In Japan, the average equity exposure is far lower, where bonds account for 48.8% of funds.
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Today, with interest rates at multi decade lows, higher equity exposure may be the appropriate structure.
Assuming growth is one of your investment goals, use the current weakness to thoughtfully add to your U.S. equity exposure.
At first glance it may seem investors are acting sensibly by increasing their equity exposure while eschewing more defensive asset classes.
The target-date model and age-in-bonds model reduce equity exposure in the later years while the flight path model holds risk constant.
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Investors in general have a much greater percentage of equity exposure invested in foreign securities than 10 or 20 years ago.
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To put the odds in you favor, I recommend that those who are fully invested reduce your equity exposure now by 20%.
From this perspective, I believe it is wise for investors, including retirees, to maintain equity exposure to benefit from long-term economic growth.
The poll data, gathered from 56 leading investment houses in the U.S., Japan and Europe, revealed a 1.3% drop in equity exposure.
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Investors wanting to add private equity exposure to their portfolio can look to the PowerShares Listed Private Equity ETF ( PSP) for diversification and income.
Or, said slightly differently, historically the role of fixed income in an individual's portfolio has been to offset the volatility inherent in having equity exposure.
By contrast, at the end of November last year, when the Dow industrials were about 8% lower, such editors as a group were advocating an equity exposure of 70.8%.
Fortunately, the case for sectors as a way to augment your core equity exposure and manage your economic perspective is buttressed by more advanced measurements of their return patterns.
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For instance, if you intended to keep a portfolio of half bonds and half equities, but the stock markets have surged, you may need to manually pare back your equity exposure to stay in line with that stated goal.
As a threshold matter, the interests of an equity investor would not necessarily be aligned with those of ACA or other noteholders, and holders of equity may also hold other long or short positions that offset or exceed their equity exposure.
The numbers in the charts below certainly support long-term stock market participation and argue that Ms. Kunis and others of her cohort should give much greater consideration to upping the equity exposure for money that is truly part of their long-term asset allocations.
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These return drivers may include reduced exposure to long equity, and increased exposure to alternatives, commodities, master limited partnerships, and different types of fixed income securities that provide returns commensurate with the risks.
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For not all bonds are created equal, and investors may be unwittingly increasing their exposure to equity risk by allocating portions of their fixed income exposure to high-yield bonds, which behave much like equities.
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It is also possible to bend the risk curve using other ETFs such as QQQ for Nasdaq exposure, DIA for Dow Jones Industrial Average exposure, EEM for emerging markets exposure, or even non-equity ETFs such as GLD for gold exposure.
Morgan Stanley CEO James Gorman recently responded to rumors that its European bank exposure is three times its market cap, and well over its entire book equity value, and that its exposure to French banks is 60% greater than its market cap.
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Far harder to quantify, and potentially more worrying, is the financial sector's exposure to the equity markets (or other financial markets) through the use of derivatives.
That move reduced all equity and high-yield bond exposure, creating 50% cash or cash equivalent allocations across all portfolios.
The Buy Korea Renaissance Equity Unit Trust, which limits exposure to equities at 50% of its assets, gained 13.9%.
Private-equity funds, for example, give investors exposure to the same kinds of risks as quoted companies, only with added leverage.
The first is to invest in private equity and venture capital funds, which provides direct exposure to private companies but at a steep price (see story, p. 158).
Undoubtedly, there is a danger that exposure to bad hedge-fund or private-equity loans could damage the banks, but the same is true of property companies.
The logic behind long-only equity, that risky assets deserve higher growth potential and straight market exposure will provide acceptable returns, works well in the ivory tower of modern portfolio theory, but often takes decades to deliver results in practice.
This, coupled with fixed income exposure, served the fund well over 2011 relative to broader equity indices.
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