Photo: Umbdet. How to Manage your Finances during the University Years
These days, providing children with the best education possible may come with a hefty price tag but there are some simple lessons parents should teach their budding scholars before they start their university life. Not always do children get financial education in schools until it is mandated by the school systems, which is why they must be trained by their parents or learn about finance in the school of hard knocks which is an unforgiving teacher.
Students need to be aware of their financial responsibilities and more importantly, the adverse consequences poor financial habits can create. Therefore, taking the time to discuss financial matters can help students to initiate sound budgeting measures and prevent them from becoming overcome by debt which will stalk them long after graduation. Financial management skills are extremely valuable later in life and are necessary in order to have a good enjoyable life. Moreover, parents must teach their children how to defer the instant gratification that comes with consumption in order to save enough money to reach their long term financial goals.
Whether entering college or getting ready to graduate, it is key that parents and students keep some essential actions in mind when managing their budget:
Becoming a frugal freshman
Put limits on spending: Make sure students know what they need to survive and determine how much they are allowed to spend on every expense category. Building a budget that works will make it easier to keep spending at a sustainable level, avoiding the need for excessive borrowing.
Major in debt management
Manage debt during and after university: Students really need to understand what debt means for them and set out a plan to pay off their student loans, and any other debt. It is important to consolidate loans in a way that ensures you are paying the lowest interest rate possible. If managed incorrectly, loans can easily become an anchor weighing on future saving and investments. Moreover, accepting a credit card that comes with your new student account can also be a massive mistake; credit cards are not a good idea unless you can pay them off each month before the high interest rates kicks in. Remember that your credit limit is not a target you have to reach, but rather something you need to manage carefully.
Graduating from the University of Mom & Dad
Prepare for life outside of the family financial comfort zone: Mom and Dad have spent years providing comfort, security and financing to their children, often at the expense of their own financial needs. Now that your offspring have completed their education, it is time for them to move out of the family nest, and parents should establish some timelines that will help transition their children towards financial independence. This is an important step not only for young adults but for their parents also. Parents can use this opportunity to reassess their own financial situation and perhaps they can now afford to save more towards retirement or make higher payments on their mortgage.
As students become more financially independent, they should start building on their financial stability and trust their financial behavior. Only recognizing their own behavior, they will be able to best identify a financial advisor they can trust to manage their investments in the future.
The school years may be the best years in life but they can leave students with a burden of debt that persists long after their studies. The lessons above should be taken into account to best learn how to manage your finances during the university years and prepare for the years ahead.
Opinion column by Robert Stammers, CFA, director of Investor Education for CFA Institute
Wikimedia CommonsPhoto: Katrina.Tuliao. Horizons ETFs Group Will Launch First Andean ETF in Colombia
S&P Dow Jones Indiceshas licensedthe S&P MILA 40 Index to Horizons ETFs Group to serve as the basis for an exchange traded fund. The ETF will be listed on the Bolsa de Valores de Colombia (BVC) and will be the first Andean equity focused ETF available in Colombia.
The S&P MILA 40 Index, launched in 2011, was the first in a series of indices for Latin America’s second-largest market. The Index gauges the returns of the largest and most liquid stocks trading on the Mercado Integrado Latinoamericano (MILA) platform, an integrated trading venture formed by the Chile, Colombia and Peru stock exchanges.
Alka Banerjee, Managing Director of Global Equity Indices at S&P Dow Jones Indices, said: “We are pleased to license the S&P MILA 40 Index to Horizons ETFs. As growth and development of the Andean equity markets continue, the S&P MILA 40 Index provides a transparent and relevant benchmark for this important region of the world.”
Howard Atkinson, Managing Director of Horizons ETFs Management (LATAM) LLC and Global Head of Sales and Marketing for the Horizons ETFs Group said: “We’re very pleased to expand our global partnership with S&P Dow Jones Indices. This is the second international market we’ve entered where the first ETF we launched has replicated an S&P index. The S&P MILA 40 Index offers a way for investors to follow the tremendous growth potential of the MILA region.”
By Dolmang. Hangang Railway Bridge, Seoul, Korea. Environmental Awareness in Asia
I traveled to China in September, quite possibly one of the best times of the year to visit in terms of weather. The air quality in both Beijing and Shanghai was actually pleasant and was very different from how it seemed during my previous visits as well as from the typical accounts one usually hears of the notorious smog in China’s major cities. It made me think about growing up during the industrialization of my home country, South Korea.
