Separating Knowledge From Noise
April 10, 2014 | By Phil Taylor
If you've ever checked your Twitter feed while watching the morning news and trying to refold your newspaper's business section, then you well understand the concept of financial noise. It's the ubiquitous, relentless drumbeat of data and information that's always in the background of our daily lives. One of the most important challenges every investor faces is to separate knowledge from noise, and then figure out how to apply that knowledge to their portfolios.
At Invesco, we believe the antidote to financial noise is Intentional Investing. Intentional Investing begins with your relationship with a trusted financial advisor, and the long-term financial plan that you build together. Your advisor can help you filter out headlines that may be too short-term or just don't apply to your situation, and can help put into place appropriate investment ideas for you.
Intentional Investing also means using an investment management firm that puts your needs first — by creating quality strategies with clear objectives, and by offering expert opinions on topics that truly matter to you. To help you separate knowledge from noise, we've created an easily accessible resource that houses concise answers to pertinent questions that many investors have, and that you can discuss with your financial advisor. Here, our investment experts address questions about:
- Alternative Investment Strategies. Where might investors turn if stocks and bonds fall at the same time? What's in store for commodities and real estate? These answers are critical for investors who are considering alternative strategies for increasing diversification, generating returns and mitigating risk in their portfolios. As alternative strategies become increasingly available to individual investors, it's important to have reliable sources of information about this multi-faceted asset class.
- Capital growth. This section houses the questions that are top-of-mind for stock market investors. Have we begun a secular bull market? How can investors mitigate emerging market volatility, and why should investors consider so-called smart beta strategies? Much of the financial noise generated today revolves around the stock market – which companies or sectors are hot or not – making thoughtful, expert commentary all the more important for investors.
- Income. As investors near retirement, their need for portfolio income becomes increasingly important, and their questions take on new urgency. How can investors manage interest rate risk? What's the outlook for municipal bonds? Are high yield bonds vulnerable in a rising rate environment? We're committed to providing expert perspectives on the various sources of income that are available in the market today, and how changing economic environments can affect tomorrow's outcomes.
To be clear, Intentional Investing is not about turning off the noise and living in silence (as attractive as that thought may be some days). It's about tuning out the irrelevant content, partnering with your financial advisor to make appropriate adjustments within your long-term plan, and working with an investment management firm like Invesco that can help you achieve your objectives through quality products and investment expertise. That's Intentional Investing.
The opinions expressed are those of the authors, are based on current market conditions as of April 10, 2014, and are subject to change without notice. These opinions may differ from those of other Invesco investment professionals.
Alternative products typically hold more non-traditional investments and employ more complex trading strategies, including hedging and leveraging through derivatives, short selling and opportunistic strategies that change with market conditions. Investors considering alternatives should be aware of their unique characteristics and additional risks from the strategies they use. Like all investments, performance will fluctuate. You can lose money.
In general, stock values fluctuate, sometimes widely, in response to activities specific to the company as well as general market, economic and political conditions.
An investment in emerging market countries carries greater risks compared to more developed economies.
Smart beta is an alternative and selection index based methodology that seeks to outperform a benchmark or reduce portfolio risk, or both. Beta is a measure of relative risk and the slope of regression. Smart beta funds may underperform cap-weighted benchmarks and increase portfolio risk.
Fixed-income investments are subject to credit risk of the issuer and the effects of changing interest rates.
Interest rate risk refers to the risk that bond prices generally fall as interest rates rise and vice versa.
An issuer may be unable to meet interest and/or principal payments, thereby causing its instruments to decrease in value and lowering the issuer’s credit rating.
Junk bonds involve a greater risk of default or price changes due to changes in the issuer’s credit quality. The values of junk bonds fluctuate more than those of high quality bonds and can decline significantly over short time periods.