MONEY bonds

The Weird Reason You Should Buy Treasury Bonds Right Now

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Henglein and Steets—Getty Images/Cultura RF

New research shows sunshine matters to the market.

Market timing is never a great strategy, but if you’ve been thinking about buying Treasury bonds to diversify your portfolio, the sunny spring days we are currently enjoying may be a great time to start.

Why’s that?

A surprising new study finds that seasonal affective disorder (SAD) doesn’t just affect individual investor’s decisions: It actually affects the market as a whole.

University of Toronto researcher Lisa Kramer and her team found that monthly returns on Treasury bonds swing 80 basis points on average between October and April, peaking in the fall and bottoming out in the spring.

“That kind of a systematic difference is huge,” says Kramer.

The variation seems to be caused by SAD, a seasonal mood disorder that affects up to 10% of the population.

Even after controlling for other explanations—like Treasury debt supply fluctuations and auction cycles—the study found that the bond return differences could be explained best by the increase in seasonal depression during dark winter months.

Kramer has also found similar effects of SAD on the stock market: Specifically, equity investors are more risk-averse as nights become longer (leading to lower returns) and then start becoming more open to risk as winter gives way to spring.

MONEY financial advice

CEO of World’s Largest Mutual Fund Shares His Best Financial Advice

The CEO of the world's largest mutual fund company shares the best financial advice he ever got and reveals his biggest money mistake.

MONEY investing strategy

How to Invest Better By Paying Less Attention

The secret to investing is not caring what happens.

Jiddu Krishnamurti spent his life giving spiritual talks. As he got older, he became more candid. In one famous moment, he asked the audience point-blank if they wanted to know his secret.

He whispered, “You see, I don’t mind what happens.”

I’ve spent the last five years as an investor trying to do the same. I’ve made a concerted attempt to care less about what happens in the investment world. I still pay attention, of course. It’s my job. But I’m far more selective about what I read. It has helped more than I could have possibly imagined.

Caring gives a false impression that what you’re thinking about is important. If I pay attention to quarterly earnings, shouldn’t I be a better investor? If I check what the market did this morning, am I not more informed?

Common sense tells you yes. But it’s wrong. More often than not, not caring is the way to go.

My journey started with a realization that the more media investors paid attention to, the worse they did. The more they analyzed, the more decisions they had to make. The more decisions they made, the more chances they had at being wrong, letting their emotions take over, and doing something regrettable. Find someone who has mastered personal finance, and you’ll find someone with a pathological ability to not give a damn.

There are so few exceptions to this rule it’s astounding. Where is the evidence that paying attention to every last piece of market news makes you a better investor? I’ve looked. I can’t find it.

So I stopped caring about a few things.

1. Finding the perfect portfolio

Investors crunch numbers to find the perfect number of international stocks they should own at a certain age, the precise amount they should allocate to bonds, and exactly when they should cut back on stocks when historical models show they’re overvalued.

Here’s the truth: None of these models are perfect, so back-of-the-envelope, “good enough” estimations will usually do just fine.

Harry Markowitz won the Nobel Prize for creating modern portfolio theory, a formula that precisely calculates the optimal asset allocation to maximize return at a given level of risk.

With his own money, he found this too complicated.

“I visualized my grief if the stock market went way up and I wasn’t in it — or if it went way down and I was completely in it,” Markowitz once said. “So I split my contributions 50/50 between stocks and bonds.”

Good enough.

2. Quarterly earnings

The median company in the S&P 500 was founded in 1949. So it’s 66 years old. Therefore quarterly earnings tell you what happened in the last 90 days, or 0.3%, of its life. The odds that groundbreaking developments will occur in such a short period of time are slim, and they approach zero as time goes on. It’s the equivalent of judging how your day is going by analyzing the last four minutes.

Amazon.com CEO Jeff Bezos says he runs his life on a “regret minimization” framework. His goal is to look back at age 80 and regret as few things as possible.