In the 1980s, I lived in an industrialized city close to Seoul. The city then was filled with factories and its harbor was dirty. In school, we had to boil the tap water before we could drink it. Sometimes, during outdoor activity, students would walk around to pick garbage in neighborhood clean-up efforts. The fast economic development and rapidly growing population of Seoul in the late 1980s also polluted the Han River—hardly the place for family picnics. Fast forward a couple of decades, however, and now it is much cleaner and frequently enjoyed as a good spot for leisure and sports.
While Korea can still do more to improve its environment, the country has done much to correct the adverse impacts of its earlier industrialization. Since systematic waste water collection and treatment systems were installed in the Han River, Korea has invested approximately 1.5% to 1.8% of its GDP each year in pollution abatement. Though overall spending in this area decreased just after the 1997 Asian Financial Crisis, it has continued to grow each year since then amid more stringent environmental rules.
Spending for environmental control in Korea is well balanced between the public and business sectors. Corporations do their share to help protect the environment and public awareness is high. In fact, many Seoul citizens seem to have the correct mindset, placing greater importance on their own actions and habits for environmental protection than relying on just infrastructure investment spending.
As a much bigger country, China’s efforts to restore its environmental health could take much longer. One of its biggest challenges may be to encourage local governments to balance economic growth with environmental health. There are many statistics to measure the costs of China’s environmental pollution to its economy. By some estimates, it could possibly cost tens of billions of dollars to install the basic infrastructure to combat China’s pollution.
But judging from Korea’s experience, environmental improvements for China should be about more than just infrastructure investment. Environmental infrastructure requires every citizen’s efforts as well as the long-term commitment of both the government and private sector. Exactly how the value of environmental improvements are measured in monetary terms concerns entrepreneurs as they develop business models accordingly. However, no doubt such improvements should benefit us in countless ways and provide for many positive opportunities going forward.
In-Bok Song, Senior Research Analyst at Matthews Asia
The views and information discussed represent opinion and an assessment of market conditions at a specific point in time that are subject to change. It should not be relied upon as a recommendation to buy and sell particular securities or markets in general. The subject matter contained herein has been derived from several sources believed to be reliable and accurate at the time of compilation. Matthews International Capital Management, LLC does not accept any liability for losses either direct or consequential caused by the use of this information. Investing in international and emerging markets may involve additional risks, such as social and political instability, market illiquidity, exchange-rate fluctuations, a high level of volatility and limited regulation. In addition, single-country funds may be subject to a higher degree of market risk than diversified funds because of concentration in a specific geographic location. Investing in small- and mid-size companies is more risky than investing in large companies, as they may be more volatile and less liquid than large companies. This document has not been reviewed or approved by any regulatory body.
Wikimedia CommonsEd Cowart, CFA, Manafing Director at Eagle AM. VARG Better than GARP as an Investment Philosophy which Focuses More on Value Than on Growth
As part of Nordea’s strategy of signing exclusive agreements with boutique asset management companies specializing in asset classes that are outside its normal range, the Nordic management company agreed to launch a UCITS US AllCap Equity strategy in 2012, sub-advised by US’ Eagle Asset Management.
At the event held in Miami by Citywire, Funds Society had the opportunity to talk with Ed Cowart, CFA, portfolio co-manager of this US AllCap Equity strategy, as well as of the strategies Large Cap Value and Equity Income which are also managed by the company, although these last two are only available to the U.S. domestic investor.
“Our investment strategy follows the VARG (Value and Reasonable Growth) philosophy which comes before the traditional GARP (Growth at a Reasonable Price) model, because valuation is paramount,” says Cowart. The main idea behind the VARG investment philosophy is that it protects against paying too much for a company, while the reasonable growth vector provides protection from falling into value traps and unlocks the shares’ future valuation.
Thus, the strategy, which maintains between 30 and 50 stocks in its portfolio, brings together the best ideas of each of the four co-portfolio managers who make up this team and who have worked together for many years. “Whenever we see an idea in which we have a greater conviction, we will make room for it, ensuring at all times that we have our favorite stocks in the portfolio.”
This team of four co-managers has over 100 years of combined investment experience in a variety of market environments, with an excellent track record in terms of the capture ratio in both bull and bear markets.
Cowart, who is also Managing Director of Eagle Asset Management, explains that the team usually talks for months or even years before making the final decision to invest in a company where it is always fundamental to combine the two essential themes of the strategy : fundamentals + valuation. “Great companies can be terrible investments if the price is not adequate” he says.
