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‘Diverse perspectives lead to better decision making’: Ariel Investments’ John Rogers Jr. pushes corporate boards to have their own ‘Jackie Robinson moment’



Decades before John Rogers Jr. founded Ariel Investments, his dad gave him his first stock at age 12.

Rogers, 62, has been recreating that gift on a grand scale ever since, with a commitment to developing investment savvy, and wealth in the Black community.

It’s a sorely needed effort. Black households are almost twice as likely not to have any stock-market investments, according to a recent study. Ten percent of Black investors said their investments would fare worse than stock-market averages in the coming 12 months, nearly twice the level of pessimism displayed by white investors.

There’s a long, troubling history behind these investing imbalances, and Rogers knows it personally.

His great-grandfather, J.B. Stradford, owned a Tulsa hotel that was destroyed during the city’s 1921 race massacre. When Stradford fled to Chicago, his son’s legal skills blocked the businessman’s extradition to Tulsa and, he said, likely prevented a lynching. But things weren’t the same after that for Stradford, whose wealth and status were reduced to ashes.

Stradford’s story has deep meaning for Rogers, but he knows there are too many tales of a step forward for Black wealth followed by a step back. And that’s what brings Rogers, the chairman, co-CEO and chief investment officer of the $12 billion asset-management firm, back to financial literacy and economic justice.

Rogers, who also sits on the board of directors at McDonald’s

  and The New York Times Company
spoke to MarketWatch earlier this month to discuss his family history and what financial literacy can and can’t accomplish. He also discussed how boardroom “Jackie Robinson moments,” and rethinking retirement-savings policies and business nuts and bolts like supplier contracts, can narrow the wealth gap.

MarketWatch: From a wealth standpoint, what did it mean for your family when your great-grandfather’s business, the Stradford hotel, was destroyed nearly a century ago?

Rogers: It was heartbreaking, and my understanding is when he came to Chicago and tried to recreate his entrepreneurial success that he had in Tulsa, he just couldn’t quite get it done. So he was crushed, I think; psychologically crushed. Never able to have the status and the wealth that he had enjoyed in Tulsa. And I think it had a debilitating impact on our family.

Of course, there’s no opportunity to have multi-generational wealth, no opportunity to pass down wealth from one generation to another when you go through the kind of crisis that he had. And then with my father, my grandfather, my mom being lawyers back then, you couldn’t work for a big law firm downtown. You had to work for other African Americans.

‘My Black friends — even those that came from professional families, doctors, lawyers, what have you, academics — they had no knowledge of the market.’

My grandfather was very involved in the Lorraine Hansberry family case that fought the redlining that was going on here in the Chicago area. It went to the Supreme Court and he was able to use his legal skills there again to fight for economic justice and fairness when it came to the historic segregation that was here.

But we never were able to kind of create the wealth that traditional lawyers would have working for big law firms with big clients that could pay big legal fees.

MarketWatch: You started getting stocks at age 12. When your father bought that stock for you, how much of that was linked to what happened in Tulsa, and the idea of building up wealth and starting over?

Rogers: I think it could have been indirectly. My dad was a Tuskegee Airman. He met my mom in law school. He was Class of ’48 and I wasn’t born until 1958, 10 years later, so he had a lot of time to plan for me. At age 16, you’re going to have a summer job, and I became a vendor at Wrigley Field and Sox Park. You’re going to have a checking account at a certain age, savings account, etcetera.

But he always told the story that he was having a conversation with a white lawyer here in Chicago. They got into a conversation about the fact that African Americans were not invested in the stock market, and that was a problem. And this white gentleman told my father, “Well, in your community, you in the African-American community, you should know as much about the stock market as my 12-year-old son does, because I buy stocks for him every birthday and every Christmas.”

So my father vowed that when I got to be 12, I was going to have that same exposure to the stock market that the white gentleman’s son had. And so that was kind of the inspiration for him to put me through that process.

MarketWatch: As you’ve built Ariel Investments, financial literacy is just so much a part of the stated mission and culture. And, of course, there’s your own resume and career. Why is financial literacy so important to you?