What are the odds that I’ll be 80 years old and say, “Man, I wish I paid more attention to Microsoft’s Q2 2011 revenue”? Pretty low. So I choose not to care.

3. Wondering why the market fell

The Dow fell 0.4% on Wednesday. Why?

Lots of reasons were given. One article blamed fluctuating interest rates. Another cited “Greece worries.” Others pointed to the Fed, weak GDP growth, and falling energy prices.

“Random, unidentified marginal sellers were a little bit more motivated than random, unidentified marginal buyers” wasn’t mentioned. But it’s the best explanation for why stocks fell. The same goes for almost every day.

4. Getting other investors to agree with me

Let’s say your weather app says it’ll be 78 and sunny tomorrow, and mine says it will be 74 and overcast.

Would we argue about this? Go on TV and duke it out? Call each other names?

Of course not. We’d say, “Eh, let’s just see what happens. Probably doesn’t matter either way.”

Investors don’t think this way. The fights people get into about whose forecast is right are off the charts.

Unlike weather, money is an emotional subject. And unlike tomorrow’s temperature, our investment decisions are in our control. So many investors get offended when others disagree with them. But once you realize that A) your views are just as biased as everyone else’s and B) there’s a good chance you’re both wrong, you stop seeing any reason to argue. Debate, sure. But life’s too short to argue.

Investing is so much more fun when you come to terms with these things. Set up a portfolio that suits you — one that lets you sleep at night and gives you a reasonable chance of meeting your financial goals. Give it room for error. Have a backup plan. It’s the best you can do.

After that, you see, I don’t mind what happens.

For more:

Contact Morgan Housel at mhousel@fool.com. The Motley Fool has a disclosure policy.
MONEY Shopping

The Death of the Shopping Mall Has Been Greatly Exaggerated

The Crystals shopping, dining, and entertainment complex at CityCenter in Las Vegas.
Jamie Pham—Alamy The Crystals shopping, dining, and entertainment complex at CityCenter in Las Vegas.

High-end malls are hot with investors

Even as the rise of online retailers such as Amazon.com leads analysts to predict the eventual death of the American shopping mall, real estate fund managers are betting some will prosper – if they can lure the right kind of consumer.

Simon Property Group, the largest high-end mall operator in the country with properties including Palo Alto, California’s Stanford Shopping Center and suburban Philadelphia’s King of Prussia Mall is the top holding in 53 of the 71 U.S. real estate funds tracked by Lipper. The average real estate fund devotes 8.8% of its portfolio to Simon, a bigger average bet than the 7.6% that tech funds invest in Apple and almost one percentage point more than the weight of Simon in the benchmark S&P U.S. REIT index.

Still a symbol of a car-based, middle-class suburban America, malls are increasingly seen as viable only if they attract the affluent. Fund managers are bullish on so-called Class A malls, anchored by department stores like Bloomingdale’s and featuring retailers like Apple, reflecting how better-off consumers have thrived since the end of the financial crisis while middle and lower income consumers have struggled.

“Class A malls are repositioning themselves to be destinations, with more restaurants, which is making them more resilient to what’s going on with the Internet,” said Rick Romano, a portfolio manager of the $3.8 billion Prudential Global Real Estate fund, who holds 4.5% of his portfolio in Simon, his top holding.

Class A malls are also the only shopping centers able to attract an Apple store, which can post annual sales of more than $5,000 a square foot – the highest of any U.S. retailer – and boost sales growth for other retailers throughout the mall, Romano said. As a result, Simon has been able to post rent increases of 18.9% for new leases over the last 12 months, according to Paul Morgan, an analyst at MLV & Co.

Simon’s average rent per square foot – which includes ongoing and new leases – rose 4.5% in the first quarter compared with the year before, or about six times the 0.8% pace of inflation in the U.S. Bloomingdale’s is the most frequent anchor store at the highest-rated malls in the country, followed by Nordstrom.

