Research Papers

The following are the most recent proprietary research papers written by PlanStrong Investment Management. These papers are available at no charge, and will be emailed to you after you fill out the short electronic form.  You can also call our office if you would like us to mail you a hard copy.

“The Fix is In” in Fixed Income

October, 2014

There is an economic train coming down the tracks, and there are a lot of retirees who are directly in its path.  This train will impact the economic and market landscape for many years to come. Any investor planning on living on a fixed income in retirement should beware.

While the US economy has recovered from the financial crisis of 2008, the recovery has cost a giant mountain of debt. Most Americans correctly suspect that the government can’t continue to spend more than it receives in income (taxes) over an extended period of time. Eventually, someone has to bear this cost.

But here’s the bad news: only some Americans will have to pay for this. Savers who have assets invested in cash or fixed income investments will bear the brunt of this cost. Since retirees have historically accumulated and relied on these kinds of stable investments, they will be the group most adversely impacted.

This information is provided for informational purposes only.  The information contained herein is from sources believed to be reliable, but its accuracy or completeness is not guaranteed.  This information should not be construed as an offer to sell or a solicitation of an offer to buy any security by PlanStrong Investment Management.  Any opinions expressed herein are subject to change without notice.

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Do You Know Your Number?

December, 2013

The Impact of Rising Interest Rates on Your Portfolio.

Regardless of your risk tolerance, age, or investment objectives, the vast majority of investors own individual bonds or bond mutual funds/ETFs in their investment portfolios. Recently, there has been a crescendo of opinions from respected bond managers announcing the “end of the 30 year bull market for bonds” and concerns about the “coming bursting of the bond bubble”. So why are bond managers making these predictions?

The answer is simple. Bond prices and interest rates move in opposite directions. Interest rates have been steadily declining for 30-years and are now at or near record lows, which has pushed the prices of existing bonds to record highs. Interest rates are not just at historic lows, but are also very close to zero, with nowhere to go but sideways or up.

Changes in interest rates affect bonds differently. For example, the price of long term, fixed rate bonds usually fare the worst in a rising interest rate environment. On the other hand, bonds that can reset their interest rate in a relatively short timeframe (i.e., variable rate bonds) can actually protect you from an increasing interest rate environment. So, it is really important to understand which bonds are positively and negatively impacted in this kind of environment, and to make sure that the portfolio is appropriately positioned for the current and expected inflation/ interest rate environment.

How exposed is your portfolio to rising interest rates?  What is Your Number?

This information is provided for informational purposes only.  The information contained herein is from sources believed to be reliable, but its accuracy or completeness is not guaranteed.  This information should not be construed as an offer to sell or a solicitation of an offer to buy any security by PlanStrong Investment Management.  Any opinions expressed herein are subject to change without notice.  Past performance is not a guarantee of future returns.

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In Search of Yield:  Mortgage REITs

October, 2012

For the last 30 years, fixed income investors have enjoyed a bull market.  Interest rates were at all time highs in 1981, and investors could buy very high quality 10 year bonds that paid 15%+ annual interest rates while experiencing relatively low inflation.  Investors could realize a real (net of inflation) return of about 11% while incurring very little risk.

Today is a very different story.  The safest 10 year bonds yield 1.5-2.0%, while inflation is running at about 2.2%, so the real return is negative.  Yield starved investors and investment managers have scoured the economic landscape for suitable replacements.  Over the past several years, money has flowed into high yield (“junk”) bonds, longer maturity bonds, mortgage backed bonds, emerging market government bonds, and dividend paying stocks (like electric utilities and telephone companies).  In the end, investors have been forced to accept significantly more risk to generate a yield that outpaces inflation.  One lesser known type of investment that has generated big dividend yields over the past several years has been mortgage REITs.  In fact, certain mortgage REITs currently have a dividend yield of 11-14%.  Of course, past performance cannot guarantee future results.

This paper discusses what REITs are and then defines Mortgage REITs.  It describes the risks associated with the three major classes of mortgage REITs, the investing criteria we use when we look at mortgage REITs, and the risks associated with these companies.  Finally, it concludes with some of the questions a prospective investor should ask when evaluating individual mortgage REIT companies. 

With annual dividend yields of 11-14%, mortgage REITs can be incredibly alluring to investors.  Caution is recommended when considering this kind of investment, and exposure should be limited in portfolios in which it is suitable.  It is very important to understand the details of any mortgage REIT before investing.

This information is provided for informational purposes only.  The information contained herein is from sources believed to be reliable, but its accuracy or completeness is not guaranteed.  This information should not be construed as an offer to sell or a solicitation of an offer to buy any security by PlanStrong Investment Management.  Any opinions expressed herein are subject to change without notice.  Past performance is not a guarantee of future returns.

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You’ve (Almost) Made It Back – Now What?