When holdings are added to the portfolio, it is with the view of maintaining them for 2-3 years, so that on average, portfolio managers are adding a new name each month, usually to replace another one in the portfolio. “The catalyst which helps us decide to enter into a company which we like and which is cheap, varies. For example now, with the shale gas revolution in the U.S., the triggers required for manufacturing companies, not necessarily related to exploration, to be added to our portfolio are all in place. “
Eagle Asset Management’s US AllCap Equity strategy was launched in its U.S. domestic version in the last quarter of 1999, but it was not until June 2012, with its launch on Nordea’s SICAV, that it achieved greater successes, growing from an initial seed capital of $2 million at its launch to the $1.2 billion under management today.
“Together, in these three strategies we manage about $4 billion, and we find no problem seeing the AllCap strategy grow beyond $10 billion because our portfolio is more mid-cap than small-cap,” says Cowart.
Many investors have expressed concerns over the quality and general integrity of financial reports filed by Asian companies. Often cited as a reason to be less trusting are less stringent regulatory laws that have created a historical culture of accepting transgressions in corporate governance. Complicating matters are the size and maturity of capital markets in the region, particularly when compared to more advanced economies. Also, there are challenges faced by minority shareholders from company executives unaccustomed to outside interests in the management of their company. All of these are real concerns for investors in the region, and in many cases, can only be addressed through experience in different countries, industries and cultures—and even the variety of families that run each business.
As fundamental investors, being able to understand the myriad of complex accounting practices used in Asia, and ultimately being comfortable with them in order to make investment decisions, is critical for firms like ours. In what will be a series of commentaries, we will aim to dissect in more detail the often esoteric approach taken by many Asian companies to financial reporting and the communications around earnings management. This first issue will focus on “the numbers” and begin by looking at how we evaluate the quality of financial reporting. It will also explain what the role of forensic accounting—the process of taking a deeper look into a company’s accounting practices—plays within our firm.
At Matthews, the consistency with which a management team applies sensible and responsible accounting rules during both good times and bad is something we constantly evaluate and this presents a useful starting point for our discussion. Areas we pay specific attention to include determining whether the accounting policies a company elects to use increases management’s influence in setting executive compensation. For example, a company that incentivizes management with 10% growth in earnings per share (EPS), might see a consistent 10% improvement in its EPS year after year. In this instance, less volatile patterns of EPS are suspicious and we would tend to take a closer look into this area of their books.
We also pay attention to free cash flow generated by a company. While free cash flow is a fairly simple concept (cash flow from operations less capital expenditures), we tend to focus on those instances in which a company boosts cash flow from operations. For example, securitizing account receivables gives an exaggerated picture of the sustainable cash flow generated.
Related party transactions are another key area of concern. We tend to closely monitor these disclosures and try to understand the economic rationale behind these transactions. Corporate balance sheets are another factor to consider. For instance, there are many times when investors focus solely on the income statement. However, management might bypass the income statement altogether, and this may pose another red flag if the firm has unrecognized losses on its balance sheet without a credible economic explanation.
Opinion column by Sudarshan Murthy, CFA; Research Analyst at Matthews Asia
The views and information discussed represent opinion and an assessment of market conditions at a specific point in time that are subject to change. It should not be relied upon as a recommendation to buy and sell particular securities or markets in general. The subject matter contained herein has been derived from several sources believed to be reliable and accurate at the time of compilation. Matthews International Capital Management, LLC does not accept any liability for losses either direct or consequential caused by the use of this information. Investing in international and emerging markets may involve additional risks, such as social and political instability, market illiquidity, exchange-rate fluctuations, a high level of volatility and limited regulation. In addition, single-country funds may be subject to a higher degree of market risk than diversified funds because of concentration in a specific geographic location. Investing in small- and mid-size companies is more risky than investing in large companies, as they may be more volatile and less liquid than large companies. This document has not been reviewed or approved by any regulatory body.
Generali Investments Europe has appointed Wilfrid Pham as Head of Equity department and Vivek Tawadey as Head of Credit Research. Both will focus on supporting the company’s investment team, that globally manages more than €320 billion, and ensuring a strong alignment between analyst and portfolio managers.
In his position Pham will strengthen the current Equity team organization based on more than 20 people in Paris and in other European locations of Generali Investments Europe. Vivek Tawadey will consolidate the strong credit research capability of Generali Investments Europe, that globally manages in excess of €300 billion of fixed-income assets, with a specialist team dedicated to credit (more than €100 billion in this asset class).
