21 min
How to Invest When You Can’t Predict the Future: Part 2 Finance Lab
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- Investing
Welcome back to the second part of our conversation with Artie Green, Certified Financial Planner and founder of Cognizant Wealth Advisors, continuing our discussion from last episode on unraveling the complexities of investing when the future is unpredictable. Today we continue the conversation on managing risk effectively.
Artie shares insights derived from the renowned economist Harry Markowitz's modern portfolio theory. He emphasizes the power of diversification, explaining how spreading investments across various assets and using tools like mutual funds or exchange traded funds can help mitigate risks. We also explore the concept of correlation, understanding the delicate balance needed between assets to maximize diversification.
Artie also sheds light on the tumultuous year of 2022, marked by the worst performance in bond history. He unravels the intricacies of the bond market, discussing the impact of rising interest rates and inflation on bond prices.
Despite the challenges, however, Artie remains optimistic about bonds as an investment option, pointing out the potential for attractive returns, especially if the Federal Reserve stabilizes rates. Our conversation delves into the nuanced world of short-term and long-term rates, providing listeners with valuable insights into navigating the complex landscape of bonds.
Guest Bio: Artie is a CERTIFIED FINANCIAL PLANNER™ Professional and founder of Cognizant Wealth Advisors. He is a recognized expert in financial planning and has been quoted in numerous print and online media such as The Wall Street Journal, Kiplinger, Forbes, Bloomberg, and Money. He has served on two non-profit boards and currently on the Los Altos Community Foundation investment committee.
Key Moments:
0:46: We are continuing our conversation from the last episode with Artie Green.
1:33: Artie explains diversification, a principle from modern portfolio theory.
3:59: Diversification involves selecting uncorrelated assets to reduce risk and potentially increase returns.
6:12: Bonds, known for stability, exemplify assets with low or no correlation.
7:00: Artie details how a rapid rise in interest rates led to historic losses in bond market in 2022.
10:09: Bond holders are unaffected if they're holding until maturity; issues arise for bond mutual funds in 2022.
11:39: Bond duration, based on maturity, affects sensitivity to interest rate changes.
13:30: Artie explains why he sees bonds as one of the better investments today.
17:08: Artie predicts that Fed is likely to slow or stop rate hikes if inflation mitigates and recession risks rise.
18:17: Artie adds that any time is the right time to invest in the capital markets for future growth.
Additional Resources:
Finance Lab website: https://www.financelab.dalbar.com
Visit the Cognizant Wealth Advisors’ website: https://www.cognizantwealth.com
Listen, rate, and subscribe!
Thanks for listening to Finance Lab! If you enjoyed our discussion, please rate our show and subscribe to hear more illuminating financial discussions weekly.
Amazon Music: https://music.amazon.com/podcasts/0d0eedbe-fae4-4451-9a83-13d9cc35d050/finance-lab
Apple Podcasts: https://podcasts.apple.com/us/podcast/finance-lab/id1707189976
Google Podcasts: a...
Welcome back to the second part of our conversation with Artie Green, Certified Financial Planner and founder of Cognizant Wealth Advisors, continuing our discussion from last episode on unraveling the complexities of investing when the future is unpredictable. Today we continue the conversation on managing risk effectively.
Artie shares insights derived from the renowned economist Harry Markowitz's modern portfolio theory. He emphasizes the power of diversification, explaining how spreading investments across various assets and using tools like mutual funds or exchange traded funds can help mitigate risks. We also explore the concept of correlation, understanding the delicate balance needed between assets to maximize diversification.
Artie also sheds light on the tumultuous year of 2022, marked by the worst performance in bond history. He unravels the intricacies of the bond market, discussing the impact of rising interest rates and inflation on bond prices.
Despite the challenges, however, Artie remains optimistic about bonds as an investment option, pointing out the potential for attractive returns, especially if the Federal Reserve stabilizes rates. Our conversation delves into the nuanced world of short-term and long-term rates, providing listeners with valuable insights into navigating the complex landscape of bonds.
Guest Bio: Artie is a CERTIFIED FINANCIAL PLANNER™ Professional and founder of Cognizant Wealth Advisors. He is a recognized expert in financial planning and has been quoted in numerous print and online media such as The Wall Street Journal, Kiplinger, Forbes, Bloomberg, and Money. He has served on two non-profit boards and currently on the Los Altos Community Foundation investment committee.
Key Moments:
0:46: We are continuing our conversation from the last episode with Artie Green.
1:33: Artie explains diversification, a principle from modern portfolio theory.
3:59: Diversification involves selecting uncorrelated assets to reduce risk and potentially increase returns.
6:12: Bonds, known for stability, exemplify assets with low or no correlation.
7:00: Artie details how a rapid rise in interest rates led to historic losses in bond market in 2022.
10:09: Bond holders are unaffected if they're holding until maturity; issues arise for bond mutual funds in 2022.
11:39: Bond duration, based on maturity, affects sensitivity to interest rate changes.
13:30: Artie explains why he sees bonds as one of the better investments today.
17:08: Artie predicts that Fed is likely to slow or stop rate hikes if inflation mitigates and recession risks rise.
18:17: Artie adds that any time is the right time to invest in the capital markets for future growth.
Additional Resources:
Finance Lab website: https://www.financelab.dalbar.com
Visit the Cognizant Wealth Advisors’ website: https://www.cognizantwealth.com
Listen, rate, and subscribe!
Thanks for listening to Finance Lab! If you enjoyed our discussion, please rate our show and subscribe to hear more illuminating financial discussions weekly.
Amazon Music: https://music.amazon.com/podcasts/0d0eedbe-fae4-4451-9a83-13d9cc35d050/finance-lab
Apple Podcasts: https://podcasts.apple.com/us/podcast/finance-lab/id1707189976
Google Podcasts: a...
21 min