Volatility

Volatility is a measure of how the price of an asset – be it a stock, an option or a fund - changes. Volatility tracks how much the price moves and also how fast it changes. Beta is a commonly used statistical measure that represents volatility, and the higher beta is, the greater the risk. There’s usually a reference index such as the S&P 500 and if a stock perfectly tracks the index, it is said to have a beta of 1.0. If it changes more than the index, be it on the up or downside, it is a high beta stock. For example, a stock with a beta of 1.5 means that historically, it has moved 150% for every 100% move in the benchmark index. Mutual funds nowadays provide free volatility measures so you can get a good feel for how stable the fund is year in and year out.

Fees, Portability and Fiduciary Risk Continue to Present Hurdles for In-Plan Annuity Market

"In-Plan" annuities refer to the use of annuities within defined contribution pension programs such as 401k plans. The concept is relatively new, but the timing should be a perfect the concept to gain traction: The financial crisis has devastated the portfolios of many retirees and near-retirees. Millions of baby boomers will add to the 70 million or so U.S. residents over the age of 55. People are starving for stable, guaranteed sources of income in light of market volatility and increasing...

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Putnam CEO Advocates New Approach to Retirement Planning

Putnam Investments CEO Robert Reynolds spoke about the notion of "lifetime financial product allocation" at a recent industry conference. Reynolds supports the notion of a range of products over the course of one's lifetime that include: Lifetime income options to hedge against longevity risk . Relative return strategies to hedge inflation risk . Absolute return strategies to deal with both inflation and volatility risk ( sequence of returns risk ). Reynolds offered comments on the over-...

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Putnam Makes Move to Address Sequence of Returns Risk in Target Date Funds

Putnam, a large Boston-based money manager with $110 billion in assets, plans to move from 10 to 50 percent of the assets currently in its target date mutual funds into four different absolute return funds. The move serves as a confirmation of the hazards that sequence of returns risk presents to near retirees and those who are recently retired. As recently reported by Bloomberg, target date funds have come under increasing regulatory scrutiny as funds that are intended to serve investors...

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Is the "Cult of Equities" Coming to an End?

Brett Arends' recent column in the Wall Street Journal discusses the Cult of Equities, or as Arends describes: the naïve and euphoric belief that the stock market offers a one-way ticket to wealth: "riches for all." Arends discusses the possibility that a generation of investors--both professional and retail--may be starting to realize that stocks are to be cautiously considered for a portion of one's portfolio rather than serving as the dominant asset class. Market volatility is likely a...

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