Why NetWorthProtect Believes We Are In Buying Territory

1) U.S. Downgrade is basically a ”Political Leader B#tch Slap” (one I think they deserve): Below is an excerpt from Standard & Poor’s (S&P) most recent Sovereign Default Study – the study most applicable for discussing US debt obligations.  Notice anything concerning the difference between AAA, AA and A?    This is an average cumulative default table – so on average, for instance, the 5-year cumulative default study for BBB-rated debt is 3.97%.  THERE IS NO DISCERNIBLE DEFAULT FREQUENCY or frequency variation around any sovereign debt rated above A.  Thus, S&P’s own study shows no default variation differential between AAA & A.  The fact that the US is AA+ or A- is completely qualitative and arbitrary relative to historical default data.  This means that the market will continue to view the U.S. as effectively AAA because the downgrade has nothing to do with statistics and models.  BUT, it has everything to do with telling the U.S. Leaders that they screwed up so bad that a subjective over-ride of their debt rating model is warranted given the government’s inability to balance the budget and create a budget surplus, control spending (and its general failure investing money).

S and P 500


2) 10-year Treasury Yields of … Read the rest

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Should You Leverage The S&P 500 In Your Portfolio


Recently I sat down to think of possible improvements that I can make that will enhance the performance of my Questrade retirement investment portfolio. Like most people, I have significant exposure to the greater U.S. equity markets with approximately 45% of my finance portfolio invested in large capitalization equities, which are components of the S&P 500 Index.

S&P 500

The S&P 500 Index tracks the combined performance of the 500 largest companies in the U.S.  So, buying a share in a mutual fund or Exchange-Traded Fund (ETF) that has an investment mandate to mirror the S&P 500 will give you returns equal to the index, less any fees and expenses related to managing the portfolio.  In other words, if I hear someone say “the S&P 500 went up 2% today”, then it is highly probable that about 45% of investment portfolio increased in value by 2% as well.

Now, I am quite certain that for the foreseeable future my portfolio will continue to have significant S&P 500 Index exposure.   Therefore, whether I know it or not, I am effectively saying, “I believe that investing in an S&P 500 Index Fund is going to give me the necessary long-term returns to fund … Read the rest

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