Those Americans in the top 20% of income – or Class A mall shoppers – have seen their household assets jump from about $15 trillion in 2010 to $25 trillion in 2014, according to Green Street Advisors. Household assets for Class B and lower mall customers rose from about $7 trillion in 2010 to a little over $10 trillion in 2014.

Class B malls are often saddled with struggling department stores such as Sears or J.C. Penney as anchors, making them less attractive to prospective tenants. Some 24 such malls have closed since 2010, and an additional 60 are on the brink of closure, according to Green Street Advisors.

No REIT fund hold Class B or lower mall operators as their largest holding, according to Lipper. J.C Penney and Sears are the most frequent anchor stores at Class C and lower malls, according to Green Street.

There are about 1,000 enclosed shopping malls in the U.S. Foot traffic at malls during the November and December holiday shopping season fell from approximately 35 billion visits in 2010 to 17.6 billion in 2013, according to an October Cushman and Wakefield report. Online commerce now accounts for 15% of retail sales – just 5 percentage points less than the percentage of retail sales that come from malls and gaining, according to a report from Green Street Advisors.

DEMAND FOR HIGH-END RISING

Investor demand for high-end malls will rise even if consumer spending overall flattens or starts to slow, said Jason Ko, a co-portfolio manager of the $2.1 billion J.P. Morgan Realty Income fund who has 7.8% of his portfolio in Simon, his largest position.

Macerich, the third-largest mall owner in the U.S., rejected a $16.8 billion takeover offer from Simon Property on April 1, a merger that would give Simon an even larger hold of the high-end mall market. Simon is not expected to come back with a higher offer, analysts and fund managers said.

“What that attempt signifies is that high quality malls are irreplaceable: difficult to build and difficult to buy,” Ko said.

Shares of Simon Property are down 5.5% since Macerich rejected its takeover offer, while shares of Macerich have fallen 2.2% over the same time. Over the last 12 months, shares of Simon are up 5.7%, or about 2 percentage points less than the 7.9% gain in the benchmark index.

Simon shares closed Wednesday at $181.31, compared with the average target price of $217.05 among analysts tracked by Thomson Reuters. At that price, Simon is selling at 39 times trailing 12 month earnings, slightly below the average 45 times earnings among its peers, according to Thomson Reuters data.

Class B malls, meanwhile, will not only feel the effects of sales declines at J.C. Penney and Sears, but will see increased competition from so-called power centers – suburban developments that are often next to a major highway and include a Home Depot or Best Buy alongside a traditional strip mall, said Ian Goltra, who helps oversee $2 billion in real estate investments at San Francisco-based Forward Funds.

Goltra has several short positions for Class B mall operators in his funds, yet expects shares of Simon to rise, even with its high percentage of fund ownership. He has been adding shares of Simon as it has traded in the $180s, down from a high of $205.31 on Jan 28th.

“They have the largest portfolio of blue-chip tenants, and that’s something their competitors have not been able to replicate,” he said.

MONEY Ask the Expert

How to Save For Retirement When You Don’t Have a 401(k)

Ask the Expert Retirement illustration
Robert A. Di Ieso, Jr.

Q: The company I work for doesn’t offer a 401(k). I am young professional who wants to start saving for retirement but I don’t have a lot of money. Where should I start? – Abraham Weiser, New York City

A: Millions of workers are in the same boat. One-quarter of full-time employees are at companies that don’t offer a retirement plan, according to government data. The situation is most common at small firms: Only 50% of workers at companies with fewer than 100 employees have 401(k)s vs. 82% of workers at medium and large companies.

Certainly, 401(k)s are one of the best ways to save for retirement. These plans let you make contributions directly from your paycheck, and you can put away a large amount ($18,000 in 2015 for those 49 and younger), which can grow tax sheltered.

But there are retirement savings options beyond the 401(k) that also offer attractive tax benefits, says Ryan P. Tuttle, a certified financial planner at Connecticut Wealth Management in Farmington, Ct.

