1 Please refer to "Markets Are Cyclical: Your Success Should Not Be".
Passive fixed income investments offer lower fees than active products but pose unique challenges. Active managers address these challenges through security selection, active sector allocation, deliberate positioning on yield curves, managing portfolio duration and tactical buy/sell decisions. Investors should understand the following about passive fixed-income:
Passive products that reflect indices such as the Bloomberg Barclays U.S. Aggregate Bond Index are subjecting investors simultaneously to both low yields and elevated risk should rates increase.
Source: Bloomberg, Factset. As of December 31, 2016. Duration is a measure of the sensitivity of the price of a fixed-income investment to a change in interest rates. Duration is expressed as a number of years. The yield to worst (YTW) is the lowest potential yield that can be received on a bond without the issuer actually defaulting. Past performance is no guarantee of future results.
Six years of underperformance by international equity relative to domestic equity may have led some investors to minimize rebalancing, resulting in a significant international equity underweight today. Is now the time to rebalance? Investors should consider that U.S. and international equities have historically performed in cycles:
1 Source: MSCI, Dow Jones, FactSet as of December 31, 2016.
2 Source: MSCI, Standard and Poor’s Corporation, FactSet as of December 31, 2016. Based on 30-years of rolling 5-year annualized performance of the MSCI ACWI ex USA and S&P 500 Indices. Past performance is no guarantee of future results.
Dividend-paying stocks have accounted for a large proportion of the S&P Index’s total return since the early 1970s. Also, as the U.S. population ages, an increasing number of retirees seek to invest in financially strong companies offering the potential for income and growth. Dividend-paying stocks have benefited from:
1 Source: Ned Davis Research Inc. as of December 31, 2016.
Source: Factset, as of December 31, 2016. Indices are unmanaged, are not available for investment and do not incur expenses. The returns shown do not represent or predict the performance of any fund or other specific investment product. There are no guarantees a company will pay or continue to increase its dividend. Past performance is no guarantee of future results.