with the sizzle.”
“Stock buybacks Don’t Really Matter” (Noahpinion). “[I]n practice, making repurchases more expensive likely won’t do much to increase hiring or wages. But there’s another reason lots of people want to tax or even ban buybacks; they think buybacks pump up the price of a company’s shares, giving an untaxed windfall to shareholders. Interestingly, this is also wrong; as I’ll explain, a stock buyback should have only a small effect on the price of the stock, and it’s not clear whether the effect will be positive or negative.”
