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As the new year begins and interest rates are at multi-year highs, many investors may be wondering how best to invest their money in 2024, given the uncertainty facing the market. unknown. Thomas Heller, chief investment officer at Switzerland-based Belvedere Asset Management, said his first advice to clients with a long-term horizon is to stay invested regardless of the current macroeconomic situation. talk. “Invest. I think not being invested is the biggest investment mistake people make,” Heller told CNBC Pro from Zurich. “My experience is more than that. [investors] have [cash] They simply don’t know what to do or ignore it. “It’s not an active position,” he explained. Heller, whose company typically serves clients with about $1 million in investable assets, added that earning a high interest rate on cash balances should not be an excuse to delay investment decisions. Ta. Redha, head of multi-asset solutions at PineBridge Investments, believes that investors should make portfolio allocation decisions based on economic conditions, and has previously managed portfolios of sovereign wealth funds and hedge funds. Mr. Redha laid out a “medium-term approach.” The focus is on the next five years. He believes that this period roughly corresponds to his one business cycle and allows investors to adapt to changes better than holding investments statically for his 10 years. The graph below shows his five-year forecast for Pine Bridge His Investments over multiple time periods. Where to allocate? For a 10-year investment horizon, assuming a limited need for investment capital over that period, Heller recommends a “medium-risk” portfolio with 90% to 95% equity; and 70% allocation to stocks. Heller, who previously served as chief investment officer, says he puts 20% in bonds for “more cautious investors.” He spent eight years at Schweizer-Kantner Bank, a Swiss government-owned lender that also invests in high-yield assets such as credit. “We will allocate 10% to similar recommended alternatives over the next 10 years,” he added. Reda cited the VanEck CLO ETF, which PineBridge is “sub-advising,” as an example of an alternative asset that investors could invest 3% to 5% of their portfolio into. CLOI YTD Line This fund bundles Collateralized Loan Obligations (CLOs), which are fixed income products with higher returns than corporate bonds. Previously, CLOs were only accessible to ultra-high-net-worth individuals, family offices, or institutions. The ETF, which primarily holds bonds issued by investment-grade companies, is up 8.8% this year and currently has an SEC 30-day yield of 6%. However, Reda cautioned that because CLOs are sensitive to prevailing interest rates, future returns may not be as high as the Federal Reserve has signaled three rate cuts next year. Turning to geography, Heller said global investors shouldn’t “ignore the U.S. market” despite the recent surge in U.S. stock prices, and should not “ignore the U.S. market” with a slight bias toward their home country. I think it should be distributed to He suggests explicitly tilting U.S. equity exposure beyond large-cap benchmark indexes to also include global small-cap stocks. Meanwhile, Redha believes that emerging markets and Indian stocks in particular are attractive equity investments for a $1 million portfolio, with the expected annualized return of these markets over the next five years exceeding a broad range of stocks in the US and Europe. We expect it to be significantly higher than the index. He points out that valuations across major benchmark indexes are expensive and advises being selective in markets such as the tech-heavy Nasdaq. Even the S&P 500 is on track to close 23% higher this year, with many market participants believing valuations are outpacing fundamentals. Instead, Reda suggests investors should look to U.S. healthcare stocks through the Healthcare Select Sector SPDR ETF, which he says is attractive for structural and cyclical reasons. He thinks so. XLV YTD Line Bonds Rising yields over the past year have generated more investor interest in bonds than seen in the past decade. Belvedere’s Heller prefers investing in corporate bonds rather than government bonds for additional yield, and recommends “high-quality” companies for at least half of the bond allocation. Pine Bridge’s Redha echoed that sentiment. “Bonds are back,” he said, noting that bonds and other fixed-income investments are much more attractive now than they were in the past decade, when yields were low. The Vanguard Long-Term Corporate Bond ETF, for example, pays an annual dividend of nearly 6%, which Redha says is “a pretty good result” for corporate bond investors. Mr. Reda said investment-grade corporate bonds are outperforming what stocks have historically done, even given his expectations that inflation will decline from current highs but remain above pre-pandemic lows. It said it would deliver similar “real returns” adjusted for inflation. Overall, Heller and Redha emphasize that investors should be more selective in their investments over the next decade, rather than relying on basic market-cap-weighted indices or broad benchmarks. did.
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