The tickets are going fast.

Must be a rock star in the house. Though not demanding bowls brimming exclusively with red M&Ms, of late, model portfolios have become all that and more, at least as far as some financial professionals are concerned, according to tifin.com

And, hey, they’re onto something. Besides salting away mucho time for investors, giving them all the opportunity to serve more clients with stepped up efficiency, they also play a pivotal role in their ability to ensure investment strategies remain on track throughout the client bases. What’s more, they make sure overexposure to any particular investment or asset class doesn’t burgeon into an issue.

Target risk models are a staple among a plethora of model portfolio types. Among several attributes, they’re designed to align with the goals of investors, who have specific risk tolerances. The range stretches from conservative to aggressive.

So, how popular are they? As of March of last year, assets following model portfolios hardly sat on their hands; they parachuted to $$349 billion, according to Morningstar, reported smartasset.com. That’s an approximately 22% bounce between June 30, 2021, and March 31, 2022.

Even at his advanced age, Warren Buffett continues to make prescient moves. The most recent example includes loading up on energy stocks just prior to the sector’s incredible gains in 2020 and 2021. While prices have receded amid concerns that a recession is near, Buffett is using the weakness to increase his exposure to the sector.

However, his most aggressive bet in the sector is on Occidental Petroleum of which Berkshire owns 222 million shares which is equivalent to nearly 25% of the company’s market cap. While Occidental is an integrated operator, the bulk of its revenues are from drilling which means that it’s sensitive to swings in the price of crude oil.

Based on his public comments, Buffett sees the energy supply chain as being constrained given a lack of capital expenditures over the last decade, Russia’s invasion of Ukraine, and changes wrought by increased electrification. At the same time, global demand for oil continues to increase, leading to a tighter equilibrium between supply and demand. 

In addition to his Occidental investment, Buffett also has a $22 billion stake in Chevron. Additionally, Berkshire Energy contributes $25 billion of revenue to its parent company and is composed of power generation and distribution companies like pipelines, renewables, and utilities.

Finsum: Energy has delivered poor returns in 2023 amid increased supply and growing recession fears. However, Warren Buffett continues to increase his exposure to the sector.

Client turnover and attrition is a reality for every financial advisor. In order to combat this entropy, advisors need to have a marketing plan, generate leads, and build a pipeline of prospects. For many advisors, this is something they don’t enjoy as they get into the business because they enjoy analyzing investments and servicing clients. 

However, this type of discipline is necessary to ensure that your firm keeps growing. In an article for Nasdaq.com, Luke Acree, the President and founder of ReminderMedia, discusses some ways that financial advisors can generate leads which is the first step in growing a practice. 

The simplest step is to ensure that you are providing proper and full attention to existing clients. A good idea before embarking on a growth plan is to ensure that your current clients are satisfied. This also increases the chances of getting a referral which tend to be the highest-quality leads. 

Building on online presence is a strategy that will pay off in the long-term. In the short-term, there is little return for your efforts, but it’s increasingly how younger generations will find you and make decisions. Ensure that your profiles are professional while displaying your personality and unique offering. 

Finsum: High-quality leads are integral for any financial advisor practice to grow. Here are some suggestions on how advisors can ensure a steady stream of leads to help build their pipeline of prospects. 

In an article for MarketWatch, Mark Hulbert discusses the collapse of the volatility index (VIX) over the last couple of months, and why it could be a harbinger of a sustained stock market rally according to historical data. 

According to Hulbert when the VIX reaches a fresh, 3-year low, it’s likely to remain low for a couple more months which implies further gains for equities. However, this view is contrary to the consensus expectations on Wall Street which see further erosion in the economic outlook, causing the economy to stumble into a recession. This perspective sees the low Vix as a sign of complacency rather than a ‘continuation’ signal.

Hulbert points to history. Since 1990, the best performing months from a risk and return perspective, have come with low VIX readings. Based on this data, investors should increase equity allocations as the volatility index declines and reduce it as it rises.

Another benefit of this strategy is that it dampens the impact of volatility on the portfolio which increases the odds that investors will stick to their investment plan and not let the market’s twists and turns shake them out of their holdings. 

Finsum: Many on Wall Street see the plunge in the volatility index as a contrarian signal, implying complacency. Mark Hulbert disagrees and sees it as the start of a sustained rally.

In an article for SeekingAlpha, Armada ETF Advisors make the case for why public real estate is due to outperform vs private real estate given the gap in valuations. Over the last couple of years, the combination of the Fed’s rate hiking campaign and weakness in segments of the real estate market like commercial real estate have led to major drawdowns for publicly traded REITs. 

In contrast, private real estate has fared much better. According to Armada, these types of wide differentials in performance have been reliable indicators of mean reversion, historically. In addition to favorable valuations, the firm also believes that the headwind of higher rates is about to recede given trends in inflation and budding signs that a recession is imminent.

Over the last 2 decades, there have been 8 instances when REITs underperformed by more than 10%. Each instance was followed by a period of strong REIT performance in absolute and relative terms. 

It’s also a rare opportunity for investors to acquire high-quality real estate assets at cheaper prices than what is available in private markets. Typically, the situation is inverted given the greater liquidity of publicly traded REITs. 

Finsum: Private real estate has outperformed public real estate by a significant amount over the past year. But, it could be an indication that a major mean reversion is imminent.