Timothy Murray explains why emerging markets are now a different animal from what they were and why this has implications for asset allocators. Read more...
Emerging markets have evolved, and investors now need to look at them through a different lens.
Infrastructure-driven sectors have become much less important drivers of performance, while consumer-oriented sectors have dramatically increased in importance.
For tactical asset allocation purposes, the outlook for commodity prices is still quite important to the relative performance of emerging markets equities, but it is now part of a much broader mosaic of factors.
Partially due to the ongoing trend toward more domestically driven economies, emerging market fundamentals are becoming more impacted by country-specific factors, making broad generalizations about the asset class more and more difficult.
This makes evaluation more complex for tactical asset allocation purposes, but it also means that the alpha potential for active management is higher.
We believe leveraged loans are a compelling option for fixed income investors seeking a low-duration, higher-yielding asset class and... Read more...
Loan funds experienced positive flows in 2017, and this trend is likely to continue as investors gravitate toward the protection from higher rates offered by the floating rate feature of bank loans.
Although resilient demand has allowed companies to lower their borrowing costs on existing loans, the rise of LIBOR has outpaced the growth of refinancing transactions, meaning that the rate reset feature of the asset class helped mitigate the loss of coupon for investors.
Bank loans are a true floating rate asset again because the benefits of resetting bank loan coupons have come to fruition as LIBOR has risen above floor levels.
Although troubled market segments such as retail are likely to experience more bankruptcies in 2018, we believe the default rate will remain comfortably below the long-term average, as earnings growth and mostly favorable macro conditions should be supportive for borrowers.
Being defensive did not pay off last year, but we believe that positioning for volatility is the best approach for 2018. Read more...
2017 was notable for the calmness of markets. This was beneficial for equity investors, but it led to underperformance in our Dynamic Global Bond fund1 because of the defensive stance we maintained throughout the year.
This was disappointing, but we strongly believe that our positioning in 2017 was correct given the number of risks present in the market at the time.
Geopolitical risks will continue to challenge the global economy in 2018, inflation could make a comeback and a number of developed market central banks are set to begin hiking rates. Concerns over these developments have already led to increased volatility.
As such, we believe that positioning the fund's portfolio for further volatility and rising yields will help deliver competitive results this year.
Questions remain about how the U.S. tax reform legislation passed at the end of 2017 will affect supply and demand in the municipal bond market in 2018. Read more...
While the reduction in the corporate tax rate has made the tax advantages of holding munis for banks and insurance companies less pronounced, we expect most of these corporations to maintain the majority of their holdings in the sector.
A provision in the new law that eliminates the tax exemption on advance refunding bonds, which are issued to retire older, higher-cost debt, is likely to reduce the supply of new bonds in the muni market by 10% to 20%.
If the muni market does experience volatility and yield ratios become more attractive relative to Treasuries, we would generally see this as a potential buying opportunity due to the continued long-term attractiveness of the sector.
Strong credit fundamentals, a benign macroeconomic environment, and a glut of new issuance could present a range of attractive opportunities for investors in the European high yield sector, but... Read more...
An expected surge in issuance in the European high yield sector is likely to bring a number of compelling opportunities to market this year.
The sector currently benefits from higher credit quality and a more favorable macroeconomic environment than U.S. high yield.
U.S. investors who buy European high yield bonds and hedge their investments back into U.S. dollars can benefit from wider credit spreads than those available from U.S. high yield debt.
Selectivity is the key to navigating the sector, with an emphasis on companies with improving credit stories based on sound business plans.
We believe T. Rowe Price’s strategic investing approach, underpinned by the rigor of our independent research and the decision-making of our experienced portfolio managers, has created value for our clients over the longer term.
We reviewed the performance of 18 T. Rowe Price diversified active U.S. equity funds over the 20 years ending in 2017, or since inception in cases where the fund had less than a full 20-year track record. We found that the majority of funds generated positive average excess returns, net of fees, over their benchmarks across multiple time periods.1
The likelihood that T. Rowe Price’s diversified U.S. equity funds would outperform the relevant benchmarks increased as rolling time periods were extended.
