‘Black swan’ strategies
Anticipating “still more financial pain in the months ahead,” some investors have embraced “black swan” strategies designed to succeed amid market calamity or other unpredictable events, said Jane J. Kim in The Wall Street Journal. A typical strategy is to put most of your portfolio in “ultra-safe” investments, such as Treasurys, then allocate a tiny portion to “speculative bets whose prices will soar during a market panic.” Traditionally, this sort of “tail-risk” approach has been the territory of institutions and well-to-do investors. Now it’s “trickling down to Main Street.” Retail bond-fund firm Pimco recently began incorporating such tactics into its Global Multi-Asset Fund. Naturally, there are drawbacks—in this case, higher-than-average costs that can chip away at returns when the market is uneventful.
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A recent report issued by the esteemed Wharton School touts annuities as a retirement-planning solution, said Neil Parmar in SmartMoney. There’s just one problem: The research is funded by New York Life, “one of the nation’s biggest sellers of income annuities.” Unfortunately, such collaborations between academia and industry are increasingly common. While professors insist that corporate sponsors are prohibited from “meddling,” some of them are still able to “squelch” unfavorable findings. So read the fine print. “One study by a professor who has consulted for a derivatives-trading firm called economic derivatives ‘exciting new risk diversification opportunities for individual investors.’”
Can frugal be sexy?
There’s a fine line between signaling to prospective mates that you’re mindful of money and suggesting that you’re just plain cheap, said Ron Lieber in The New York Times. A survey from ING Direct asked 1,000 people to identify words they associate with “frugal.” While 27 percent picked “stingy,” only 3.7 percent chose “sexy.” These findings may assist users of online dating sites, such as eHarmony, on which members are asked to rank their frugality, among other factors. Rank yourself too high on the frugal scale and you “turn off nearly half of the mating pool.” Instead, try using “subtle codes,” such as talking about your love of a good bargain.
