Morningstar's Kinnel: Investing in a 'meh' environment

Jun 20, 2014 @ 12:00 am

Runtime: 3:21

Russ Kinnel of Morningstar says there’s a general lack of enthusiasm in the stock market right now. So where should you be looking to keep your clients excited about investing? Plus, Mr. Kinnel offers his perspective on smart beta.

Video Transcript

[MUSIC] One of the themes I'm getting from all of the managers here is if, if you were to say, what do you think about the market? I'm getting a big meh. You know, people are saying stocks are okay. They're, they're maybe a little overpriced, but there's nothing that's really great. There's nothing that's really terrible. So, you know, I, I don't hear a lot of enthusiasm from either the value or the growth camp. I think, they both face challenge, and, growth's had a little tougher go of it, more recently, but, you know, I, I, I really don't sense a, a huge. People think there's huge opportunities in either one. I think advising for responding by just simply keeping their, their, their bets, diffuse and, and spread out rather than, buying whole hog on the one side or the other. When it comes to the strategic beta, that's what we call smart beta, I think it's valuable in a couple of ways. One. It gives you a cheaper way to, access different strategies, like momentum or dividends, and what's great about that is you can then compare them with an active manager doing that same strategy, and say, okay, are they adding enough value that I wanna go up in fees and pay that level? If not, if I'm simply getting a commodity, I've got this very targeted, precise option, and that can be pretty useful in building a portfolio, if you have, say, a dedicated momentum fund. Maybe you just add a four percent position to that and it balances out some value holdings elsewhere. So I think it's a useful tool. I don't think, all the claims are maybe quite justifiable. Maybe there's a little hype around that, but I still think there's some value there among the opportunities out there are simply that because people have not been that enthused about equities, you can still find some really good managers in small, mid, and large camp, that haven't been overwhelmed with assets. Usually five years into a rally like this, they'd all be overwhelmed, but now I think you can find a lot of good boutiques only running a few hundred million or you can find some bigger shafts, but they're not yet overwhelmed. So, to me, that, that's great that there's still capacity out there with some of the very best managers. With the economy kind of chugging along it makes sense to stay diversified, but recognize, that we've had a tremendous rally both in bonds and stock if you look out long term, and that means that, you know, it makes sense to be cautious and, and this probably isn't the best time to be greedy. So accept that some of your portfolios are going to be boring, have some money in cash, or short-term bonds. And no, it's not gonna do much for you but it's defensive and you can put it to work when, when you do have a a decline in one of those areas. Of the places that look attractive probably emerging markets in Europe are at least among the better opportunities out there. In my own portfolio, I was re-balancing this year because we had such a run up in US equities, so I've been buying foreign equities just to get that back up both diverse, both developed market and emerging markets. [MUSIC]


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