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Forbes
4 days ago
- Business
- Forbes
Is Your Broker Gouging You? Use This Guide To The Best Buys In Money Markets
Brokerage firms are short-changing customers with their money-market funds, says one angry commentator. Gosh. These brokers deliver a lot of terrific service for free (custody, trading, research). How are they supposed to pay for it all? Instead of grousing, do this: Accept the fact that the brokerage has to cover its costs, but arrange your affairs so that some other customer picks them up. This survey shows you how to side-step expensive money funds. The path to low-cost portfolio management has two elements. First is to set up your finances so that the cash in your transaction accounts, where you can't avoid high management fees, is kept to a minimum. The second is to shuttle excess cash in and out of some other safe, liquid investment, one with a low management fee. The transaction accounts, for paying bills, receiving direct deposits and settling securities trades, might have $10,000 most of the time and more than that only when there's a need. The low-fee account might have $100,000 most of the time. If you do business at Vanguard, that low-fee account could be a Vanguard mutual fund. Anywhere else, you have to be creative, because the money market fund on offer is going to be expensive. Instead of using a Schwab or Fidelity money fund for the $100,000, buy shares in an exchange-traded fund that behaves like a money fund but has a much lower expense ratio. You have to keep an eye on the balance in the transaction account. When it needs feeding, sell some of the ETF shares (or Vanguard fund shares) a day ahead. When the trade settles the following day, move cash into the transaction account. At some institutions you'll be juggling three pots of money: a brokerage account where you hold the ETFs and other shares; a 'settlement fund' that handles proceeds of stock sales and payments for shares bought, and a 'cash management' account that does your everyday banking. It's a shame that you have to juggle at all, but the brokers evidently hope that you won't have the patience for the transfers and so will leave idle cash in places where they can help themselves to a chunk of the interest. If you are inattentive, you will have too much in a settlement account with a disappointing yield or too much in a cash management account with a terrible yield. Not even Vanguard is above such mischief. It sells low-cost money funds, but the one you want most if you live in a high-tax state, Vanguard Treasury Money Market, cannot be used as your settlement fund for securities trades. (Why is it in Vanguard's interest to force you to pay state income tax? I'm waiting for an answer from the company.) Vanguard's cash management account has a 3.65% yield, which, at a time when Treasury bills yield 4.35%, is equivalent to a money market fund with a very stiff management fee. Let's assume you have wised up to moving cash into the brokerage account and want to deploy it. Where are the best deals? Here's what Vanguard has to offer in low-cost money-market mutual funds: For most Vanguard investors, the Treasury fund is the best choice, although the three funds with municipal paper might be useful to taxpayers in the highest federal bracket. Muni funds, it should be noted, have very volatile yields. A month ago they were paying a percentage point more. Everyone not banking at Vanguard needs to use an ETF to hold large cash balances. Here are the best ones: You can get in and out of a Vanguard mutual fund with no sales fee. In an ETF you're going to get hit with a bid/ask spread of a penny or two a share. Except over a short holding period, the trading cost is likely to be less consequential than the management fee. ETFs are a tiny bit riskier than money funds, since shifts in the yield curve can move their prices. This is a fair bet for you: Rate changes are as likely to make you a few extra cents a share as to lose you money. If the risk bothers you, sort the table on the duration column and select a very short-term portfolio. Now that you have optimized the yield from cash, ponder this question: Do you maybe have too much of it? I see three fallacies that lead savers to make this mistake. Fallacy #1: The bucket strategy. This one, oh so popular with financial planners, goes like this: Once you are retired, you need to have two years of spending in a cash bucket. That way, they tell you, you will not be forced to sell stocks at an inopportune time. To which I respond: Great. Now tell me when the opportune times to sell stocks will occur. Fallacy #2: The rainy-day kitty. This is the advice given to younger people. Put six months of spending into a bank account to cover emergencies. You could get laid off. I agree that a reserve fund, ideally outside your 401(k), is a great idea. But it doesn't have to be in cash equivalents. It could be invested in stocks and bonds. Their liquidity is high. You get next-day settlement. Instead of six months of spending in a CD, set aside 12 months of spending in ETFs. That gives you more protection and a better shot at living well later. Fallacy #3: The dry-powder notion. Instead of putting 100% of your stock money in stocks, you invest 80%, leaving money to deploy after a crash. This might work for Warren Buffett, who's sitting on a lot of cash at Berkshire Hathaway. But how confident are you that you can identify a market low? Did you buy stock in March 2009, during the financial crisis? Did you buy in March 2020, in the pandemic? If you didn't, maybe it's time to give up on the idea you can time the market. MORE FROM FORBES
Globe and Mail
26-05-2025
- Business
- Globe and Mail
Beating the index with a Canadian equity fund requires some deft handling by Mackenzie Investments' William Aldridge