April, 2012

From October 2007 to March 2009, the major US stock indices lost half their value. Since that time, the markets have recovered some or all of their losses, and investors are understandably wary of the market turbulence. And, it has not been lost on investors that while the markets have been improving over the past 3 years, the first half of each year has been robust, and then the second half has been disappointing or worse. Having just completed the third year in a row with a strong start, the question is, what now? This paper reviews the market performance, economic growth outlook, and key risks facing investors. More importantly, it addresses the question “now what?” with several investment ideas and suggestions for future portfolio decisions.

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2011 Year in Review and 2012 Market Outlook

January, 2012

This paper reviews economic and market performance in 2011. The year was best described as a three act play, with an optimistic period, a time of weakening, and then a recovery of sorts. Investing results for stocks in the U.S. were humble, but positive, while outright negative in Europe and Asia. Some stock sectors generated attractive returns, while others lost 10-20%.

The paper examines what’s ahead for 2012, outlining two major factors that could likely impact economic and market performance, including Eurozone debt refinancing and U.S. presidential and congressional elections. Finally, several potential areas of opportunity to invest are discussed, and some areas to potentially avoid are also outlined.

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3 Portfolio Moves Before Year-End 2011

December, 2011

It’s hard to believe, but we are rapidly approaching the end of another calendar year.  Every year is a little different; thanks to our friends in Congress and the IRS; and 2011 is no exception.  With historic levels of market volatility experienced in 2011 and new tax rules effective this year, investors should carefully review the following items to see if they apply to their particular situation.  Pay special attention to the due dates, most of these actions must be completed by December 30th 2011; but some must be completed even before that!

This paper discusses the top three actions you may want to consider before year-end that may save you from a hefty tax bill.  Click below to order your free copy before its too late.

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Master Limited Partnerships Primer & Analysis

November, 2011

In today’s market, traditional fixed income yields are not entirely appealing. If your objective is to generate income from your portfolio, Master Limited Partnerships (MLP’s) may be right for you. Many MLP’s currently pay generous income (5-8% yields) and can offer price stability, growth, and tax benefits to investors.  Past performance is not a guarantee of future returns.

Critical factors should be used when considering certain MLP’s to invest in.  Click below to order your free copy to learn about MLP’s in detail and to learn tips on how to identify specific MLP stocks that may be favorable to include in your portfolio.

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Investment Landmines

October, 2011

Are you exposed to investments that could hurt your portfolio’s performance? Economists and market pundits are divided over whether the US will experience a double dip recession. At this point, solving the European crisis is likely the most imminent priority, with the deficit proposal for the US probably number two on the list. Without the successful resolution to both of these issues, the market could experience a meaningful decline, and economic growth could turn negative.

The first step to successful investing in an uncertain environment is to avoid known areas of risk. This concept is a key component of the PlanStrong investment approach. The purpose of this paper is to identify several kinds of investments that may be exposed in the current economic environment.  Click below to order your free copy and take a look at your investments to see if you have significant exposure to our areas of concern.

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Is the Bond Party Over? Alternative Options to Generate Income

March, 2011

For the past few decades, investment portfolios have been able to generate ample income from traditional, stable fixed income securities (like bonds) without experiencing much downside risk to the value of their principal.  More recently, this has become much more difficult to accomplish.

Simply put, investors are looking for a bond substitute portfolio that has reasonable price stability, is not overpriced, and has an attractive yield.  With interest rates at or near historic lows for bonds, it is very difficult to generate an attractive income stream.  Investors may be forced out on the risk-curve to generate the 5-6% annual yields they have grown accustomed to.  The question is: How can you generate attractive yields without going too far up the risk curve?

This paper examines fixed income investments that have historically paid better yields, but incur more risk.  It also includes a discussion of defensive stocks that may make sense, and factors to take into account when evaluating potential investments.  Finally, the paper discusses allocations of these assets to generate more attractive returns, while attempting to mitigate price volatility (risk).  Click below to order your free copy.

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Is Your Portfolio Ready for 2011? Where to Be and What to Avoid

January, 2011

Rate your portfolio now.   Find out if your portfolio is ready for 2011 by taking a quick 14 question quiz. Strategies and investments that worked in 2010 may not be best suited for 2011. The quiz focuses on key sectors that may be poised to do well and other areas that may be risky in the upcoming year. How does your portfolio compare?

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Individual Bonds - Hold to Maturity or Sell While They’re Hot?

October, 2010

During 2008 and 2009, the confidence in the bond market collapsed as a result of the rising default rates associated with the sub-prime mortgage crisis.  Investors fled from corporate and municipal bonds into “risk-free” US government securities.   As a result, corporate and municipal bond prices dropped and yields increased dramatically relative to U.S. Treasuries. This turned out to be a great opportunity for yield-seeking income investors who purchased these high coupon bonds.  When the credit markets subsequently calmed down in 2010, yields reversed course and are now near historic lows.  The prices of the bonds issued with high coupon rates in 2008-09 have been bid up to historic highs.  With the economy at a point where interest rates may increase, bond holders are concerned that bond prices may decline somewhat.  This begs the question:  Should I hold my bonds until maturity or sell them now while the prices are high to achieve maximum total return?”  Find out how to analyze your bonds in this paper.

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