Franklin Templeton Insights: To Rebalance or Not to Rebalance
Some investors use a set-it-and-forget-it approach to their portfolios, but there are times when the asset mix may need to be recalibrated to achieve one’s goals.
Some investors use a set-it-and-forget-it approach to their portfolios, but there are times when the asset mix may need to be recalibrated to achieve one’s goals.
In this week’s article we will have a look at the relationship between net asset value (NAV), yield, and total return. There are two main components of total return, Income or yield and capital appreciation, which are two ways how an investor in mutual funds can earn money.
Last week global equities were weaker overall on what turned out to be a rather interesting week in terms of newsflow. The MSCI World Index finished down 1.5%, the S&P 500 Index was down 1.3%, the STOXX Europe 600 was down 1.2% and the MSCI Asia Pacific was down 2.3%. Headlines remain mixed as we progress towards some kind of loosening of the COVID-19 lockdowns.
Global economic activity is being frozen to stem the coronavirus pandemic. Yet implications for asset prices will depend on the cumulative impact of the growth shortfall over time. BlackRock believe that policy actions to cushion the impact of virus shock are nothing short of a revolution.
A mutual fund’s price is calculated as its net asset value, or NAV. The NAV for a given mutual fund is the price of its assets (with all of its liabilities subtracted) divided by the number of shares.
When times of turmoil hit, most investors become risk-averse, seeking safety over opportunity for higher returns. The coronavirus-driven crisis is no different in that regard. However, director of fixed income at Franklin Templeton, London, sees some striking differences between this and other crises.
All major ratings agencies adopt a “rate through the cycle” approach. All agencies have also given implicit/explicit credit to euro issuers for being part of the EU and, to a greater or lesser extent, operated in the expectation that the EU will work to help any member state as long as that state tries to help itself.
Amid all the debate around the fallout from COVID-19, we have been surprised by how little we have seen about what the massive stimulus efforts actually mean against the potential economic destruction caused by the virus.
It was a quiet start to last week, with a number of markets closed on Monday for the Easter holiday. Equity markets moved higher, which largely reflected investor focus on the incremental positives regarding the COVID-19 situation despite the fundamental backdrop still looking both grim and precarious.
BlackRock have turned more cautious on emerging market (EM) local debt despite depressed valuations after recent selloffs. Some EMs have allowed their currencies to weaken to help absorb the economic shock, and we see a risk of further currency declines in selected EMs that could wipe out coupon income.
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