Portfolios

Advice to the Advisors

two puppies | the difference between SPX and SPY | Sheaff Brock Institutional Group

Have Your Clients Warmed to SPY and SPX? What’s the Diff?

“Many advisors have warmed to using options and products that use options in their portfolios in 2018,” Christopher Robbins writes in Financial Advisor magazine. “They have been encouraged by both more volatile markets in stocks and bonds and by the increasing ease and efficiency of applying the strategies.” In fact, not that long ago, the Chicago Board Options Exchange reported a new monthly volume record in October 2018 for S&P 500 options, at 41.4 million contracts traded. Two of the most [...]

Advice to the Advisors

On Paddle Board | Active Management of Preferred Stocks | Sheaff Brock Institutional Group

Elements of Active Management of a Preferred Portfolio

No question as to which side of the ongoing debate about the merits and shortcomings of active vs. passive management is exemplified in the Sheaff Brock Preferred Income portfolio—it’s run using an actively managed strategy, and there are reasons why. With the two-part goal of generating income while preserving capital, Senior Portfolio Manager JR Humphreys utilizes both institutional and retail preferred shares. So, how can advisors set about explaining to clients the distinction between active management and a passive approach? Passive [...]

Advice to the Advisors

Cityscape for REITs and New Tax Law Savings | Sheaff Brock Institutional Group

New Tax Law May Not Be the Only Reason to Pay Heed to REITs

Remarking on the fact that the Tax Cuts and Jobs Act is set to deliver over a trillion dollars in tax savings over the next decade, adding fuel to an already healthy economy, those tax savings can stand to generally improve the tax efficiency of REITs and other real asset investments,” JR Humphreys, portfolio manager of the Sheaff Brock Real Estate Income & Growth strategy posits. One of the central features of the tax bill is a 20% deduction on [...]

Advice to the Advisors

Upside Volatility on Wanted List | Sheaff Brock Institutional Group

Put Upside Volatility on the Wanted List?

Far from doing everything possible to avoid volatility, downside volatility is the only type to avoid. We should all want portfolios that have higher levels of upside volatility, Craig Israelson asserts. Traditionally, one advantage of building a broadly diversified portfolio is reduced volatility of returns. When higher standard deviation results in impressive upside performance, that is hardly something to be upset about, he observes. Well worth explaining to clients, the SPDR S&P 500 (NYSE symbol SPY) is the most widely traded contract [...]

Advice to the Advisors

Sheaff Brock Institutional Group | Featuring Option Strategies

Who’s Talking About Option Strategies?

The study results, published just a year and a half ago, represented good news for both Registered Investment Advisors and the Options Industry Council. The OIC had commissioned global research and consulting firm Cerulli Associates to find out how much interest and involvement there is among financial advisors when it came to including options in client portfolios. The report highlighted three important developments: One-third of financial advisors were already using options in 20% of their client portfolios. Advisors expected to [...]

Advice to the Advisors

Warren Buffett Lesson on Risk and Volatility | Sheaff Brock Institutional Group

The Lesson Many of Your Clients Were Never Taught

“That lesson has not customarily been taught in business schools,” Warren Buffett observes, referring to the concept that “Volatility is far from synonymous with risk.” In a 2015 letter to shareholders, the Berkshire Hathaway CEO wrote about the difference between risk and volatility. Many investors, he observes, “conflate these concepts, costing themselves money.” Of course, the fact that stock prices will always be far more volatile than cash-equivalents must play a part in any advisor-client discussions of portfolio design. But, [...]

Advice to the Advisors

Option Overlays Timely and Timeless | Sheaff Brock Institutional Group

Option Overlay Strategies—Timely, Yet Timeless

One over-arching theme in any financial-advisor-to-client messaging is the power of time, with the goal being to select investment tactics which are timely, yet which belong in portfolios based on timeless wisdom. In that context, option overlay strategies, Sheaff Brock posits, become a particularly relevant topic. There’s nothing new about option overlays. In fact, as Institutional Investor explains, the majority of U.S. pension plans have adopted overlay techniques as part of their investment tactics. And, while in investment vocabulary, the term “overlay” can have [...]

Advice to the Advisors

Our Dividend Growth Investing Methodology | Sheaff Brock Institutional Group

Dividend Growth Investing Methodology

Dividend growth investing, as seekingalpha.com explains, involves the researching and careful selection of high-quality companies that are capable of growing profits for extended periods of time and that pay shareholders sustainable dividends that are regularly increased on an annual basis. “The U.S. stock market has been one of the greatest long-term wealth generators in history, recording a compound annual growth rate around 9% since the late 1800s,” simplysafedividends.com reminds investors. “However, as with most things in life,” the authors caution, [...]

Advice to the Advisors

Preferred Stock as Portfolio Ballast | Sheaff Brock Institutional

Preferred Stock as Portfolio Ballast

“Corporate bonds and preferred stocks are two of the most common ways for a company to raise capital,” Ravi Srikant writes in Investopedia, and income-seeking investors, he says, can make good use of both. While bonds make regular interest payments, preferreds pay fixed dividends, Srikant explains, going on to note three qualities the two investment types share: Interest rate sensitivity—the security’s price falls when interest rates rise. Callability—the issuer has the right to call back the security and issue [...]

Advice to the Advisors

Dividend Growth Stocks | Potential to Take the Baton as Leaders | Sheaff Brock Institutional Group

Dividend Growers Might Steal the Baton

As advisors, having watched our clients move through the “banana peel” month of September and the “jinx month” of October, months known for stock market price drops, it’s crucial for us to prevent volatility-induced panic selling, keeping our investors’ vision focused on the months—and years—to come. Sheaff Brock Managing Director Dave Gilreath is doing just that. “Dividend growth stocks could become the leaders,” he predicts, “taking the baton from growth stocks.” Even assuming that growth in our economy slows to [...]