Simple, but Not Easy

While host Drew Carter is on sabbatical, producer Sammie Spector guest hosts a two-part series on top reading recommendations from Morningstar employees. Guests include Christine Benz as well as portfolio managers, sales directors, and behavioral scientists, to provide a variety of reading material ranging from investment self-service books, to environmental sustainability, as well as one 'picture book' and perhaps the only investment principles book in the fiction genre. Hosted by Simplecast, an AdsWizz company. See https://pcm.adswizz.com for information about our collection and use of personal data for advertising.

When you save and invest, most likely your biggest financial goal is retirement, a topic that can be daunting or even frightening on both a personal level and on a macro level. Host Drew Carter discusses the state of retirement with David Blanchett, head of retirement research at Morningstar Investment Management, who has called retirement the "largest purchase most Americans will ever make." Today's discussion revolves around the "right" age to retire, online savings and management tools, retiring earlier than planned, and how far off people tend to be when planning for retirement, as well as if there is in fact a retirement crisis. Hosted by Simplecast, an AdsWizz company. See https://pcm.adswizz.com for information about our collection and use of personal data for advertising.

Today's episode explores what the role of financial advisors really entails. When you think about, did the role of 'behavioral coach' cross your mind? Guest Ryan Murphy, Ph.D., head of decision sciences at Morningstar, Inc. thinks it should. Host Drew Carter and Ryan Murphy discuss the responsibilities, such as behavioral coaching, that may be central to an advisor’s role, perhaps even more important than some traditional roles, like, say, building investment portfolios. Hosted by Simplecast, an AdsWizz company. See https://pcm.adswizz.com for information about our collection and use of personal data for advertising.

Millennials. Has a generation ever attracted so much attention from—or created so much angst within—the financial services industry? If you Google “Millennials and financial advisors” or “Millennials and investing,” you’ll find a dizzying array of surveys and published opinion pieces on the topic. And for good reason—Millennials and those that will come after them represent the future of investing and financial advice. Host Drew Carter decides to leave the surveys and data behind, and focus some interviews on real… live… Millennials, here in the studio to talk about investing and financial advice. Drew Carter asks our 4 millennials in the studio about their investing habits, their opinions on working with a financial advisor--and what specific types of financial advice they're looking for, and their approach to savings. Hosted by Simplecast, an AdsWizz company. See https://pcm.adswizz.com for information about our collection and use of personal data for advertising.

Like all investments, MLPs have risks investors should consider before making an investment decision. Those risks include governance features that can favor management over other investors, potential conflicts of interest, and concentrated exposure to a single industry or commodity. Since most MLPs are clustered in the energy sector, they can therefore be sensitive to shifts in oil and gas prices. There may be advantages and disadvantages associated with MLPs including, but not limited to, MLPs’ net income being passed through to the investor, which is then taxed at the investor’s individual tax rate and certain distributions being deemed as return of capital. Morningstar and its affiliates, including Morningstar Investment Management do not provide tax advice. Individuals should consult with their Financial Adviser and/or tax professional about this and other tax issues relating to their accounts Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

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Developed equity markets outside the U.S. have struggled mightily for about a decade since the global financial crisis. Individually, these markets have their unique struggles, whether it’s Brexit in the U.K. or sustained economic growth and profitability in Japan. So, why would anyone want to invest in these markets, let alone prefer them to the U.S. market? Portfolio manager Gareth Lyons, who covers equity markets outside the U.S., discusses his views with host Drew Carter. Hosted by Simplecast, an AdsWizz company. See https://pcm.adswizz.com for information about our collection and use of personal data for advertising.

The U.S. Treasury market has seen a stunning turnaround in about six months. The Federal Open Market Committee voted to continue to raise rates last December, despite the ongoing stock-market rout. Shortly into the new year, the Fed changed its tune. Stocks rallied, but so did Treasuries, pushing the yield on 10-year notes down to nearly 2%. The fact is, we don't really know why this has happened. Assumptions of rate cuts, the possible end of the economic cycle (read: a pending recession), and even actions of bond vigilantes might be at play. Regardless of the cause, the yield curve has come down and is now inverted, with very short-term and long-term rates appearing like shoulders on the curve above an intermediate-term "belly." This belly is where yields have fallen most. So, as valuation-driven investors, we have naturally asked ourselves whether yields have fallen too much—in other words, do these prices call for trimming exposure to these assets? We'd previously looked at our Treasury exposure as a sort of barbell approach, with short-term bills offering strong yields and less duration—or interest rate risk exposure—which might lessen the damage of rising rates. On the other end of the barbell were long-term bonds. These bonds weren't attractively priced, necessarily, but were decently attractive to us relative to government debt from other countries, as well as in light of their potential portfolio protection in a downturn (recessionary environment or a crashing stock market). After prices of Treasuries across the curve were bid even higher, we expected to find them less appealing, especially in that belly area. But, as contrarians, we want to challenge predictable conclusions. Also, as a reminder, we don’t know what's next for bond markets—if a recession is at hand, yields could possibly go even lower, but if this is an overreaction by the market, they may bounce back quickly. Those were our two central scenarios when thinking about this probabilistically—that is, the most likely outcomes that we might try to assign probability weightings to. From there, we built a model to test how different portfolios might respond in different environments, which is known as scenario testing. Our test results may seem surprising: The middle of the curve now looks most attractive. Certainly, long-term bonds appear to offer the widest range of potential outcomes—positive or negative—but the likelihood of a meaningful positive outcome is low. The positive skew only points to overweighting long-term bonds under relatively high probabilities of the more extreme downturn, in which we might expect the long end of the yield curve to move to, or below, its lowest point since 1993. Otherwise the balance is less attractive. Short-term bonds appear exposed to very little downside risk, but also don't offer much upside in the event that yields continue downward. The belly, which we'd previously avoided, may be the sweet spot for Treasury exposure now, with Treasuries of between three and seven years to maturity offering what we believe to be the best trade-off of potential rewards and potential risks in a highly uncertain environment. The key here is that if we did move into a recession, we could expect the Fed (as one of the only central banks globally that has managed to raise rates) to cut the fed funds rates aggressively. Unless a recession is severe enough to affect expectations for long-term growth and pull long-term bonds materially lower, the middle of the curve has enough duration to benefit from the steepening that would likely occur as the Fed unpinned the short end by cutting rates toward zero, but not enough to greatly offset its income if we saw a more positive economic outcome where rates actually reverted toward previous higher levels. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

The market for initial public offerings, or IPOs, in the U.S. is hot, with household names like Lyft, Uber, and Pinterest coming to the public markets with a lot of media coverage and interest from investors. But many of these so-called unicorns who’ve achieved $1 billion valuations before they’ve gone public have never turned a profit. So, how can investors tell if these IPOs are potentially worth investing in? Host Drew Carter speaks with Ali Mogharabi, senior equity analyst at Morningstar Research Services, about the history of the IPO market, internet bubble, and 'tech unicorns.' Then, we learn from John Owens, senior portfolio manager at Morningstar Investment Management, about the caution taken when approaching 134 firms that went public last year. Recorded on: May 14, 2019 Hosted by Simplecast, an AdsWizz company. See https://pcm.adswizz.com for information about our collection and use of personal data for advertising.

Now that we've been given a great background on sustainable investing, Drew Carter turns our attention to how advisors and investors might go about investing in a sustainable way. Recorded on: April 5, 2019 Hosted by Simplecast, an AdsWizz company. See https://pcm.adswizz.com for information about our collection and use of personal data for advertising.