We attribute our success to our ability to go beyond the numbers and get ahead of change, which we believe leads to better decision-making and prudent risk management on behalf of our clients.
The potential return of volatility could hurt investor portfolios, meaning a different approach to portfolio construction may be necessary. Read more...
Volatility has traditionally been a major consideration for investors, but in recent years it has been notable largely for its absence.
However, the withdrawal of quantitative easing, combined with geopolitical instability and the possibility of asset price corrections, could mean that volatility is set for a comeback.
The low-yield environment since the financial crisis has led many investors to build portfolios comprising highly correlated assets, potentially leading to significant losses if volatility returns.
Risk parity strategies work far less effectively when correlations increase. Given this, investors may find it beneficial to adopt a more active approach based on country and sector allocation and duration management.
When faced with conflicting financial priorities, how do you decide where to put your next dollar? Our experts share their perspectives on which savings and spending choices to consider. Read more...
In this podcast, Lynnette Khalfani-Cox, who’s also known as The Money Coach®, is joined by guests Kimberly Palmer, author of “Smart Mom, Rich Mom,” and Judith Ward, a CERTIFIED FINANCIAL PLANNER™ at T. Rowe Price, to answer some tough questions on prioritization.
The panel will address questions, including: What are three things to consider when choosing where to put your next dollar? How does proximity to retirement play a role in where to put your next dollar? Are there any tricks or questions to ask yourself when deciding between two financial priorities?
In a segment called “This or That?,” the experts weigh the pros and cons of a common financial conflict: Should you save for emergencies or pay off a credit card? Tune in to hear their advice.
If your retirement is right around the corner, new questions are likely surfacing. Our experts will help answer some of the ones most commonly asked. Read more...
In this podcast, Lynnette Khalfani-Cox, who’s also known as The Money Coach®, is joined by guests Kerry Hannon, AARP’s Jobs Expert and Great Jobs columnist, and Roger Young, a CERTIFIED FINANCIAL PLANNER™ at T. Rowe Price.
The panel will address questions, including: How do you know if you have enough saved for retirement? If you haven’t saved enough for retirement, what are your options to catch up? When should you consolidate your retirement assets?
In a segment called “Keeping You Up at Night,” the experts address a common concern: Will I have enough money to live comfortably in retirement? Tune in to hear their advice.
Estate planning can be less intimidating when you’re armed with practical strategies that can provide peace of mind when you think about the afterlife of your money.
In this podcast, Lynnette Khalfani-Cox, who’s also known as The Money Coach®, is joined by guests Jeffrey Condon, author of “Beyond the Grave: The Right Way and the Wrong Way of Leaving Money to Your Children (and Others),” and Roger Young, a CERTIFIED FINANCIAL PLANNER™ at T. Rowe Price, to tackle the subject.
The panel will address questions, including: What are the various components of an estate plan? Is it expensive to develop an estate plan? What happens if you don’t have an estate plan?
In a segment called “This or That?,” the experts discuss the pros and cons of two choices: liquidation of assets versus distribution of items. Tune in to hear their advice.
It's challenging to focus on something that seems so far away. With our experts’ help, you can develop a more comprehensive understanding of how to build a solid retirement plan. Read more...
In this podcast, Lynnette Khalfani-Cox, who’s also known as The Money Coach®, is joined by guests Christine Benz, director of personal finance and senior columnist for Morningstar.com, and Judith Ward, a CERTIFIED FINANCIAL PLANNER™ at T. Rowe Price.
The panel will address questions, including: At what age should you begin to focus on your retirement plan? How do you know how much you will need to save for retirement? What are the different ways to save for retirement?
In a segment called “This or That?,” the panel discusses the pros and cons of saving for retirement versus paying down debt. Tune in to hear their advice.
