Are you curious about the investment strategy of star Yale University economist Robert Shiller?
The Nobel laureate has money devoted to stocks, bonds and real estate, though he told
The Globe & Mail that all three markets are frothy.
"I'm still in the [stock] market, but I'm not heavily committed to it," Shiller noted. "The fundamental dilemma is that everything looks pricey. Real estate prices in the U.S. have gone up. The stock market looks high, and the bond market looks high."
There are markets overseas that have more appealing valuations, he professed.
"China looks interesting, because it has low price-earnings ratios," Shiller stated. "On the other hand, people are uncomfortable about putting a big share of their investment dollars in a country with which our relations are iffy."
So how are Shiller's investments weighted? "It's changing all the time. It's something like 50 percent [for equities]. I still have a lot in fixed income, and then housing — I have two houses."
He has no long-term bonds, "although I don't have an ironclad case to stay away from them," Shiller said. "But they have very low yields. People are willing to take nothing for 10 years."
The 10-year Treasury yield stood at 1.76 percent Thursday, after hitting a 20-month low earlier this month.
As you go about investing, it pays to remember that all of us make mistakes, even stars such as Jeff Gundlach, CEO of DoubleLine.
The key, of course, is to learn from your mistakes, so you do better next time.
As for Gundlach, "the biggest mistake I made was not buying high-yield bonds in my total return fund in October 2002, when I put maximum weighting in every other strategy I ran," he told
MarketWatch.
And why did he make the mistake? "I was thinking too narrowly," Gundlach confessed.
"I was running something that was always government credit at the time, in that one strategy. All my other strategies were diversified. It was crystal clear high-yield bonds were super cheap. And I didn't buy them because I was narrow in my thinking: 'Oh, this is just a government-guaranteed thing.'"
But Gundlach took a lesson from his misfortune: "Be expansive in your thinking," he said. "You can mutate your strategies, when the market offers unusual opportunities. And you should do it if it's really compelling."
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