William Aldridge's interest in stocks began during the 1990s bull market. But riding his bike to work as an analyst for a Toronto investment bank put him on a path to his dream job as a portfolio manager. (Well, that and an MBA.) He often ran into fellow cyclist Robert Tattersall, co-founder of mutual fund firm Saxon Financial. Tattersall invited Aldridge for tea and offered him a spot on his Canadian small-cap team. After Saxon was acquired by Mackenzie Investments in 2008, Aldridge was appointed portfolio manager. His mandate includes the $699-million Mackenzie Canadian Equity Fund, whose F series has outpaced the S&P/TSX Composite Total Return Index over the long haul. We asked why he's bullish on Canada's two railways and likes Bombardier. What's your strategy to outperform your index? We don't refer to value or growth but would call it a more opportunistic strategy. Key to our philosophy is patience to get the timing right. Markets are noisy and volatile, so we seek to use that dynamic to our advantage. We manage risk by diversifying by market-cap weightings and sectors. We also aim to mitigate risk by not chasing high-quality winners trading at high multiples. We may own U.S. equity exchange-traded funds to gain easy exposure to high-quality technology and health care names, which are limited in Canada, and to small-cap stocks for more diversification. What's your outlook for the Canadian market given the tariff threats and hikes by U.S. President Donald Trump? We are bullish long-term but, understandably, sell-offs in the market give people little comfort. With the strong market returns over the past couple of years, it has been more challenging to find good ideas for our mandates. If the market is selling stocks inordinately because of tariff worries, that becomes an opportunity for us. Why are CPKC (formerly CP Rail) and CN Rail top holdings if tariffs can hurt volume growth? We recently raised our weightings in Canadian railways because their stocks came on sale as investors became fearful around tariff risk. But railways are great businesses. They have excellent pricing power because no new ones are being created. It will likely be challenging from a volume perspective in the short run, but they are resilient companies. Their stocks have been trading at compelling valuations, and we think that will reward us over time. Your fund's gold stocks have benefitted from the metal surging to the US$3,000 level. What is your outlook for the sector? Gold holdings serve as a degree of protection for investor returns when things are more challenging economically. But the price of gold is very difficult to predict. We get around that by looking at the cost of production, which is much lower than the cost of gold today. We feel that Agnico Eagle Mines, Kinross Gold and Franco-Nevada are the best positioned companies in a very tough sector. Your fund owns Bombardier, whose stock has been range-bound for the past decade. What's the attraction? The Bombardier of today is not the Bombardier of old. It was a diversified company that has spun out its train and regional jet businesses. It is now a very focused business-jet company under new leadership. Bombardier and Gulfstream Aerospace are the only truly global competitors in this space, and the barriers to entry are extremely high. For those who find the world a bit scarier and can afford it, flying privately makes a lot of sense. Bombardier has de-risked its balance sheet; it generates significant cash flow and has an attractive valuation. It also has recurring revenue from aircraft maintenance and a small, but growing defence business. Given that you run an all-cap fund, what is another smaller company that you like? Small-to-mid-size companies make up about one-third of the fund. We like CAE, which makes flight simulators to train pilots for commercial airlines, business jets and military aircraft. It also gets recurring revenue from providing additional training to pilots every year so they can maintain their licence. Demand for pilots is also growing globally as more people fly often. That's a strong tailwind for the business. Your time is valuable. Have the Top Business Headlines newsletter conveniently delivered to your inbox in the morning or evening. Sign up today.
Fast Company
20-05-2025
- Business
- Fast Company
Building a dream team: Tips for new CEOs
The chief executive officer (CEO) role can sometimes be misunderstood. It certainly is a position of importance, and the CEO is ultimately accountable for a company's performance, but in many cases those chosen to support the CEO are the real drivers of success. I became CEO of Vestmark, a portfolio management solutions provider, in the summer of 2022, and before that, I held the position at online investment brokerage E*TRADE. So I can say with some confidence that one of a new CEO's first, most important tasks is choosing the management team. Building a 'dream team' will look different based on the company and how you like to lead. Having led companies of 400 people and 4,000, however, I believe the principles are the same. Taking pages from my experiences, these are some general suggestions I would offer for anyone entering a new CEO position as they build out their dream team. When I start a new role, the first thing I do is listen. Talk to the existing team and to the people who report to them. If you come in thinking you know everything or are already planning to bring in 'your people,' then you're doing yourself, your company, and your employees a disservice. The corollary is to not go on listening too long. It's tempting to try to get everyone's opinion, especially in a smaller organization. That path leads to paralysis. Connect with key players at each group and level, then start making decisions. 2. AVOID GROUPTHINKERS Teams that value consensus aren't necessarily a bad thing, but if roles seem fuzzy, or everyone has a veto, that might be a sign of an organization that isn't getting the best out of each team member. Whether looking for new hires or restructuring, your job as CEO is to ensure each leader has a clear role and area of responsibility, establish how they are to work together while respecting each other's zones of expertise, and to provide a clear vision for them to work towards. 