Wealth Management
Portfolio construction is crucial for any investor, whether a beginner or experienced, as it helps balance risk and maximize returns. The key is to ensure each investment serves a specific purpose within the portfolio, rather than just collecting assets.
Diversification, or spreading investments across different asset types, reduces risk by balancing higher-risk stocks with safer options like bonds. ETFs, particularly passive ones, offer a simple and cost-effective way to achieve diversification, providing exposure to a wide range of assets.
Understanding your risk tolerance is vital, as it influences your portfolio's composition. Lastly, keeping long-term goals in mind is essential for managing both risk and return.
Finsum: Advisors could really benefit by integrating basic portfolio metrics into their calculations, such as Sharpe and Sortino ratios.
Apollo Global Management secured $5 billion in funding from BNP Paribas as part of a move to expand its asset-backed lending business, traditionally dominated by banks. BNP’s commitment, which may increase over time, will support deals initiated by Apollo and its Atlas SP unit, which was acquired from Credit Suisse.
Apollo aims to grow its credit business significantly, with plans to generate $200 to $250 billion in annual volume through its origination platforms within five years. The partnership reflects the growing presence of private credit in financial markets, where asset-backed lending has become more attractive due to its potential for higher returns.
This funding boost adds to previous investments from the Abu Dhabi Investment Authority and MassMutual, further solidifying Apollo’s influence in private credit.
Finsum: We’ll see how the relative attractiveness of private credit plays out given interest rates might be falling.
As the end of the year approaches, investors should focus on capital gains management and explore tax-smart strategies in nonqualified accounts. Active trading can significantly impact capital gains liability and improve after-tax performance.
Moving investments into exchange-traded funds (ETFs) may offer a tax-efficient solution, with active ETFs presenting a strong option during tax loss harvesting. ETFs have been more tax-efficient than mutual funds due to their unique structure, minimizing capital gains distributions.
Additionally, actively managed ETFs typically have lower operational costs than mutual funds, providing a more cost-effective investment option. This makes them appealing to investors looking for both performance and tax efficiency as they assess their portfolios.
Finsum: It will be critical with some potential rallies coming on for investors to maximize their tax efficiency and take advantage of the volatility in sectors of the market.
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The ongoing unwinding of yen carry trades could lead to more turbulence in the markets this month, warns Kathy Lien of BK Asset Management. As U.S. yields drop and the dollar weakens, the yen is expected to gain strength, potentially triggering sell-offs similar to those seen in August.
The practice of carry trading, where investors borrow in low-yielding currencies like the yen to invest in higher-return assets, is facing disruption due to Japan’s recent interest rate increases. Lien suggests that if stock markets experience significant downturns, the yen's value could continue to rise, reversing its longstanding undervaluation.
This shift may impact asset prices globally in the coming years, with additional volatility likely as the U.S. economy faces growing pressures. September, often volatile for stocks, could see more dramatic market moves.
Finsum: This is one of the most important currency stories to watch in the coming weeks as rate cuts look to be very aggressive.
RNMKRS, a company based in Larchmont, New York, leverages artificial intelligence (AI) to enhance sales training. By creating an AI persona called Alex, the system simulates customer interactions and provides feedback to sales representatives, helping them improve their communication and selling skills.
Since its inception, RNMKRS has trained around 30,000 sales professionals from over 100 companies. Co-founded by Stefanie Boyer, a marketing professor at Bryant University, the platform is grounded in her extensive research on learning science and sales performance.
The AI-driven system has role-played over 500,000 conversations, refining its ability to give consistent, data-backed feedback. Boyer believes AI has the potential to transform human-to-human communication by offering non-judgmental, constructive criticism.
Finsum: Advisors really need to utilize the full capabilities of artificial intelligence to grow and expand their business, and sales training could be a very valuable addition.
Gold prices retreated slightly after hitting a record high in response to the Federal Reserve's half-point interest rate cut. Spot gold fell 0.4% to $2,560.29 per ounce after briefly reaching $2,592.39 earlier in the day, while U.S. gold futures closed up 0.2%.
The Fed's decision to lower rates, which is expected to continue into next year, has pushed gold prices higher due to its reduced opportunity cost compared to interest-bearing assets. As bond yields rise and the dollar weakens, the demand for gold strengthens. Investors are awaiting further insights from Fed Chair Jerome Powell on the future direction of monetary policy.
Meanwhile, with inflation still elevated, many are turning to gold as a hedge against eroding purchasing power. Silver prices rose 0.6%, while platinum remained steady, and palladium dropped 3.2%.
Finsum: Gold could be an important hedge if inflation comes back from the grave with interest rates quickly falling.