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Video Update: U.S. Treasury Bond Yields Continue to Fall

To everyone’s surprise, so far this year, interest rates remain low and U.S. Treasury Bond yields continue to fall. Right now we are going into a seasonally weak period in the stock market – September is traditionally a weak month for stocks. We think that people are seeking safe havens in bonds, creating higher prices and lower yields. We are working under the impression that the U.S. stock market correction is not over, and we think that investors should be prepared for that as well.

In this video, Doug has charts and facts to share about what is happening in U.S. stocks and bonds, as well as detailed information about the international economy. Watch here for complete details.

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Is Downside Risk Over?

There is a lot of confidence in the world about central banks and the policies of Quantitative Easing and the financial markets. This creates false complacency and a lack of concern about downside risk.

Corrections of 10% is typically annual and normal in the financial markets – but we are currently three years from any 10% correction! This is incredible, and people have been lulled to sleep by the Federal Reserve’s meddling and the seemingly low risk environment we’re in right now. Many people feel that central banks will keep the markets on the straight and narrow and help us to avoid any significant correction.

Of course, when you think about it, this is ridiculous. Despite Federal Reserve and other central bank action, we still have to worry about recessions, business cycles and everything else that investors always have to worry about. There are always those X factors which we need to keep in mind and avoid being surprised by, despite the optimism and complacency that often surrounds us.

There is risk in the markets. We will have another Bear market someday and you need to be prepared for that. We encourage you to “stress test” your portfolio and prepare yourself for upcoming risk. You need to know how much risk you are prepared to experience and what you will do if it starts to appear on the horizon. If you need help making those decisions or you just need a fresh perspective on your portfolio, call our offices today for a complimentary, one-on-one consultation with Doug. Call 800-391-1118 today and we will help you make the right choices for your portfolio and prepare you for the very real possibility of risk in the markets.

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Narrow Your Universe

Doug is working on a presentation called “The Five Secrets of Success in ETF Investing” for the San Francisco Money Show coming up next week. Today we’ll share one of Doug’s secrets, which is:

Narrow Your Universe

No one can keep track of 1500 investment vehicles, and trying to do so muddies your goals and makes action more difficult. Knowing your investment objectives can change what you need to look for and invest in, and we think that looking within a narrow universe that is specifically tailored to your goals and needs is vital to your investing success.

Right now, Doug is focused on China, Precious Metals, Emerging Markets, High-Income and Multi-Asset ETFs. If you are interested in any of these areas or growing your portfolio that way, keep reading the blog and listening to the podcast for details on these sectors in the weeks to come.

Remember that you can access the full ETF report for free anytime here. Download it today!

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Falling Interest Rates

Don’t forget to download the new ETF Snapshot here! This month we are focusing on China, and we think this is valuable information for any investor.

Next week, Doug will be at the San Francisco Money Show. If you are interested in hearing his presentations there, check out the Money Show website here, and also consider subscribing to our newsletter for more information.

The banking sector is under-performing right now, because interest rates are falling. Higher interest rates help banks to be more profitable. Lower interest rates are an indication that growth is not happening in major economies. We are seeing problems in Europe, but good performance in the bond market – which is an indication that our recent correction in stocks has further to go. Areas that are performing well are: Bonds, China and the emerging markets and large-cap and dividend stocks in the U.S. markets. Stress points in the financial markets are: high-yield bonds, Europe, treasury yields and small-cap stocks.

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The ETF Revolution

As a reminder of why we like ETFs so much, consider the following positives. Here are our top five reasons why you should invest using ETFs:

  1. Cost. Investors know that ETFs are cheap. The average cost is an expense ratio of just 0.33%, which is well below the average cost of a mutual fund. Over the course of your lifetime you will save thousands of dollars in management fees by using ETFs vs. mutual funds.
  2. Ease. ETFs are really easy to invest in. It is easy to buy and easy to sell once you know how. Granted, there is a knowledge gap when it comes to buying and selling specific ETFs, but once we show you how you’ll find extremely easy to do.
  3. Simplicity. ETFs are a simple concept. They are index-based. Most investors understand the concept of an index fund. Index investing is both wildly successful and popular, and it’s also much more transparent than mutual fund investing.
  4. Choice. Today there are over 1500 ETF choices. Of course, choice can be a blessing and a cruse. However, with a little knowledge choice becomes a very big advantage.
  5. Access. Access is about more then choices, it’s about being able to invest in places that are not available to mutual fund investors. Some examples would be single country ETFs, or commodities ETFs.