Rogers: I’m really channeling my dad, because I found that as I started my career as a stockbroker at William Blair I quickly realized that my white friends that I had gone to high school with and college, they were always familiar with the markets. They became my early customers. Some of them had money from their bar mitzvah, money from their holidays. They learned about the markets from their parents, their grandparents. They were totally comfortable buying and selling.

My Black friends — even those that came from professional families, doctors, lawyers, what have you, academics — they had no knowledge of the market, and when they came to see me, I was sort of showing them something, and teaching them something they had no exposure to.

So I realized that when I got started in my career, I just felt a responsibility to take my dad’s values and try to do what I could to expose African Americans, particularly, to the stock market: Go and speak at churches in the Black community. Go and speak to students in lower school and middle school and high school; try to get interviewed in Black publications to talk to people about the importance of saving and investing, the magic of compound interest.

‘These private-equity firms and hedge funds and venture-capital firms have to start getting out of their comfort zone and stop only hiring people that look like them.’

I felt I should pay it forward by exposing as many people to the markets as possible because I just believe it’s a wonderful thing to be able to compound money as you lived your life and built your career.

MarketWatch: Too little financial literacy is a problem in many places. But why is it that especially so in the Black community?

Rogers: Whenever we got a step ahead, we got pulled back down: Jim Crow laws, historic discrimination that we faced, the lack of education in our communities — all those extraordinary challenges. We know that we were supposed to get 40 acres and a mule after the Civil War. And after Abraham Lincoln was assassinated, the new president wasn’t interested in that. We really went backwards every step of the way. Whenever we made progress, something would come back and pull us down again. So, because of the historical racism we faced in this country, we never had the chance to generate wealth. We never had a chance to build multigenerational wealth.

So you get comfortable in the markets if you have some money to invest in the markets, and you have parents, grandparents, aunts and uncles who had wealth and invested in the markets, and they can help pass along not only their inheritances, but their knowledge of the markets and understanding of the markets.

‘The volatility is going to be something that’s hard to live with, without people you can trust who can make you be comfortable and help you be comfortable.’

But when you have families who are living month to month and taking care of extended families because of the historical discrimination we face in this country, we’re just not going be comfortable in the markets. It’s a foreign concept. If you didn’t get comfortable with it at an early age and then all of a sudden start, if you begin to make a little bit of money, it’s a whole new thing that you’re not going to be naturally comfortable with. The volatility is going to be something that’s hard to live with, without people you can trust who can make you be comfortable and help you be comfortable.

And so inevitably what happens is, we found in research with Charles Schwab

  and others over the years, is that African Americans are much more comfortable investing in tangible real estate. Which, of course, is problematic if you live in a segregated city like Chicago — because you end up buying property and parts of the city that don’t grow and thrive, and you don’t have the same kind of wealth-creation vehicle for your real-estate investments.

But there’s a lot more comfort investing in real estate. Also, we’re comfortable investing in insurance products. This risk aversion that’s developed in our community shows up again in investing in real estate and insurance products.

MarketWatch: You mentioned segregation and redlining earlier. When we’re talking about narrowing the wealth gap, how much can a financially literate mind set accomplish when there are so many other external headwinds?

Rogers: You’re exactly right. Financial literacy can only do so much. We feel strongly that public schools should be teaching young people about the stock market and teaching them about investing. And we started the Ariel Community Academy over 25 years ago to help teach kids at this one public school in Chicago about the markets by giving them real money to invest in real stocks, the way that my dad did.

So financial literacy helps not only in kids learning at an early age about investing and savings, but they also learn about financial-services careers that can be so lucrative. And we think it prepares them to be better entrepreneurs if they get exposed to financial literacy at an early age, learning how to budget and all the things necessary to start a business.

‘So financial literacy helps not only in kids learning at an early age about investing and savings, but they also learn about financial-services careers.’

But I do think, when I talk to parents about how can you create wealth for your families. I tell them the most important thing is to get your child into the appropriate studies that will allow them to be qualified to work in the parts of the economy where the wealth and the jobs are being created today.

