REPOST: Emerging Markets Hang Tough During Global Selloff

Despite the recent global selloff, emerging markets are coping quite well. Global growth is on an upswing, which is generally a benefit for developing countries. More insights from The Wall Street Journal:

Attendees at a Tencent Holdings’s conference in Guangzhou, China. The near-term growth outlook for the developing world, including China, has improved. PHOTO: QILAI SHEN/BLOOMBERG NEWS

Wild price swings this week upended stocks and bonds around the globe, but some of the historically most volatile markets are holding up better-than-expected compared with past global selloffs.

Since U.S. markets reached a high on Jan. 26, the S&P 500 index is down 10.2%. Emerging-market stocks performed better during much of the recent selloff. The MSCI Emerging Markets Index is now down 8.6% since Jan. 26.

Bonds issued by companies and countries in the developing world started selling off last week, but by Wednesday the spread between emerging-market debt and U.S. Treasurys—or the extra yield investors receive for emerging markets—had narrowed back to levels in late January.

“It’s notable how restrained the negative reaction was this time,” said Sacha Tihanyi, senior emerging-market strategist at TD Securities in New York.

Unlike during some previous global selloffs, where a government default or currency devaluation in Asia, Eastern Europe or Latin America weighed on global markets, “this time the volatility is coming from U.S. markets,” said Katia Bouazza, co-head of global banking for Latin America at HSBC . “It’s not coming from some headline news in the emerging world.”

Investors also point to several positive factors that cushioned the blow. Global growth is on an upswing, a benefit for developing countries that export commodities or are manufacturing hubs.

Read full article HERE.

REPOST: Bill Gates utilizing public-private partnerships to help save planet

Stronger public-private partnerships can potentially speed up coordination in energy innovation and investment, helping both the developing world and developed countries establish more environment-friendly practices, products, and services. The full story on The Hill:

This week in Paris, we are witnessing an expanded effort by the private sector to shape new approaches to energy investment that could have important ramifications worldwide.

During the One Planet Summit, Microsoft Co-Founder Bill Gates, who lead the formation of Breakthrough Energy in 2015, announced a new public-private partnership to support more coordination in energy innovation and investment.

Gates also announced that the $1 billion Breakthrough Energy Ventures Fund, which counts him and Jeff Bezos as investors, will invest its “patient capital” in five potentially transformative technology areas. These are landmark announcements.

More innovation and collaboration between the public and private sectors can make a major impact in the energy field, which is a vital sector not only for the developing world, but also for the developed world.

The developing world still lacks important energy infrastructure, and in particular, often lacks access to reliable electricity. The developed world is looking to update its infrastructure to make it more efficient and environmentally friendly, as well as more resilient to changing climate.

Even for a developed country like the U.S., 2017 has been a painful reminder of how extreme weather events can destroy vital infrastructure and set back the economies of affected areas.

The Gates-led Breakthrough Energy Coalition announced it will expand to include major global investors like General Electric, Total and BNP Paribas, and these members will be involved in piloting public-private collaborations with five governments: Canada, the European Commission, France, Mexico and the U.K.

Through these partnerships, Breakthrough Energy Coalition says it will “help these governments review how innovations are developed in each country, help make policy and regulatory recommendations to attract early and mid-stage capital for those innovations, and match promising research with investors interested in commercializing the technology.”

This type of coordination between the public and private sectors is needed, because tightening budgets worldwide and growing deficits have put greater pressure on distributing scarce financial resources to answer various economic needs and demands.

Anemic economic growth, flatlined productivity and rapidly aging populations all suggest that there is no easy way out from under this increasing debt, unless we reconsider how we finance the various demands in an innovative way.

This initiative is important because it takes some of the burden off the public sector and, according to a U.S. Treasury Department paper, “when a public private partnership transfers risks to the private sector that it can manage more cost effectively, it creates value for taxpayers by lowering long-term project costs, improving the quality of services, or both.”