If you have questions about how to use ETFs in your portfolio, email Doug personally with your questions at askdoug(at)dougfabian(dot)com.

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International Market News

Everybody knows there’s some volatility in global events at this time – watch the news for even a few minutes and you can see that. But, from a financial standpoint, we believe that stocks in the emerging markets will continue to outperform the U.S. market for the forseeable future. Right now, we are in a correction mode in the U.S. and we think that this will continue. August is traditionally a tough month for the markets and we don’t see a lot of reasons for the domestic markets to push to new highs. Europe also is not doing very well, and we do not advise exposure to Europe right now.

If you don’t have money in the emerging markets, that is the area that we believe will be growing and presenting opportunities internationally for investors right now. Look at your portfolio – watch for growth and weakness, and keep an eye on those emerging markets, since they are continuing to do well for our investors.

If you want to re-examine your international exposure and make sure that you have the right allocations in the right areas of the world, please call our offices at 800-391-1118 to schedule a complimentary consultation.

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Video Update: Positives in the Emerging Markets

While we are seeing some stress in the domestic U.S. markets, emerging markets are still doing well. We believe that we are coming into a bull market season in Asia right now, and we encourage investors to be alert to opportunities there.

While August is traditionally a slow month in the financial markets, we are seeing some great opportunities in the emerging markets, particularly in China and the rest of Asia. For more information on investing in China through Exchange Traded Funds, please check out our August ETF Snapshot here.

For more complete details on this topic, please watch the full video update here.

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New ETF Snapshot: Top China ETFs

For August, we have highlighted China in our Exchange Traded Fund Snapshot (download it here). The month of July proved to be a real breakout month for Chinese stocks, with the Shanghai Stock Exchange Composite Index surging nearly 7.5%. That’s outstanding on its own, but it is particularly telling considering the S&P 500 sank 1.51% in July.

There currently are more than 30 ETFs that give you exposure to various sub-segments of the Chinese market. This month, we show you the largest China-based ETFs by assets. When choosing an investment vehicle, one important and unique factor to Chinese equities is deciding between ETF exposure to “A-shares” or H-shares. Before the ETF revolution, A-shares were basically available only to domestic Chinese investors. Now, however, both the A-shares and H-shares are available to “foreigners”.

While both types of equities have their particular advantages and disadvantages, the most important thing is to get in on China soon.

Why Consider China?

Investors should consider China-focused ETFs because of valuation, correlation, and technicals.

Valuation:
The most widely followed and liquid A-shares have an average price-to-earnings ratio of about 10. This compares favorably to the S&P 500’s P/E of 18. Even the MSCI Emerging Markets index as a whole trades at a P/E of 17, so with A-shares you get value.

Correlation:
The A-shares have a minimal correlation to the U.S. Market. So theoretically, a correction in the U.S. market should not cause the A-shares to follow suit.  However, over the last decade or so the H-shares do have a about a 70% correlation to the US market.

Technicals:
After spending most of 2014 trading below the 200-day moving average, most of the China equity ETFs highlighted below now have spiked back above their respective long-term moving averages, and some funds now trade at new 52-week highs.

To see which funds made our Top China ETFs list, download it today! If you have questions about how China fits into your portfolio or you would like Doug to take a close look at your allocations, please call our offices at 800-391-1118 for a personal consultation.

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Investment Strategy Update

For our clients, newsletter subscribers and listeners, we thought it would be wise to go over our strategies for investing in portfolios, as it’s midsummer and that’s always a good time to evaluate your investing strategies and goals.

For growth investors:

  • Monitor ticker symbol VT, an exchange traded fund that owns all markets in the world. VT is currently 1% from its 52-week high and gives investors a good view of stocks in the world.
  • In the U.S., the sectors that are doing well are energy, technology and health care.
  • In the rest of the world, we like Asia, Latin America and the emerging markets in general
  • Dividend equities

For fixed-income investors:

  • Closed-end funds (Several ETFs available here: PCEF, YYY for example)
  • Floating rate securities

As always, if you are looking for more investment ideas from Doug and personal advice for your own portfolio strategies, please email Doug directly at askdoug(at)dougfabian(dot)com.

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Video Update: Bond Market Update

Interest rates are still low and it’s pretty amazing that they have continued to go lower. It will be really important to see how the economy responds in the months ahead – we’d actually like to see slightly higher interest rates, because that would mean that the economy is improving.

For more of Doug’s thoughts on the bond market, mutual funds and international equities, watch the full video here.

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