When you start collecting Social Security, it can have a big impact on your retirement income. Our experts will discuss tips to help determine the right Social Security strategy for you. Read more...
In this podcast, Lynnette Khalfani-Cox, who’s also known as The Money Coach®, is joined by guests Philip Moeller, author of “Get What's Yours: The Secrets to Maxing Out Your Social Security,” and Judith Ward, a CERTIFIED FINANCIAL PLANNER™ at T. Rowe Price.
The panel will address questions, including: When will you be eligible for Social Security? What is full retirement age? How much can you expect to receive from Social Security? Why is there a deficiency in Social Security?
In a segment called “This or That?,” the panel discusses the pros and cons of claiming at different ages. Should you claim at age 62, claim at full retirement age, or claim at age 70 for the maximum benefit? Tune in to hear their advice.
Recent strong, broad-based, synchronized economic growth across
Central and Eastern Europe has opened up a number of attractive relative value opportunities for fixed income investors. Read more...
Central and Eastern Europe (CEE) has recently benefited from strong, broad-based, synchronized economic growth that has exceeded market expectations, driven, in part, by robust levels of private consumption and investments.
In spite of this broadly coordinated growth, the expansion of CEE has been accompanied by a divergence in inflation dynamics and nuances in the reactions of central banks to growth.
This has opened up a number of attractive relative value opportunities for fixed income investors, although investors also need to be aware of certain idiosyncratic political risks facing the region.
While taking RMDs from tax-deferred retirement accounts is mandatory at age 70½, you may not need to spend this money. You have options of reinvesting it in a taxable account or donating it to charity. Read more...
At age 70½, you will need to start taking an RMD from your tax-deferred retirement accounts.
The money can be invested in a taxable, nonretirement account.
You could also contribute the RMD to a Roth IRA account if you have earned income and meet the income limits.
You can transfer your RMD to a charity using a qualified charitable distribution (QCD).
RMDs can also be contributed to a 529 College Savings plan.
We expect inflation to reach 2% or higher in 2018 as a result of continuing solid growth in the broader economy and a tightening labor market. Read more...
We believe that the sub-2% annualized consumer price index readings we saw during the summer represented a low for the current inflation cycle, and we expect inflation rates will stabilize or run moderately higher in the near term, followed by 2%—or higher—inflation in 2018.
U.S. Treasury inflation protected securities (TIPS) have yet to price in the potential uptick in inflation, providing some upside potential for TIPS investors if inflation does return to trend at 2% or higher over the next year.
Increasing price pressure from the tightening employment market, the weaker U.S. dollar, and relatively stable oil prices are likely to contribute to rising inflation.
The Federal Reserve, which has made it clear recently that its focus on the tightening labor market and easy financial conditions will take precedence over inflation readings that fall short of its 2% annual target, stands as the most prominent obstacle to higher inflation and will likely serve as a cap on TIPS performance in the medium term.
Once investors turn age 70½, they will need to take required minimum distributions (RMDs) from their retirement accounts, whether they need the money or not. Read more...
For IRAs, you must take your first RMD by April 1 of the year after the year you turn age 70½—regardless of whether or not you are retired. For each following year, you must take an RMD by December 31.
If you have multiple IRAs, you must calculate the appropriate RMD for each one. The total distribution amount can be taken from one or more IRAs to satisfy the withdrawal—as long as the total RMD amount is withdrawn.
If you have multiple prior employer retirement accounts (401(k)s, etc.) you will have to contact your prior employer to calculate the RMD and send you a distribution.
Once the RMD is distributed, you don’t have to spend it, but it cannot remain in the tax-deferred account.
Overall, the U.S. tax reform measure highlights the importance of a planning strategy that can adapt to change. Read more...
The U.S. tax reform measure will have wide-reaching effects on investors. We believe a planning strategy based on fundamental principles is the best response.