“Wilfrid and Vivek are outstanding asset management professionals, enabling us to strengthen our team significantly”, said Santo Borsellino, CEO of Generali Investments Europe. “Our aim is to make Generali Investments Europe a more international and pure play asset management Company, increasingly focused on new product development to meet the needs of our insurance and third-party clients”.
Foto: Artyominc. La apuesta a contracorriente por Brasil
Brazilian equities have suddenly outperformed after trailing for a large part of the year. Since the end of August Brazil’s stock market has outperformed all other countries in the Latin America universe and has also widely outperformed the broader global and emerging market (EM) equity indices.
Three main drivers have contributed to the strong performance of emerging market assets and Brazilian equities. First, the US Federal Reserve’s (Fed) decision to postpone their planned ‘tapering’ of quantitative easing has ended speculation about a stronger US dollar and weaker EM currencies and bonds. This has led to strong rallies in local currencies and the stock markets of emerging market countries such as Brazil, India and Turkey that had suffered during the market sell-off earlier this year. The Brazilian Real was further supported by the central bank stepping in and intervening in the currency market. Second, Chinese economic data started to improve and countries with good export links to China have performed well. Finally, the Brazilian economy has started to show early signs of stabilisation – recent retail sales numbers have shown improvement and higher iron ore prices have boosted commodity-related industries.
The headwinds for this Latin American country are all well-known by investors – the economy has been growing below trend in recent years and the government remains stubbornly interventionist. It should be highlighted, however, that two of the three factors supporting Brazil in recent months are likely to remain in the near future i.e. the Fed further delaying tapering and stronger Chinese data. Furthermore, investor positioning in Brazil remains light and any marginal improvement in market sentiment is likely to lead to strong movements in equity prices. We believe that the contrarian case for Brazil remains based on its comparatively low equity valuations and sensitivity to any cyclical upturn in the fortunes of its main trading partners such as China and the US.
Opinion column by Christopher Palmer, Director of Global Emerging Markets at Henderson Global Investors.
Pershing released a white paper on the pending regulatory changes for fiduciaries and the potential impact on how advisors manage IRA rollovers. The white paper, “Pursuing Rollovers in an Evolving Regulatory Landscape” provides insight into the anticipated regulatory changes that will modify the definition of a fiduciary. Pershing has released this white paper to help guide advisors on how they can accommodate these rules as it pertains to IRA rollovers and continue to deliver services to their clients.
IRA Rollovers are a critical client need as well as an important part of the advisory business. As the “Baby Boomer” generation retires, advisors will need to help manage the transition of billions of dollars from retirement plans into rollover IRAs. At the same time, retirement plan distributions and IRA rollovers are becoming more regulated by the Department of Labor (DOL) which will require advisors to be knowledgeable about the regulatory changes to come.
“It is important for advisors to understand the complexities of the regulatory environment,” says Robert Cirrotti, director of retirement solutions at Pershing. “Being knowledgeable of the current and pending regulations that will affect the definition of a fiduciary is essential for advisors. These new definitions require advisors to understand when they are considered a fiduciary and when they are not.”
As the DOL works on regulation to expand the definition of fiduciary advice, more advisors could be subject to regulation by the Employee Retirement Income Security Act (ERISA). According to the paper, advisors who are not fiduciaries can help participants with distributions and rollovers. For those who are fiduciaries, or who become fiduciaries under the expanded definition, the DOL interpretations mean that advisors should consider a prudent approach for assisting clients with rollovers, including:
Clearly defining the fiduciary services provided to a plan so as not to include rollovers
Ensuring that the decision to take a distribution and to rollover an IRA is the participant’s decision
Offering clients unbiased educational materials regarding distribution alternatives and rollover services
Providing written disclosure of fees and expenses for the IRA and its investments, as well as the advisor’s compensation
If regulations change to expand the fiduciary definition, it will focus more attention on an advisor’s fiduciary status with regard to a plan or participant. Because it is not possible to predict what the rules will be once they are finalized, advisors should always consider their current practices based on the current regulatory environment until pending changes are clear.
Pershing partnered with Fred Reish, a nationally recognized ERISA attorney and retirement plan expert, to develop the white paper. To obtain a copy of the white paper, “Pursuing Rollovers in an Evolving Regulatory Landscape”, you may visit www.pershing.com.