Since you’re just getting started, your first step is to get a handle on your spending and cash flow, which will help you determine how much you can really afford to put away for retirement. If you have a lot of high-rate debt—say, student loans or credit cards—you should also be paying that down. But if you have to divert cash to pay off loans, you won’t be able to put away a lot for savings.

That doesn’t mean you should wait to put money away for retirement. Even if you can only save a small amount, perhaps $50 or $100 a week, do it now. The earlier you get going, the more time that money will have to compound, so even a few dollars here or there can make a big difference in two or three decades.

You can give an even bigger boost to your savings by opting for a tax-sheltered savings plan like an Individual Retirement Account (IRA), which protects your gains from Uncle Sam, at least temporarily.

These come in two flavors: traditional IRAs and Roth IRAs. In a traditional IRA, you pay taxes when you withdraw the money in retirement. Depending on your income, you may also qualify for a tax deduction on your IRA contribution. With a Roth IRA, it’s the opposite. You put in money after paying taxes but you can withdraw it tax free once you retire.

The downside to IRAs is that you can only stash $5,500 away each year, for those 49 and younger. And to make a full contribution to a Roth, your modified adjusted gross income must be less than $131,000 a year if you’re single or $193,000 for those married filing jointly.

If your pay doesn’t exceed the income limit, a Roth IRA is your best option, says Tuttle. When you’re young and your income is low, your tax rate will be lower. So the upfront tax break you get with a traditional IRA isn’t as big of a deal.

Ideally, you’ll contribute the maximum $5,500 to your IRA. But if you don’t have a chunk of money like that, have funds regularly transferred from your bank account to an IRA until you reach the $5,500. You can set up an IRA account easily with a low-fee provider such as Vanguard, Fidelity or T. Rowe Price.

Choose low-cost investments such as index funds and exchange-traded funds (ETFs); you can find choices on our Money 50 list of recommended funds and ETFs. Most younger investors will do best with a heavier concentration in stocks than bonds, since you’ll want growth and you have time to ride out market downturns. Still, your asset allocation should be geared to your individual risk tolerance.

If you end up maxing out your IRA, you can stash more money in a taxable account. Look for tax-efficient investments that generate little or no taxable gains—index funds and ETFs, again, may fill the bill.

Getting an early start in retirement savings is smart. But you should also be investing in your human capital. That means continuing to get education and adding to your skills so your earnings rise over time. Your earnings grow most quickly in those first decades of your career. “The more you earn, the more you can put away for retirement,” says Tuttle. As you move on to better opportunities—with any luck—you’ll land at a company that offers a great 401(k) plan, too.

Do you have a personal finance question for our experts? Write to AskTheExpert@moneymail.com.

Read next: Quick Guide to How Much You Need to Retire

MONEY Warren Buffett

13 Priceless Warren Buffett and Charlie Munger Quotes From the 50th Anniversary Meeting

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Nati Harnik—AP Berkshire Hathaway Chairman and CEO Warren Buffett, right, speaks alongside Vice Chairman Charlie Munger.

This year’s event offered numerous gems.

I made the trip to Omaha recently to glean investing wisdom from two of the greatest investors of all-time — Warren Buffett and his second-in-command, Charlie Munger — but I left with much more. Here are 13 of the most memorable life lessons from Berkshire Hathaway’s 2015 annual meeting.

1. On diets

Buffett said: “I am one-quarter Coca Cola. … if had eaten broccoli and brussel sprouts, I don’t think I would have lived as long.” Buffett added, “I don’t see a lot of smiles on the faces of people at Whole Foods.”

Both Buffett and Munger spent the majority of the meeting chowing down on See’s Candies and drinking Coke — though Buffett did mix in some pineapple juice for his voice. Say what you will about their diet — Buffett is 84, and Munger is 91. Maybe they cracked the code: Do what makes you happy.