While the biggest changes relate to business taxation, the measure also reduces individual tax rates. Those individual changes will revert to 2017 levels after eight years unless Congress takes further action.
Considering the temporarily lower rates and future uncertainty, investors may want to consider contributing to Roth accounts.
Lower taxes may help people to boost their retirement savings to the 15% or more of current salary (including employer matches) that we typically recommend.
Given the complexities and uncertainties associated with the new tax measure, we strongly recommend that investors consult with their professional tax advisors.
Social Security is not a simple benefit system. It is worth learning about the rules of the program and understanding how benefits are calculated so you can make informed decisions on your claiming strategy.
Because Social Security is a significant, inflation-adjusted source of steady income, it should be an important part of your holistic income strategy in retirement.
Social Security claiming is not one size fits all. There are specific considerations for you to think through if you are single, married, divorced, or widowed.
A variety of risk factors lead us to believe that volatility across fixed income sectors will increase in 2018, so we favor meaningful allocations to liquid sectors to facilitate tactical portfolio shifts in response to a risk event. Read more...
Although markets have thus far shrugged off risks, including North Korean nuclear tests as well as expected actions by many developed market central banks to unwind their ultra-accommodative monetary policies, we think that is unlikely to persist through 2018.
The potential risks that could shake up fixed income markets include a surprise in developed market politics, a breakdown in the NAFTA negotiations, escalating geopolitical tensions, and an abrupt slowdown in the Chinese economy.
With some major developed market central banks beginning to scale back their extremely accommodative monetary policies, there is the potential for increased volatility if markets misjudge the speed or timing of the normalization process.
Maintaining meaningful allocations to liquid sectors allows us tactical flexibility should volatility create pricing dislocations and more favorable valuations in credit sectors.
Some emerging market currencies are poised to gain in 2018 even after the impressive 2017 returns for many against the U.S. dollar, but investors will need to be increasingly selective in their positioning. Read more...
We believe many of the broad trends that drove gains in emerging market currencies against the U.S. dollar last year are likely to continue in 2018.
We use an assessment of a currency’s relative valuation versus fundamental factors to help find opportunities in emerging market currencies.
The currencies of emerging markets that are poised to tighten monetary policy as a result of strong growth or high inflation are likely to be supported, as are those of countries that are implementing meaningful structural reforms.
Several major emerging markets will hold elections in 2018, and we expect the outcomes of these elections, as well as sentiment leading up to the votes, to be meaningful idiosyncratic drivers of currencies for those countries.
Central bank tightening will create the biggest risks and opportunities in 2018. Read more...
The main risks and opportunities in 2018 will arise from central bank tightening: The risks will arise from the impact of a number of central banks tightening at the same time, and the opportunities will come from increased volatility and differentiation between markets.
Systematic risk factors do not currently offer good value for money because rates are low, credit is tight, and volatility is muted. One way of responding to this is to allocate more to idiosyncratic risk assets that are sufficiently driven by their own stories to behave differently than the broader market.
Insurance positions have not offered value for money in 2017 because the markets have not been moving sufficiently when negative events have occurred. However, this may change in 2018, and we think there are risks that would require some form of insurance.
The 2008 financial crisis forced regulators to take actions that they would previously never have considered in order to save the global economy. As a result, they will be psychologically better prepared to respond to the next one.
David Eiswert discusses the challenges for markets and why he is more positive. Read more...
Markets are worried about inflation, trade wars and the end of monetary stimulus. We are skeptical, however, about the “return of inflation” and believe markets can cope with a rising rate environment.
We remain focused on being on the right side of change, investing in companies that can grow in what we believe will be a lower-growth world.
However, we are taking a more balanced approach and are being specific about the stocks we own.
Some injection of uncertainty feels normal. For fundamental stock pickers like ourselves, it gives us an opportunity to demonstrate our skills and abilities.