And most people in our community, because of the discrimination we face, we don’t know about hedge funds, we don’t know about private equity. We don’t know much about venture capital. We don’t know about the enormous wealth that is created by these parts of the economy that have just sort of sprung up. If we want to bring wealth to our communities, we have to get our young people exposed to the markets at an early age so they can get career paths that will lead them to the right places.

At the same time, these private-equity firms and hedge funds and venture-capital firms have to start getting out of their comfort zone and stop only hiring people that look like them and hiring from their own communities in our segregated society. We have to hold these institutions accountable.

Pension funds hire private-equity firms; family offices do, universities and hospitals and foundations do. If all those anchor institutions in our community told their private-equity managers and their hedge-fund managers and their venture-capital managers that they had to have staff that looked like America and they had to have leaders in those organizations that look like America, I guarantee you, they would find that talent once the customers asked and insisted on it.

MarketWatch: I want to hear more about the private sector, but first I want to hear more about the public sector: Are there any regulations or tax-code changes or laws that could be changed in order to help close the wealth gap?

Rogers: I was very fortunate during the Obama administration to chair his Council for Financial Capability for Young Americans, and one of the suggestions we gave the president at the end was that we would hope that the government would encourage financial institutions to partner with urban schools in the way that we have. The federal government can’t mandate it, but I think that would go a long way.

If all the major financial institutions in this country, small, mid-sized and large, did what we’ve done with the Ariel Community Academy, you would have a whole different story out there. It would be an amazing success story.

I think the second thing the government can do is follow what’s happening in Australia. Australia has the best kind of Social Security on steroids where they allow all citizens to create wealth and, over a long period of time, have money put aside for their retirement benefits.

[The government can] put tax incentives in place to bring back defined-benefit plans. Right now, all the regulatory and tax law incentivizes corporations — strongly incentivizes corporations — to get out of the pension-fund business, and replace it with the 401(k) business.

‘Right now, all the regulatory and tax law incentivizes corporations — strongly incentivizes corporations — to get out of the pension-fund business, and replace it with the 401(k) business.’

And that’s especially debilitating for Black and brown folks coming along, who are not as familiar with the markets. So they’re going to, of course, get into the 401(k) late and they’re going to get in and out, sell their securities at the wrong time. When the markets are panicking, they’re going to panic. They’re going to also be more likely to take hardship withdrawals or loans from their 401(k) plans. All those things conspire for people of color to be able to not have the kind of retirement they deserve.

It would be wonderful if the government could intervene backwards, and go back to the way it used to be, where the incentives for corporations were in line to have strong pension plans. It was meaningful and material and made all the difference.

I was on a call with [BlackRock

 chairman and CEO] Larry Fink. He’s talked a lot about this, and he was saying he didn’t understand why the press, why the presidential candidates, why congressional leadership wasn’t focused on this issue of the future of retirement income for Americans. And I made the point to Larry that it’s much worse for people of color. This is a crisis for everyone, but it’s a super crisis for folks of color.

MarketWatch: Now getting to the private sector, and boardrooms in specific. You’ve been on both sides: You sit on some boards and in Ariel Investments, you encourage boardrooms to become more diverse. Why do you do that and what have the results been?

Rogers: We can point to now over 45 instances where we have caused a corporation to have what we call a Jackie Robinson moment, and have their first diverse board member. So we’re really quite proud of that, from Sotheby’s

to Jones Lang LaSalle

When we talk to these companies, we tell them, “We’re one of your bigger shareholders, we believe in you, we think you’re going to be a great business. But if your management team and your board looks like a 1940s company, it’s hard for us to have confidence in you as an investment. We want a company that looks like a 21st-century company that cares about these issues but understands that if you search for diverse talent, you’re going to have a stronger team.”

‘if your management team and your board looks like a 1940s company, it’s hard for us to have confidence in you as an investment. We want a company that looks like a 21st-century company.’