This pilot program on public-private partnerships could also be applied to various policies worldwide to improve the overall process. For example, the U.S. is expected to undertake a large infrastructure project next year.

Involving the private sector in certain aspects of the project at an early stage could leverage best practices, improve the process and help prevent the waste of the taxpayer dollars, as well as bring in private-sector dollars to help fund the project.

In addition to this new public-private initiative, Gates also announced the five initial focus areas of the $1 billion Breakthrough Energy Ventures Fund. The venture fund plans to invest in grid-scale storage, liquid fuels, micro/mini grids for Africa and India, alternative building materials and geothermal energy. The ultimate goal is to figure out an energy pathway to achieve an emission-free future.

Although not explicitly mentioned, the group’s initiative is an example of what many experts call “life cycle assessment.”

According to SETAC in Brussels, life cycle assessment is a “process to evaluate the environmental burdens associated with a product, process, or activity by identifying and quantifying energy and materials used and wastes released to the environment; to assess the impact of those energy and materials used and releases to the environment; and to identify and evaluate opportunities to affect environmental improvements.”

The group’s first investment criteria points to this by stating “only invest in technologies with the potential to reduce at least half a gigaton of greenhouse gases every year.”

The groups’ investment criteria highlight best practices that could decrease waste in the overall process and maximize efficiency. First, they have a clear target goal for selection of their projects: reduce greenhouse gases.

Because they cannot be the only financier of the venture, they state that they will only invest in companies that could ultimately attract additional investment. They also plan to weed out projects at an early stage through consultation with their technical experts so as to not waste valuable capital.

They see themselves as a complement to existing investment in clean-technology and plan to help with basic “portfolio optimization” by focusing on certain areas where they can add value through their global network.

Bill Gates made his mark early on by opening the door of personal computing to millions. His latest Breakthrough Energy initiatives could open the door of prosperity and a cleaner planet to billions and introduce a new way of doing business around the world.

REPOST: How to invest without losing money

Is it really possible to invest in something and not face the risk of losing money? This article on USA Today tries to explain how this may be attainable:

When it comes to returns, time is your friend.

When it comes to investing, realize that risk and reward tend to move in opposite directions. If you take more risks, you run a larger chance of losing your money, but you often have a higher upside.

It’s possible to invest without losing money. In the current market, where interest rates are very low, any investment guaranteed to not lose money will have a very small return.

For most people thinking about investing, the goal is to minimize the potential for losses while maximizing how much you might make. Exactly how you do that — and where you put your money — depends a lot on what type of investor you are, and what your goals are.

There is no one answer

A 67-year-old looking to live off his or her investments has different needs from a 22-year-old planning to work about 45 or so years. In addition, someone with a lot of excess income has different needs from someone struggling to make ends meet.

Whether you’re starting small, even with a few dollars each week, you’ll want to have a diverse portfolio. That means owning not only stocks, but also bonds, cash, and even alternatives such as shares in a real estate investment trust (REIT).

Even within your stock portfolio, you’ll want to diversify. That means owning shares of companies in multiple industries, as well as shares in operations of multiple sizes. By not having all your eggs in one basket, you give yourself protection against outside forces. For example, an event that hurts oil stocks — perhaps a breakthrough in electric-car technology — may benefit shares in parts of the technology sector.

How to be safe

The safest way to invest without losing money is buying cash equivalents. Money markets, Treasuries, certificates of deposit (CDs), and corporate bonds offer generally stable returns with very limited risk, and in some cases no risk at all. The problem is that safety comes with a price.

CDs, to examine one cash equivalent, constitute an agreement in which you give your money to a financial institution for a period of time in exchange for a set interest rate. Perhaps you will receive 2% for a 12-month CD and slightly more for longer periods. These are safe investments, but they also have no upside beyond whatever interest rate you’re being paid.

Continue reading HERE.