July 10, 2018
David J. Eiswert, Portfolio Manager, Global Focused Growth Equity Strategy
Volatility should bring dispersion back to emerging markets, creating new opportunities to invest in assets at attractive valuations. Read more...
Markets across the world have entered a new era of volatility, with emerging markets (EM) likely to be particularly affected.
This is bringing dispersion back to EM equity and debt markets, creating new opportunities to invest in assets at attractive valuations—for investors with the insight and resources to identify them.
For investors in both EM equity and debt, there are many idiosyncratic local risks to consider in addition to broader, market-wide ones. While we agree with the consensus view that Turkey is a major risk at present, we think that concerns about Mexico, Brazil, and Russia may be overdone.
The period ahead will be challenging—the ability to be highly selective, and be agile, may prove to be a very useful attribute.
In this interview, Archibald Ciganer, manager of the Japan Fund, discusses what’s driving the Japanese economy and equities and his expectations going forward. Read more...
By the end of 2017, the Japanese economy had recorded eight straight quarters of expansion, its longest growth streak since the 1980s, and, in January of this year, the Nikkei 225 Index hit its highest level since 1991.
He believes that the overall Japanese market is not expensive and that it’s not too late to invest because the improvements are taking place slowly and will continue for a long time.
The commodity downcycle that started in 2011 may last several more years, but even in commodity bear markets, there are attractive opportunities and periods where such stocks may perform well. Read more...
The surge in U.S. oil production and productivity and lower costs for energy exploration could keep oil prices relatively low longer term.
T. Rowe Price has invested in natural resource equities since 1969 and has developed the experience and resources needed to anticipate changing trends and take advantage of opportunities even during challenging environments.
We expect more failures in this commodity cycle than in the bear market of the 1980s.
April 27, 2018
Shawn T. Driscoll, Portfolio Manager of the New Era Fund
The current environment of synchronized global growth and low inflation is supportive of current U.S. equity valuations, in our view. On a fundamental basis, we are still seeing... Read more...
U.S. growth strategies have generally rewarded investors handsomely in recent times. That said, we are clearly in the late stages of the market cycle, and U.S. stock valuations are at the top end of their historical range.
However, the current environment of synchronized global growth and low inflation remains supportive of these valuation levels, in our view.
U.S. corporate earnings continue to come through strongly, boosted by recent U.S. tax reforms. However, even excluding the contribution from these tax cuts, on a fundamental basis, we are still seeing improving topline earnings growth from U.S. companies.
One of the key risks to the U.S. market outlook is that of a sharp acceleration in inflation. However, the influence of secular factors—for example, the cost reductions derived from new technologies—are, in part at least, having an offsetting impact on inflation.
Emerging market currency volatility can be muted by using relative value strategies that take advantage of price differentials between currencies. Read more...
Emerging market local debt has traditionally been a volatile sector, largely because of currency movements.
In fact, EM local debt can be considered as essentially comprising two different elements—a relatively high-yielding, low-duration bond portfolio and a volatile currency stream. A major challenge with managing the currency stream is that EM currencies can deviate from “fair value” for an extended period.
One way to hedge against currency risk is by adopting relative value strategies, which seek to take advantage of price differentials between pairs or sets of currencies.
Combined with careful security selection within the bond element of the portfolio, relative value strategies can help to deliver smoother, more predictable returns.
Borrowing from your workplace retirement plan is a decision that shouldn’t be taken lightly. With these steps you can keep your retirement savings on track. Read more...
Borrowing from your employer plan affords you the flexibility to access a large amount of your own money that you pay back to yourself with interest.
Understanding the benefits and drawbacks can help you make a better informed decision. Continuing to contribute to your plan while paying back the loan is the best action you can take to keep your retirement savings on track.
If you use 401(k) loans perpetually or for everyday expenses, see if your employer offers financial wellness programs that can help you manage your daily finances while planning for a secure retirement.
U.S. high yield has performed well this year, but we are cautious on the asset class as spreads have tightened. Read more...