3. LOOK FOR TEAM MEMBERS WHO WILL ADD 'DIVERSITY OF THOUGHT' At each CEO stop, I have benefitted from building teams with what I call 'diversity of thought.' That might arise from different backgrounds, experiences, or personality profiles. Certainly expertise and proficiency matters, but don't be afraid to go outside your industry to find it. I'd go one step further and say it's good to have people come in with different backgrounds and people who have experience solving problems in different ways. It doesn't mean that you throw everything up in the air, but getting your team working in new ways keeps leaders asking questions and pushing themselves. 4. HIRE PEOPLE YOU LIKE TO BE AROUND As CEO, you need to be able to bond with your team and have them bond with each other. You don't have to be best friends. Yet, I like the people I hire and elevate to be what I call 'Sunday people'—good, decent people with a high EQ with whom I could see myself spending a Sunday afternoon. If you can't have an hour-long conversation with a candidate, you probably won't enjoy working with them either. Now, the person I can talk to for an hour may not be the same person you would find engaging—that's where each CEO gets to shape a team that works for them. 5. MIX SEASONED PROS WITH UP-AND-COMERS As CEO, you have an opportunity to mentor new leaders, and having some people at that stage on your executive team lets you work closely with them. Having a blend of more seasoned peers alongside young talent can benefit each professionally as they absorb new ideas, knowledge, and energy from each other, which is an asset to your company. Getting the right mix can be a powerful cultural sparkplug for the entire organization. 6. BUILD A REPUTATION FOR INVESTING IN YOUR PEOPLE Whether a new addition or established expert, every person on your leadership team deserves the opportunity to grow. You need to have the courage to invest in talent. Giving gold-star performers more responsibility or new opportunities, or putting them in a position to build their own teams, will help you attract and keep the right people. Doing so also puts the pressure back on you. When something works, as CEO, it's tempting to avoid change, but doing that can cause stagnation and brain drain when top talent walks out—and then a new CEO may be called in to set things right. Change is scary, and some people will resist. That's natural, but it can slow you down, so as CEO, you'll also have to make tough decisions and try different things until you find what works—like a coach putting the right talent on the field. Your job is to set the strategy and vision, find people to execute on that vision, and stress accountability. It won't happen overnight, but once you get that team of people who are passionately bought into that vision and they click, that's when the dream team becomes reality.
Yahoo
18-05-2025
- Business
- Yahoo
How to balance fixed income and equities in your portfolio
Northwestern Mutual Wealth Management's chief portfolio manager of equities, Matt Stuckey, outlines his allocation strategy for equities and fixed income (^TYX, ^TNX, ^FVX) To watch more expert insights and analysis on the latest market action, check out more Market Domination here. bonds that are the drag on your portfolio until they're the thing that saves your portfolio. For our chart of the day, we have a bar chart showing how bonds can protect your portfolio in the event of a recession here. How much bond exposure should you recommend investors have right now? Look, I mean, I think everybody's allocation is different, depending on their overall goals and objective and time horizon. But let's say, you know, you're you're a mixed investor, half in equities, half in fixed income. We'd actually recommend a little bit more fixed income, above and beyond your target. And the reason being is simply return skew. Um, you know, right now, with a 450 tenure, let's call it, shock interest rates up or down 100 basis points and look at what happens over the next year in terms of total return. Well, if if interest rates go up 100 basis points, you know, you're down roughly 2 and a half percent, but if they go down 100 basis points, you're up roughly 12%. And so the risk return skew there does is attractive. And you know, we walked through some of the stretch valuation in the equity space. If that were to reprice, uh, we do think bonds offer some attractive diversification, uh, characteristics for portfolio in that in that case. Sign in to access your portfolio
Yahoo
18-05-2025
- Business
- Yahoo
How to balance fixed income and equities in your portfolio
Northwestern Mutual Wealth Management's chief portfolio manager of equities, Matt Stuckey, outlines his allocation strategy for equities and fixed income (^TYX, ^TNX, ^FVX) To watch more expert insights and analysis on the latest market action, check out more Market Domination here. Bonds the drag on your portfolio until they're the thing that saves your portfolio for our chart of the day we have a bar chart showing how bonds can protect your portfolio in the event of a recession here how much bond exposure should you recommend investors have right now? Look, I mean, I think everybody's allocation is different depending on their overall goals and objective and time horizon, but let's say you know you're, you're a mixed investor, half in equities, half in fixed income. We actually recommend a little bit more fixed income above and beyond your target, and the reason being is simply return skew. Um, you know, right now with the 450 10 year, let's call it shock interest rates up or down 100 basis points and look at what happens over the next year in terms of total return. Well, if, if interest rates go up 100 basis points, you know, you're down roughly 2.5. But if they go down 100 basis points, you're up roughly 12%. And so the risk return skew there to us is attractive. And you know we walk through some of the stretch valuation in the equity space. If that were to reprice, we do think bonds offer some attractive diversification characteristics for a portfolio in that in that case.