REPOST: How do I know what to invest in?

As a newbie investor, you may be easily overwhelmed (and confused) by the great diversity of investment options presented to you. In fact, getting insights from experts (or seeking help from professionals) may be necessary to avoid making big mistakes. But to get started, here is a simple guide from CNN Money to help you streamline the process and make things a bit less complicated:

You’re not the only one feeling overwhelmed by the tens of thousands of stocks, bonds, mutual funds and exchange-traded funds out there.

A lot of young people who are new to the investing game feel so intimidated by all the choices, that they shy away from investing altogether. But avoiding your 401(k), or keeping all your money in a savings account can cost you in the long run.

Just by following a few simple steps, you’ll be earning returns like the pros (or better).

Step 1. Start with retirement accounts

Your company 401(k) plan is a good entry point. Financial planners advise you stash away at least 10% of every paycheck for retirement.

It may not sound like a lot, but the magic of compounding will surprise you.

“If a young professional, say she is 25, earns $50,000 per year, saves $5,000 each year, and places this money into her company’s 401(k) balanced mutual fund or even an ETF, which earns 8% annually on average; she could end up with $1.3 million in retirement assets,” said John Barnes, a certified financial planner with Barnes Financial.

That number assumes no company matches, additional contributions or salary increases.

But in reality, you’ll probably earn more money over the course of your life.

A better strategy is to slowly increase your contributions over time as you get raises, until you reach the legal maximum — currently $18,000 a year.

After that, you can invest any additional money in an IRA or a taxable mutual fund account.

 

Step 2. Figure out how comfortable you are with risk

Generally speaking, the younger you are, the more risk you can afford to take on.

The stock market can be volatile, but young people have a unique opportunity to take on risk because they have plenty of time to recover from market setbacks before retirement. So it’s pretty common for people under age 30 to have 90% or even 100% of their savings in the stock market, said Pearce Landry-Wegener, a wealth management advisor at the Summit Place Financial Advisors.

But asset allocation — or how you divide up your money between stocks, bonds, cash or other investments — is a completely personal choice.

If you’re not all that comfortable with risk or need money in the next few years, invest a larger chunk of your money in safer assets like bonds.

 

Step 3. Diversify, but keep it simple

So you know you want, say, 90% stocks and 10% bonds. Now what?

You can offset some of the stock market’s risk by spreading your money around in a variety of different investments.

For newbies with a limited amount of money, investing in mutual funds or exchange-traded funds (ETFs) is the way to go. ETFs and mutual funds are securities that track a basket of stocks, bonds, commodities and indexes — like the S&P 500 index, for instance. With just one fund, you’re investing in a variety of different underlying investments.

And you don’t need many funds to be diversified.

Mychal Eagleson, president of An Exceptional Life Financial, recommends a portfolio with just three funds: a total U.S. stock fund, and total international stock fund, and a total bond market fund.

In some cases, just one fund is enough.

For instance, some retirement accounts offer target-date mutual funds. Rather than selecting different funds to create the right mix of stocks and bonds yourself, a target-date fund will do it for you.

Pick one target-date fund around the time you plan to retire. The investment mix will change over time, transitioning into more conservative assets as you get closer to retirement.

“Set it and forget it! And don’t try to get sexy with your money,” said Randy Bruns, a certified financial planner with HighPoint Planning Partners. “Time in the market, not timing the market, is how you’ll become a multi-millionaire.”

 

Step 4. Keep fees as low as possible

When choosing what to invest in, don’t forget to look at the fees each fund charges.

It’s important to select funds with low fees to get the biggest bang for your buck, because the charges can eat away at your returns over the years.

Look for funds that are cheaper than average. The average ETF expense ratio (aka fee) is 0.24%, and the average for target-date funds is 0.71%, according to Morningstar.

“You can’t control what the market as a whole does,” Landry-Wedener said. “What you can control is how much of your return is taken away in fees.”