U.S. high yield has performed well this year, delivering positive returns at a time when other fixed income sectors, such as Treasuries and investment-grade credit, have declined.
The good performance, which has occurred even while money has been flowing out of the asset class, has been due to a combination of strong technical factors and the rising oil price.
However, while the sector continues to be supported by strong fundamentals, we are cautious about U.S. high yield. Spreads have tightened considerably since early 2016 as investors returned to the asset class, and we do not anticipate any further tightening from here—on the contrary, the widening of investment-grade and emerging market spreads makes high yield appear vulnerable from a relative value perspective.
European high yield looks like a better value at this stage in the cycle.
Japanese society is changing. A large part of what we do involves identifying these secular trends early and investing in those areas that we anticipate being the key long-term beneficiaries. Read more...
One of the biggest changes that we are seeing is in relation to Japanese workers, who are increasingly changing jobs throughout their career. This is a modern phenomenon and a major shift away from historical expectations of lifetime employment.
Similarly, consumer spending patterns are also changing, and the trend toward online retail is another key theme that is growing rapidly in Japan.
The services sector is another rich area of opportunity, in our view, specifically for nurses and care workers for the elderly. The over 60 years demographic makes up more than 33% of Japan’s total population, the largest of any country in the world.1
A large part of what we do involves identifying these secular trends early and investing in those areas that we anticipate being the key long-term beneficiaries of the changes taking place in Japanese society.
The global economy is weakening on the back of the rising oil price, trade fears, reduced capex, and Chinese deleveraging. Read more...
Recent economic data point to a weakening global economy. The reasons for this include the rising oil price (which is a tax on consumers) and growing fears over the possibility of a trade war led by U.S. President Donald Trump.
The prospect of a trade war is particularly concerning, not so much because of the direct impact of tariffs, but rather the much bigger impact it could have on business confidence and therefore capital expenditure.
In addition, Chinese authorities’ recent efforts to manage their slowing economy have been slow and reactive, and we therefore expect China’s slowdown to continue.
Our forecast for global growth in the period ahead is below consensus as our proprietary lead indictors point to continued deceleration—a signal that is reinforced by the worrying outlook for global trade policy.
Fears that Italy’s new populist coalition could trigger a repeat of the 2011–2012 sovereign debt crisis are probably overstated. Read more...
The political situation in Italy, where the anti-establishment parties League and 5-Star Movement have formed a ruling coalition, has revived painful memories of the European sovereign debt crisis of 2011–2012.
Both coalition partners have pledged to increase the fiscal deficit to fund new spending programs, and the size of Italy’s government debt means that if it ran into trouble, the EU would not be able to bail it out in the way it did for Greece.
However, despite these issues, we do not believe that the situation in Italy is likely to trigger a major debt crisis soon. The government is running a current account surplus and the central bank owns a large chunk of the outstanding debt, meaning it can effectively be ruled out.
We also believe the coalition will adopt a more pragmatic approach to the economy than many people expect.
After recently underperforming Treasuries, agency mortgage-backed securities (MBS) now appear to offer more attractive valuations, supported by resilient demand, solid fundamentals, and reduced prepayment risk. Read more...
Although agency MBS have faced headwinds since the Federal Reserve began reducing its balance sheet reinvestment in October 2017, we now see some relative value in the sector amid resilient demand.
Expectations for increased MBS issuance in 2018 also contributed to investor worries about weakening technical conditions, but issuance has been lower than expected so far, and other buyers have stepped in as the Fed has reduced its role.
Yield spreads between agency MBS and credit sectors have widened from record lows in 2018 but still have not returned to longer-term historical averages, indicating that agency MBS could provide value relative to risk assets.
Within the agency MBS sector, we believe shorter-duration MBS with higher coupons could offer the best relative value.
While the potential for inflation accelerating further is limited, modest upside risks remain, which could translate into opportunities... Read more...