There’s a lot of research that shows diverse perspectives lead to better decision making. And, of course, when you have diverse leadership you’re going to have better understanding of your diverse customer base. And that’s really, really important.

As the country gets more and more diverse, if you don’t do this well, you’re just going to get further and further and further behind. And your competitors that get it will race ahead of you because they are going to have better talent, deeper talent and better connections with their customer base.

I know sometimes people think we’re a pain in the ass, because we keep plugging them and plugging them, and pushing them and pushing them. But if a company doesn’t get it, then at some point we may have to decide we’re going to sell.

Under the leadership of our ESG team, we are going to be keeping track of this and then voting against directors a year out if they have not had that Jackie Robinson moment.

MarketWatch: To what extent can ESG [environmental, social and corporate governance] investing close the racial wealth gap?

Rogers: I always use the example of the University of Chicago, where I’ve been a long time trustee, close to 20 years. We were talking about the fact that at the time when Bob Zimmer became president and, at some point, realized I was the only Black trustee there out of 60 trustees.

We were having lunch or breakfast, and I said, “Bob, if every progressive institution like University of Chicago never works with minority-owned companies or asks the majority companies to have minority leaders in their relationship with the university, how do you expect us to create the wealth and stature to qualify to be on the board? He said, “Every once in a while, someone helps you think about a new way to solve a difficult problem. And so John’s done that for me.”

‘There’s a lot of research that shows diverse perspectives lead to better decision making. And, of course, when you have diverse leadership you’re going to have better understanding of your diverse customer base.’

There’s now over 95 companies that are doing business with the University of Chicago — professional services, financial services, technology, etcetera — that weren’t 11 years ago.

There’s some other institutions in town doing great work like that. Northern Trust
McDonald’s, Exelon

 have been absolutely fantastic.

But those are sort of the exceptions, really, that have really made a true commitment. I’m sure there are some others out there, and some others out there nationally. But too often, the economic opportunities are not open for people of color, even today. And, you know, as Dr. [Martin Luther] King said, many well-meaning white Americans deplore prejudice, but accept or ignore economic injustice.

And we continue to see that in our country today.

MarketWatch: What did the Paycheck Protection Program in the CARES Act and the money it distributed to Black-owned businesses show about the wealth gap, and race and business?

Rogers: It was much harder for Black and brown businesses to get access to that vitally needed capital in the heart of the pandemic.

We didn’t have the relationships with the banks. We just did not get the opportunities to save our businesses the way that the majority community did. So I think that’s part of this whole financial-literacy issue; it’s part of this whole relationship. Again, segregation, discrimination. Implicit, unconscious bias is still out there where people think that we’re not worthy of the loans and the opportunities that PPP brought forth.

‘It was much harder for Black and brown businesses to get access to that vitally needed capital in the heart of the pandemic. We didn’t have the relationships with the banks.’

The second thing that’s really important, and I think it’s not been talked enough about, is the disproportionate amount of Black and brown businesses that are in the parts of the economy where the pandemic hurt them the worst.

If you’re in construction and catering, janitorial services, low-margin businesses to start with, you’re out of business when the pandemic hits. If you’re in private equity, hedge funds, venture capital or lawyers, accountants — they’re able to work from home. Many are doing as well or better, financially, than before the pandemic hit.

And so, again, this historical discrimination of not allowing us in parts of the economy where wealth is being created, that exacerbated and magnified dramatically during this pandemic.

MarketWatch: In the wake of George Floyd’s killing, corporate America pledged a lot of money toward racial justice. How much of that is lip service and PR versus a genuine effort?

Rogers: I think there’s a lot of well-meaning corporations in this case that mean well and start with philanthropy. That’s important, and [Ariel Investments co-CEO and president] Mellody Hobson would say that’s important, but we can’t let that be the end-all and be-all. Because we dream of a day when African-American entrepreneurs can create their own philanthropy, not have to go to white America for all the support.

There’s a lot of pride that comes when we can support our own communities through our own wealth-building activities and our own leadership activities in things that we built, like what happened at Tulsa, where you had a strong Black business community and had strong Black churches, had strong Black philanthropy.

