A rate hike will change your portfolio more than you think

unnamedPeople can’t be sure that any of their investments will be profitable. That’s why they are advised to have diversified portfolios: hopefully, they can compensate for losses on some investments with gains on others. If all their eggs are in one basket they can’t offset a loss when that bet goes wrong.

To put together a diversified portfolio, investors need to find assets that don’t move together – some that go up when others go down. But what if they can’t find any?

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Bad apples: Senator Warren attacks annuity sales incentives

InvestmentNews.com reports that perks distract annuity salespeople from focusing on what’s best for their clients. This is in line with recent and not-so-recent criticism of annuities as hopelessly complicated investment products that often benefit brokers and insurance companies more than investors:

“Vacations at luxury resorts, golf outings, tickets to sporting events and other incentives have led to inappropriate sales of annuities, Sen. Elizabeth Warren, D-Mass., claimed in a study released Tuesday.

“In a survey of 15 firms, Ms. Warren’s staff found 13 offered non-cash inducements to their agents to sell their annuities, which guarantee income but often are complicated, are known for having high fees, and can tie up large chunks of a client’s money.

“Disclosure requirements surrounding the perks are inadequate and usually buried in lengthy prospectuses, leaving investors vulnerable to sales professionals who are trying to win an award rather than find the best investment products for their clients, according to the report.”

Read the entire InvestmentNews article here.

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As we were saying – “Fed should wait with liftoff to see firm inflation signs: IMF note” [Reuters]

“The U.S. Federal Reserve should wait to see firm signs of rising inflation as well as a stronger labor market before hiking benchmark interest rates, an International Monetary Fund paper said on Thursday.” (November 12, 2015)

This is according to Reuters, and agrees broadly with our October newsletter, “Low inflation should keep the Fed on hold.” (October 27, 2015). Inflation remains low, and yet the market seems convinced that the Fed will hike rates soon, and Fed officials seem poised to do just that. We remain unconvinced that this is the right move.

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