U.S. inflation has normalized, with the consumer price index rising and breakevens at multiyear high levels as the Federal Reserve continues down the path of gradual tightening of policy rates.
The Fed has noted inflation's rise and become more confident about its path of tightening policy rates, which may counter a further increase in TIPS breakevens; the central bank could be more likely to react if inflation rises with additional tightening measures.
Some upside risk remains in TIPS breakevens, particularly if oil prices remain elevated, but it is important to remember that the secular forces of technology and demographics remain in place—keeping the prospect for runaway inflation at bay.
With oil prices rising steadily since last June, inflation-linked debt in Europe has reacted in a similar fashion to U.S. TIPS.
Meet the challenge of saving for college with less stress and more confidence. Our experts explore the ins and outs of college saving strategies.
In this podcast, Lynnette Khalfani-Cox, who’s also known as The Money Coach®, is joined by Robert Farrington, founder of The College Investor, and Roger Young, a CERTIFIED FINANCIAL PLANNER™ at T. Rowe Price.
The panel will address questions, including: How do you estimate future college costs? What’s the difference between a 529 savings plan and Uniform Gifts to Minors Act/Uniform Transfers to Minors Act accounts?
In a segment called “The Big Picture,” the panel takes a step back and discusses what listeners need to consider to make paying for college a reality. Tune in to hear their tips.
Looking back at the creation of the Ultra Short-Term Bond Fund as it celebrates its five-year anniversary. Read more...
The T. Rowe Price Ultra Short-Term Bond Fund was created five years ago to address investor demand for high-quality, short-dated investment alternatives that sought to provide flexibility and stability while generating income.
Our approach takes advantage of T. Rowe Price’s robust credit research capabilities to utilize our more flexible opportunity set in an effort to increase income.
Managing risk remains an important goal for investors seeking yield in a rising rate environment.
September 25, 2018
Joseph K. Lynagh, Portfolio Manager in the Fixed Income Division at T. Rowe Price
Shifting supply/demand dynamics and an increasing positive correlation with equities may undermine U.S. Treasuries’ “flight to quality” status in the future. Read more...
U.S. Treasuries have traditionally been regarded as the ultimate “flight to quality” asset, but it is unclear whether they will continue to be so in future.
One of the reasons for this is that Treasury issuance is threatening to outstrip demand—the fewer buyers there are, the riskier an asset becomes.
Another reason to question U.S. Treasuries’ flight-to-quality status is that, in recent years, Treasuries have become positively correlated with equities during times of market stress—undermining their ability to function as a defensive anchor during difficult periods.
There are no clear candidates to replace Treasuries if they cease to be the flight-to-quality asset of choice for investors. It is therefore possible that instead of relying on one asset to provide a “risk-free” element of their portfolio, investors will be forced to choose from a number of potential options or combine several different assets together to create a “lower risk” anchor.
Deciding whether to convert assets to Roth involves consideration around the amount of taxes you will pay on the conversion amount and whether the money will ultimately be passed on to your heirs. Read more...
Converting assets to Roth enables potentially tax-free distributions later, as well as more flexibility and a hedge against higher tax rates.
Because you will pay ordinary income tax right away on the amount you convert, the strategy isn’t for everyone.
It may make sense to do a Roth conversion in a low-income year for someone with irregular income.
Converting assets to Roth early in retirement before facing required minimum distributions may benefit affluent households, particularly if you plan to leave an estate.
For most parents, it makes sense to consider how much financial aid your family might receive when developing a savings strategy for a college education. Read more...
Trying to save for the full sticker price of your child’s four-year college education can be daunting.
The key is to be realistic. Rules of thumb around saving for college might be useful, but they could also be inappropriate for your situation. Remember that most schools don’t meet 100% of a family’s financial need and that loans are often part of the financial aid package.
Whatever you do, don’t let the quest for financial aid eligibility deter you from saving. You don’t often hear about people who are unhappy that they saved too much.