2. On predicting the future

Buffett made it clear that Berkshire will “never made an acquisition based on macro factors.” This is because “we know we don’t know.”

Worrying about interest rates and the global economy is stressful, and you have no control over macroeconomic events. Just do as Buffett and Munger do: focus on what you can predict and control.

3. On taking risk

Buffett explained that he and Munger missed some opportunities early on and that they could have “pushed harder.” Munger replied: “It’s obviously true. If we’d used the leverage that some others did, Berkshire would have been much bigger … but we would have been sweating at night. It’s crazy to sweat at night.”

To which Buffett added slyly, “Over financial things.”

4. On finding the right people

When asked about Berkshire Hathaway’s investment managers Todd Combs and Ted Weschler, Munger said: “We want people where … every aspect about their personality makes you want to be around them. … Trust first, ability second.”

Surround yourself with people whom you want to be around and whom you can trust — sound advice.

5. On reputations

When asked how Berkshire Hathaway has built its culture, Munger suggested that it’s about “behaving well as you go through life.” Buffett added, “Over time, you get the reputation you deserve. … I believe the same is true for companies.”

6. On seeing a glass half-full

Munger was asked about insurance premiums for older adults. More precisely, it was a complaint that, even when healthy, elders have to pay more for insurance.

Munger replied: “You find you’re not deteriorating as fast as your contemporaries. You may be paying an unfair price for your auto insurance, but it’s a good tradeoff.”

Given the choice of either staying healthy or paying lower premiums, I’d take the first choice, too.

7. On selecting a spouse

“Look for someone with low expectations,” Munger said.

8. On being liked

The duo was asked by a young boy how they have gotten people to like them. Munger said, “Get very rich and generous.”

Buffett added, “People see all sorts of virtue when you’re writing a check.”

9. On philanthropy

When asked about his pledge to donate 99% of his wealth, Buffett said, “There’s no Forbes 400 in the graveyard.” He added that his equity holdings have “no utility to me, but have enormous utility around the world.”

Later, Buffett said that his goal was to figure out how he could “do the most good.” We may not all have billions of dollars to donate, but I think we can all appreciate the sentiment.

10. On how to succeed

“We’ve now watched a lot of other people get started. The ones who follow [Benjamin] Graham have done pretty well.” Munger continued, “Avoid being a perfect idiot.”

11. On continuing to learn

Munger was asked what matters to him most. He replied, “I think it’s dishonorable to stay stupider than you have to be.”

12. On preparing for opportunity

Buffett was asked why Berkshire Hathaway holds so much cash — never less than $20 billion — and he replied, “You never know when the phone will ring.”

Moral of the story: Make sure you’re ready when the stock market offers you an opportunity you can’t miss.

13. On big-picture thinking

When Buffett was asked whether today’s companies are too short-term-focused, he said, “We don’t ignore yearly earnings, but we don’t live by them.”

Buffett added that he is looking for businesses to be “widening their moat,” or improving their competitive advantage. Essentially, while earnings are important, he wants businesses to be constantly improving, and that doesn’t always immediately translate to bottom-line results.

Insert any personal goal or aspiration, and this applies.

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MONEY Warren Buffett

5 Secrets to Investing Success from Warren Buffett’s Annual Meeting

Warren Buffett, chairman of Berkshire Hathaway Inc., center, laughs with Bill Gates, chairman and founder of Microsoft Corp. and a Berkshire Hathaway Inc. director, left, as they play bridge during a shareholder event on the sidelines of the Berkshire Hathaway Inc. annual shareholders meeting in Omaha, Nebraska, U.S., on Sunday, May 3, 2015. More than 40,000 people were expected to attend yesterday's Berkshire Hathaway annual meeting, which marks Warren Buffett's 50th year running the company.
Daniel Acker—Bloomberg via Getty Images

At the recent meeting, Buffett cited the factors that contributed to his success.

My trip to Omaha this past weekend meant only one thing, a chance to listen and learn from two of the greatest investors of all time: Warren Buffett and his second in command, Charlie Munger.

