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High-Quality U.S. Stocks Are Trading at Bargain Prices

By U.S. News & World Report

The recent decline in the equity markets has been uncomfortable, to say the least. As mentioned in a previous post, we wouldn’t have been surprised by a correction of 10 percent and would take advantage of such an occurrence to add to high-quality equity positions to portfolios.

What we did not expect was a rapid descent surrounded by tremendous volatility.

We still maintain our position that a rate increase by the Federal Reserve, whenever it arrives, will not dampen the prospects for domestic equities, although we do expect some volatility surrounding any announcement by the Fed.

Despite the recent rally, the world has been in a “risk-off” mentality since mid-August. Fears of a decelerating Chinese economy and global growth in general, significant downward pressure on emerging market currencies and the prospect of an interest rate hike in the U.S. sent investors for the exits. More than $9.2 billion was redeemed from equity mutual funds during August, in addition to $21.53 billion liquidated from taxable bond funds, according to the Investment Company Institute, an association based in the District of Columbia. The U.S. Treasury 10-year yield moved lower as investors sought a safe haven for their investment capital. This “risk-off” capital will have to find a home again. Interestingly, U.S. Treasuries are the “risk-off” instrument of choice for global investors.

As we speak to our managers, they all point out that many high-quality companies appear to be trading at bargain prices. The U.S. economy remains on a stronger course and stands out as a bastion of stability, compared to most other countries. The unemployment rate has dropped to 5.1 percent. Second-quarter GDP was recently revised to 3.7 percent. Productivity continues to rise, and we believe merger and acquisition activity may reach a record in 2015. U.S. companies are expected to return $1 trillion to investors through repurchase programs and increased dividends this year. Valuations have become more attractive — and we like what we see.

During the qualitative easing years, the U.S. was considered by many to be the risk market of choice for investors around the world, whether it was equities, bonds or New York condominiums. Global QE has created an immense amount of investment capital. That capital needs to generate returns for its owners. At some point, we will go back to a sustainable “risk-on” mentality. When this happens, we believe the U.S. equity markets are the first place investors will look.

This is not a trading call. We are long-term investors. Looking back three to five years, we believe this current market dislocation will look like a buying opportunity.

The rough ride may not be over, but it may be time to start deploying capital to domestic equities on pullbacks. We are recommending index funds for large-capitalization growth, large-cap value and dividend-oriented strategies. Small- and mid-cap stocks look especially attractive, because most of these businesses are oriented toward our domestic market. Lower energy and commodity prices are reducing input costs and these companies face fewer headwinds from a stronger dollar. We advocate active management here. We are not reducing European or emerging market equity exposure. Hedge funds have validated their place in portfolios during this dislocation. We continue to keep the duration short and credit quality high in bond portfolios.

As always, long-term success is about asset allocation and rebalancing. While it is impossible to time market bottoms and it always feels wrong to step into declining markets, we’re taking the long view and are beginning to slowly increase our allocation to high-quality U.S. stocks.

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High-Quality U.S. Stocks Are Trading at Bargain Prices originally appeared on usnews.com

Don’t Settle for Student Loans to Pay for Online Education

By WTOP Staff
Online college programs are becoming a more popular choice for prospective students, with one study finding that more than 6 million students enrolled in at least one online course in fall 2015. The popularity of these courses can be attributed in part to their flexibility with working adults' schedules, students' ability to progress more quickly through online programs and, oftentimes, cheaper tuition. [See 10 low-cost online bachelor's programs for out-of-state students.]Online degrees can be beneficial to many college students, but some studies have shown online learners complete their programs at lower rates than students at traditional brick-and-mortar campuses. Individuals with student loans but no degree comprise two-thirds of defaulted borrowers. Though these numbers are not encouraging, just like for traditional programs, there are ways to reduce how much you'll need to borrow for an online program to ensure you won't become one of these statistics. Don't just settle on borrowing student loans to cover the whole cost of your program and living expenses. Instead, start thinking about how to cut costs and cover your balance in different ways, such as the following. -- Grants and scholarships: Even though you are taking an online course, you can still apply and receive grants and scholarships. But your first step should be to complete the Free Application for Federal Student Aid, commonly referred to as the FAFSA, which will allow you to receive a Pell Grant if your expected family contribution is low enough. The EFC criteria and award amounts are adjusted annually, but the 2017-2018 academic year awards range from $606 to $5,920, which could significantly lower the amount you borrow annually. Your next step is to apply for scholarships. You can start by checking online scholarship search engines, such as the Salt Scholarship Search, College Board's BigFuture and Peterson's. But don't forget to take advantage of local organizations and your school's financial aid office. Both may offer scholarships that you can't find with a national scholarship search. [Review these 10 sites to kick off your scholarship search.]For instance, organizations like the Elks Club, Knights of Columbus or the Rotary Club typically offer scholarships annually to local students. Just because you're going to school online doesn't mean you're ineligible. Visit your local library for scholarship listings, and ask around town. You might be surprised how many local organizations offer scholarships. While these scholarships typically aren't large, every little bit counts. Each dollar you receive in a scholarship is a dollar you don't have to borrow and pay interest on. -- Work-study: Another option for online students may be work-study awards. Not all students enrolled in online programs are eligible, but students at some schools -- including, for example, SUNY Empire State College and Liberty University -- are. Work-study awards are not given upfront like scholarships and grants. In most cases, they are an offer to earn up to the awarded amount if you secure an eligible work-study job. While there is a misconception that all work-study jobs must be on campus, students can work for off-campus, nonprofit or public employers as long as the work is in the public's interest. You may be able to work for a for-profit employer if the job is relevant to your course of study. No matter who the outside employer is, it will need to have an established agreement with your college for you to receive work-study funds. Remember, to be eligible for federal financial aid, you must be enrolled and pursuing a degree or certificate. If you're not working toward a credential, Pell Grants and work-study won't be option, but you may still be able to take advantage of private scholarships -- just be sure to read the eligibility criteria carefully. [Explore what to know about financial aid in online programs.]-- Pay as you go: One of the great benefits to enrolling online is the flexible schedule, which can allow you to complete your college coursework around your responsibilities. But prospective students often overlook using their part- or full-time job earnings as an option for paying for college. Almost 80 percent of college students in 2015 worked at least part time while attending classes, according to the National Center for Education Statistics. By budgeting and thinking strategically about your college costs, you can likely reduce your dependence on student loans by paying a portion out of pocket. Many -- but not all -- online programs are less expensive than traditional programs and often have shorter payment periods. Six, eight or 10 weeks are common course durations. Because of the frequency of payments in an online setting, you may be well-placed to pay as you go and possibly avoid borrowing altogether. Attending college online and avoiding student loans may be challenging, but if you are willing to put in the effort, you can limit the amount you need to borrow. More from U.S. News Q&A: Understanding Student Loan Discharge Eligibility Student Loan Refinancing Isn't Right for All Borrowers
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