We need to get back to that. It’s a good thing they are doing this, but we can’t allow them to feel like they’ve checked that box; they’re really the good guys now because they’ve given more money this year to historically Black colleges or civil-rights organizations and community organizations.

‘There’s a lot of pride that comes when we can support our own communities through our own wealth-building activities and our own leadership activities in things that we built.’

That’s all good. I mean, that’s great. Most importantly, though, they’ve got to make sure they are hiring people within their own organization at the highest ranks, and they are bringing people of color into the C-suite, into leadership roles, and that they are spending money with minority businesses and minority entrepreneurs and minority business leaders so that we can, again, build our own wealth.

We need access to capital, but we need access to customers. So I always give the example of McDonald’s: Not only do they have over 200 Black-owned franchisees in this country — they’re all multi-millionaires, for the most part, real wealth — they also, over the years, have worked to establish many, many large suppliers to McDonald’s.

If you look at the Black Enterprise list of top 100 companies, when you drill down to the top 20 companies, five of the top Black-owned companies in the country are McDonald’s suppliers. If you have McDonald’s buying anything from croutons to ice-cream toppings to sausages from your business, you’re not going to have any problem getting capital from the banks to build and grow your business. That is the model we would hope that corporate America could follow.

MarketWatch: There’s just so much going in the world right now. How hopeful are you that the wealth gap will close, between improved financial literacy, government intervention, improved hiring practices in the private sector, all these things?

Rogers: I’m more optimistic than I was a year ago. I think it is the silver lining coming out of all this tragedy and the horrific murder of George Floyd and all the challenge we face: I’m finding that more company CEOs seem very sincere about working with Black-owned businesses and getting more Black leadership into their C-suites and into their boards. I’m seeing more non-profits, the anchor institutions in our community, more interested in doing the same thing.

I’m seeing more progressive politicians who understand business getting elected to Congress, getting elected to local offices. Maxine Waters (D., Calif.), chairman of the House Financial Services Committee, and Joyce Beatty (D. Ohio), chairman of the subcommittee on diversity and inclusion, they’re driving change to the institutions that they regulate and oversee.

So for those reasons, I’m optimistic. Corporations seem to be in a better place; business leadership seems to be in a better place. And they are getting pushed along by more progressive political leaders. I think we have hope that this can be something that can be a long-lasting change for our society.

This interview has been edited for style and length.

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‘Greed is rearing its ugly head and killing brotherly love’: My husband and his brother are at war over an inheritance from a beloved neighbor. What can we do?




Dear Quentin,

When my husband and his only (younger) brother were growing up, a childless neighbor was very kind to them and treated them as if they were her “nephews.” They even called her “Aunt Hilda.” They also treated her like family; my husband has visited her regularly over the years. But greed is rearing its ugly head and killing brotherly love.

When my husband was away in the army 30 years ago, Aunt Hilda gave a house and a piece of property to my husband’s brother when she decided to move to another state to care for her future mother-in-law, with the written legal condition that she had a lifelong ability to return and live in the house as well, should she want to or need to.

The brother decided he didn’t really like those terms, and after living in the house for a couple of years, used the “collateral” of the property to borrow money to buy a plot of land elsewhere and build another house. The “old” house has sat vacant for 20 years, but he does the minimum to keep it from disaster. She does not stay there because it is not maintained. He has stated that he doesn’t want to do anything that will encourage her to move back into the house.

‘At first, she discussed splitting her property 50/50, then she recalled that she had already given the brother the other house and land.’

Recently, the husband of Aunt Hilda died. She is 80, and decided that she wants to write a will to leave her money and property to my husband and his brother. At first, she discussed splitting her property 50/50, then she recalled that she had already given the brother the other house and land (current value is about $400,000, no small sum).

Now Aunt Hilda says since she has already given the younger brother the other house and the land, that should be taken into consideration. The brother is sending lengthy emails to my husband trying to convince him and Aunt Hilda that the previous “early inheritance” should not be taken into consideration “because it cost him so much trouble and work.”