Over five hours, the two fielded questions from shareholders on matters ranging from the state of Berkshire Hathaway BRK 0% to the German economy. But one question really grabbed my attention: What has allowed you to become such a successful investor?

In response, Buffett cited the five most important factors that contributed to his success.

1. “Enjoy the game”

Practice makes perfect, and the simple truth is that you’re more likely to practice what you love. As Buffett said, he has always been interested in investing — in fact, he bought his first stock at age 11.

The enthusiasm Buffett brings to the company’s annual meeting, and his obvious joy in educating others, makes it clear that 73 years later he still has great passion for investing.

2. “A great teacher”

Buffett had the first ingredient down pat, but he didn’t have a clear strategy. That began to take form after he read The Intelligent Investor for the first time in 1949. Buffett eventually attended Columbia Business School where he trained under the legendary value investor, and author of the The Intelligent Investor, Ben Graham.

Buffett’s investment philosophy has developed over time, but one major brushstroke hasn’t, and it is a Graham adage he shared in his 2013 letter to shareholders: “Price is what you pay, value is what you get.”

We can’t all go to Columbia, but we do have access to books written about or by legendary investors, and the opportunity to seek out intelligent people to learn from.

3. “It requires a certain emotional stability.”

Buffett and Munger are extraordinarily rational. They understand prices will rise and fall, and view falling stock prices as an opportunity to buy great businesses for less.

Theoretically, this isn’t difficult to grasp. If the same thing can be purchased at a lower cost, it’s a better deal. Yet when the stock market tumbles, it can be difficult not to panic and sell out.

Munger suggested we should all “avoid being a perfect idiot” in such situations. Which is about the best advice anyone can receive.

4. “Exceptional focus”

In a 2013 article by the Omaha World-Herald, Berkshire investment manager Todd Combs remembered Buffett coming into one of his classes at Columbia. Buffett was asked how the students could prepare for a career in investing. He grabbed a stack of pages of reports and other documents, and replied:

Read 500 pages like this every day. … That’s how knowledge works. It builds up, like compound interest. All of you can do it, but I guarantee not many of you will do it.

If the reading alone doesn’t prove Buffett’s focus, he suggested in his 1993 letter to shareholders, “Indeed, we’ll now settle for one good idea a year.” One big idea and 182,500 pages of reading per year. That’s focus.

5. “Keep yourself open to good accidents.”

Buffett was asked if he went back in time, could he recreate Berkshire Hathaway? He replied that the “odds are against it.” Mainly, he suggested, because he had experienced much good luck.

For instance, despite both growing up in Omaha, Buffett and Munger were introduced through a mutual contact when Buffett was in his late 20s and Munger in his mid-30s. Flash-forward more than 50 years, and in his 2014 letter to shareholders, Buffett credited Munger as the architect of Berkshire Hathaway: “The blueprint he gave me was simple: Forget what you know about buying fair businesses at wonderful prices; instead, buy wonderful businesses at fair prices.”

The two men’s introduction might have been fortuitous, but turning a meeting into a lifelong partnership is the ultimate example of being “open to good accidents.”

Bonus: “made some of that luck by being curious” — Charlie Munger

Buffett noted that he was also lucky to have accidentally met Lorimer Davidson in 1951. Davidson, who was named CEO of GEICO in 1958, spent four hours educating Buffett on the insurance industry during their chance meeting.

What Buffett did not mention was that his curiosity about GEICO encouraged him to hop on a train from Washington, D.C. to Maryland and visit the company. It was closed. Unfazed, Buffett pounded on the door until the custodian showed up and pointed him toward Davidson. After the meeting, Buffett began buying shares of GEICO and eventually purchased the company in 1995.

As Munger explained, he and Buffett are “dissatisfied with what they know,” and their curiosity forces them to continue learning and adapting. This has helped them — and can help you — create some of their own luck.

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