Fred Reish and Bruce Ashton also authored a White Paper for J.P. Morgan Asset Management titled“Fiduciary implications: Using re-enrollment to improve target date fund adoption”to provide advice and to give an opinion regarding the ERISA fiduciary implications of using a re-enrollment strategy when adding target date funds to an investment line up, which is accesible in pdf file through this link.
Getting back to nature and helping sea turtles has been a Banamex tradition for eight years and such a popular one that 1,000 employees applied to volunteer at this summer’s Sea Turtle Conservation & Community Development program. Over the years, the program has been developed in partnership with the Mexican government and local communities where the sea turtles come ashore to lay their eggs.
Mexico is home to seven of the world’s eight species of sea turtles, which makes preserving these animals a key priority for our country. In a scant eight years, 513 Mexican and U.S. volunteers have donated 34,880 hours of service to set up 13 sea turtle camps across Mexico, preserved and protected 16,241 sea turtle eggs and released 34,764 baby turtles into the sea.
That’s eight generations of turtles that have been launched into the ocean! This year, Banamex began a two-year commitment at the Chenkan camp in Campeche, which is on the Gulf of Mexico. Eighty-two employees volunteered 9,700 hours placing the eggs in artificial nests and released 1,200 newly-hatched baby turtles into the sea.
What’s it like to volunteer at a Sea Turtle Conservation camp?
During the day, volunteers work to improve the observation station of the CONANP (National Commission for Protected Natural Areas), the government entity in charge of protecting sea turtles. This is where the scientists and volunteers, from Mexico and around the world, live during the project.
Activities include:
Construction work to maintain the turtles’ nesting areas to ensure the rescued eggs are protected from predators. In addition, they make new artificial nests and level the sand so turtles have a clear path to lay their eggs.
At night, volunteers divide into groups and patrol more than 15 miles of beaches, watching for the turtles to emerge from the sea and lay their eggs.
Volunteers must be very quiet and wait for the turtles to finish and go back to the sea before carefully placing the eggs in coolers and carrying them to artificial nests in the camp. They finish at 3:00 or 4:00 a.m., exhausted but happy!
Field trips into the sea to count, measure, and weigh young turtles that live in water near the shore. Volunteers also installed GPS trackers and barcodes to monitor turtles’ routes in the ocean over the course of their lives.
“We are so pleased with the Banamex volunteers who have supported the conservation program. Their commitment, passion and energy inspire us to continue our efforts,” said Adriana Laura Sarti, Sea Turtle National Conservation of the Mexican government
Other team successes this year:
For the first time, the program was linked to Citi’s Green Team and has been recognized by the Secretary of Environment in Mexico, who is laddering our efforts up to national and international impact, with the inclusion of Banamex Citi Volunteer program in the United Nations Development Program (UNDP).
Measuring carbon emissions of the program in an effort to minimize our carbon footprint.
Created 164 community development activities – raising awareness about sea turtle conservation and giving local residents the opportunity to be involved in the study of the species, including workshops offering financial and environmental education.
There are a total of 500 camps all over Mexico and Banamex’ long-term goal is to positively impact each.
JP Morgan Chase announced today that Michael Boardman will join the firm as CEO of Chase Wealth Management. Chase Wealth Management (CWM) today manages $179 billion of assets and has more than 3,000 advisors. In this role, he will help grow Chase Private Client and Chase Investments across CWM, working very closely with the firm’s partners in the Private Bank at J.P. Morgan. He will report to Barry Sommers, CEO of the Consumer Bank, and be based in New York.
Mr. Boardman joins the firm from U.S. Bancorp where he was President of the Private Client Reserve. He has held a distinguished 25-year career in wealth management. He previously worked at US Trust where he was most recently Head of the Midwest Region, and earlier at Charles Schwab as Vice President in Business Strategy. Michael originally began his career at Chemical Bank in the credit training program. He worked at JPMorgan Chase and its predecessor firms 14 years across Global Asset Management, Private Wealth Management and Corporate Strategy.
“We couldn’t be more excited to have someone of Michael’s caliber join our team,” said Barry Sommers, CEO of the Consumer Bank. “Michael is an A-player and can build on the terrific success we’ve had at Chase Wealth Management.”
Mr. Boardman joins Chase Wealth Management at a time of strong growth. Client investment assets grew 16% in the third quarter 2013 over a year earlier to an all-time high, and investment sales were up 30% YOY. Chase Private Client offices are now in more than 2,000 branches, touching every market in the Chase footprint.
Mr. Boardman graduated from Middlebury College and received his M.B.A. from Columbia University.