It is of course up to Aunt Hilda how she wants to divide up the property, and whatever that is, everybody should respect her wishes. But if she asks the brothers how to do it fairly, what do you recommend? She is 80, but she might live another 15 years and any value assigned to the brother’s house today would likely change.

There is much more that could be added as to my brother-in law’s attempts to gain more than his brother, none of which reflects well on his character. My poor husband is heartsick over his brother’s greedy behavior, especially when he should be focusing on the welfare of Aunt Hilda — who just lost her husband — and grateful that she considers to leave them anything.

Should we intervene?

The Wife

Dear Wife,

Your brother-in-law is a lot of work and his inherited property is a lot of work. In that sense at least, as God made them, he matched them.

Your brother-in-law could be less self-centered and more compassionate, and it wouldn’t do any harm if he had one charitable bone in his body. But that is not who he is, and trying to wish him to be someone other than himself is an exhausting and ill-advised endeavor. Accept him for who and what he is, and you will both enjoy more peaceful nights as a result.

Remember, if one crazy person wants to have a fight with you, and you finally relent, there are two crazy people in that fight rather than one.

Your husband regards Aunt Hilda as a beloved relative and her estate as a gift, while his brother sees her estate as a lemon that can be squeezed time and again. What would I say to his brother? “The property required a lot of work over the years, and you have benefited from the property over the same amount of time. You chose to accept this inheritance early, and it has worked out very well for you.”

If he continued to make waves? I would feel compelled to tell him that it’s just plain unreasonable to constantly push for more. The love and care he lavished on his own property has been in direct proportion to the lack of care and duty bestowed upon Aunt Hilda’s home, and for all the years he enjoyed this property, she did not. You have to be prepared to stand up for what you believe is fair.

And remember, if one crazy person wants to have a fight with you, and you relent, there will be two crazy people in that fight rather than one. For that reason, advise Aunt Hilda to hire an estate attorney to draw up the papers fairly and squarely. Lawyers are paid well to deal with difficult personalities, and they have a duty to make sure their client’s wishes are upheld.

You can email The Moneyist with any financial and ethical questions related to coronavirus at

The Moneyist: ‘Warren Buffett and Harry Potter couldn’t get those two retired early’: Our spendthrift neighbors said our adviser was ‘lousy.’ So how come WE retired early?

Hello there, MarketWatchers. Check out the Moneyist private Facebook

 group where we look for answers to life’s thorniest money issues. Readers write in to me with all sorts of dilemmas. Post your questions, tell me what you want to know more about, or weigh in on the latest Moneyist columns.

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Opinion: Higher interest rates could mean more cash for seniors




Here’s a common complaint I hear from seniors all the time: Interest rates are so low that it’s impossible to earn enough cash to supplement Social Security.

“Certificates of deposit don’t earn anything,” writes MarketWatch reader Camille: “Until the mid-2000s, you could easily earn 4% on a certificate of deposit (CD). Today, your money does not earn anything, which penalizes small savers and seniors.”

She’s right. Based on rates as I write this, if you put $500 into a one-year CD, you’d get back about $502.76 in 12 months. Wow! Two whole dollars and 76 cents! Probably enough for a loaf of bread or a gallon of gas, but not much else.

Low interest rates are a double-edged sword. If you’re borrowing money, it’s obviously good, but if you’re trying to make a few bucks, no. And this isn’t likely to change in any significant way, given the Federal Reserve’s recent announcement that it plans to keep its key “Fed Funds” rate low until the economy and jobs market picks up steam.

Since things like money-market funds and certificates of deposits are tied to the Fed, that’s tough news for anyone hoping to squeeze more out of their savings.

Meantime, those paltry returns stand in contrast to things that keep shooting up, like the cost of healthcare. I recently reported that drug prices, for example, are rising much faster than inflation, and much faster than the cost-of-living adjustment that seniors typically get from Social Security.

This one-two punch—more money going out and less coming in—is punishing seniors, pushing many closer to, if not into, poverty.

The need to earn more has nudged some seniors into the stock market, which in and of itself isn’t necessarily bad; financial advisers typically say that given the possibility of decades in retirement, even seniors should have some exposure to equities. But with stocks at nosebleed levels—the price-to-earnings ratio on the S&P 500

 is up 80% from a year ago—caution abounds. As usual, I’ll emphasize that how much a retiree should have in stocks depends on factors like age, risk tolerance and so forth, and is best discussed with a trusted financial adviser.

It’s often tempting when rates are super low like now to put cash into things with fat dividends, but “you have to be very careful,” cautions Andrew Mies, chief investment officer of 6 Meridian, a Wichita, Kansas-based wealth management firm. “Saying I’m going to go buy a high dividend-paying stock or MLP (master limited partnership, an investment vehicle common in capital-intensive businesses, like the energy sector) were disasters in 2020. Buying high-dividend stocks was one of the worst performing strategies you could have had last year, and some MLPs were down 30-40%.”

In other words, what’s the use of buying something that pays a dividend of 8%, 9% or more—only to see the stock itself plunge by a third? One market strategist, the late Barton Biggs of Morgan Stanley, once said “More money has been lost reaching for yield than at the point of a gun,” and he was right. Echoing that is none other than Warren Buffett, who has called reaching for yield “stupid,” but “very human.”

So what to do?

Mies urges something that many people have trouble with: Patience. That’s because rates, all of a sudden, appear to be moving higher, and if you can wait a bit, you just might be able to find safer investments that yield more than you might be able to get now.

He’s right. As of Friday, the yield on the 10-year Treasury bond stood at 1.34%, hardly robust, but up from 1.15% for the week. Two things to remember here: When bond rates go up, bond prices go down; higher bond yields can also make stocks less attractive on a relative basis as well.

Mies thinks rates will continue to climb. “I think you’re going to have a chance in the next 12 months to put money to work at higher interest rates.” Buying or selling are choices, but so is doing nothing, so “I do think that not getting aggressive right now is probably the most prudent action.”

And after rates go high enough, he thinks municipal bonds could become more attractive, corporate bonds could, Treasurys could. “There will be pockets of opportunity that pop up.”

You may want to consider what have long been considered so-called “widow and orphan” stocks: utilities. “Utilities have been trading as if the 10-year (Treasury) is significantly higher than it is. That could be a spot worth dipping your toe in.” Possibilities to consider—preferably in consultation with your financial adviser—include the Standard & Poor’s Utilities Select Sector Fund

and iShares’ Global Utilities ETF
XLU currently yields 3.3%, while JXI yields 2.78%, certainly more than those measly rates found in CDs or money-market funds.

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Opinion: Few 401(k) participants changed portfolio allocation when market tanked




The rumor has been that 401(k) participants took little action when the stock market declined by more than 30% in February and March 2020. A Morningstar study provides some numbers to back up the lore.

The data come from a major record-keeper for defined-contribution plans. The starting point was snapshots for two dates: Dec. 31, 2019 and March 31, 2020. To be included in the analysis, the participant had to show up in both samples. That is, they had to be enrolled on or before Dec. 31, 2019 and still in the plan March 31, 2020. This construct ensures that observed changes reflect active decisions by participants as opposed to the sponsor replacing one fund with another. The final sample consisted of 635,116 participants across 509 plans.

The important finding is that only 5.6% of participants enrolled as of Dec. 31, 2019 changed their portfolio allocation during the first quarter of 2020. Participants who adjusted their portfolios changed their equity allocations. Most of these changes were relatively small, with an average equity reduction of about 10 percentage points. However, older participants who changed their accounts made larger changes than younger participants, particularly if they were invested more aggressively.

Much of the report goes on to look closely at the 5.6% who did move their money. For this exercise, the report identifies four types of participants: self-directing their accounts, using a target-date fund, defaulted into a managed account, and opted into a managed account. The pattern across participants shows that those with professionally managed solutions — target-date funds or managed accounts — were much less likely to change their allocation.

On balance, this report seems like good news. Buying high and selling low doesn’t end well.

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