financial

Apache is functioning normally

Average mortgage rates have fallen for the first time in months, new data has revealed.

Data published by financial information company Moneyfacts shows that two and five-year fixed-rate deals have dropped for the first time since the spring.

The average rate on a two-year fixed deal is 6.79 per cent, down from 6.81 per cent. Meanwhile, the average five-year rate has dropped from 6.33 per cent to 6.31 per cent.

The average two year tracker mortgage has remained unchanged, at 6.03 per cent.

It comes after a surprise drop in the rate of inflation, from 8.7 per cent to 7.9 per cent.

The Office for National Statistics (ONS) revealed that the rate of increase had “slowed substantially” to its lowest annual level since March 2022.

Experts have forecasted that the drop means that the Bank of England is less likely to keep interest rates higher for longer, taking pressure off of mortgage holders.

While core inflation has dropped back after May’s 30-year high, it is still well above the Bank’s official 2 per cent target – estimated at around 5.75 per cent.

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Chancellor Jeremy Hunt said that ‘we aren’t complacent and know that high prices are still a huge worry for families and businesses’

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Chancellor Jeremy Hunt said that ‘we aren’t complacent and know that high prices are still a huge worry for families and businesses’

(PA Wire)

Less than two years ago, in October 2021, the average rate on a five year mortgage deal was just 2.55 per cent.

Inflation in the UK remains the highest in the G7 group of rich economies. The government said inflation figures were finally “moving in the right direction”. However, chancellor Jeremy Hunt said that “we aren’t complacent and know that high prices are still a huge worry for families and businesses”.

Some financial experts have predicted that the Bank of England could increase the base rate beyond 6.5 per cent by early next year – pushing up mortgage rates and pressure on homeowners.

Mark Harris of the SPF Private Clients mortgage broker said some lenders may start to reduce pricing if inflation continues to fall and swap rates – which lenders use to price their mortgages – begin to ease.

“There is a strong argument for the Bank of England to pause interest rate rises for now, giving the market time to settle down and adjust,” he said.

UK house price inflation in May this year was running at about one-seventh of the levels seen at the end of last summer – around £7,000 below a recent peak seen in September 2022, according to the official figures.

Source: independent.co.uk

Apache is functioning normally

Rumors this week that regulators would increase residential mortgage capital requirements for larger depositary banks, far exceeding international standards under the Basel III rules, have raised alarms for industry executives, analysts and trade groups. 

The consensus is that the change would primarily affect the shrinking jumbo market (loans greater than $726,200) and hurt regional banks, sources said. The first impact would be through higher rates, but a shift of origination volume from depository banks to independent mortgage banks is not to be dismissed, experts added. 

Overall, banks help inject money into the mortgage system by providing warehouse lines of credit to independent mortgage banks (IMBs) and trading mortgage-backed securities (MBS) and mortgage servicing rights (MSR). Facing higher capital requirements, these institutions would reduce their interest in accumulating these assets – or even sell them, pressuring prices, observers told HousingWire. 

To understand the context, U.S. agencies decided to review banks’ capital framework in response to the financial crisis, consistent with the standards issued by the Basel Committee on Banking Supervision in 2010 (Basel III). U.S. regulators increased the overall quality and quantity of banks’ capital and improved leverage ratios for the largest banks. 

In 2017, the Basel Committee issued a second set of revisions to Basel III, called the Basel Endgame, to address the calculation of risk-weighted assets and limit banks’ internal models to estimate risk. U.S. regulators have been working on these rules for years but have prioritized them since the recent bank failures of Silicon Valley Bank and Signature Bank. 

Initially, regulators signaled that big Wall Street banks might face a 15% to 20% average increase in overall capital requirements. The current rule for mortgages was expected to remain unchanged: first-lien whole loans prudently underwritten and performing to their original terms receive a 50% risk weight, while other loans receive a 100% risk weight. 

However, this week, Bloomberg reported that under the latest draft proposal, 40% to 90% risk weights would be assigned for large banks issuing residential mortgages, depending on the loan-to-value ratio. That’s 20 basis points higher than the international standard. Residential mortgage-backed securities guaranteed by government-sponsored enterprises (GSEs) wouldn’t be affected. 

More pain for the jumbo market 

“Our initial thought is that the impact would not be huge, just because the GSEs are the main source of mortgages and banks are not holding loans that have high loan-to-value that are conforming – they probably get they done through the FHA or the GSEs to be securitized,” Bose George, managing director at Keefe, Bruyette & Woods (KBW), said. 

According to George, the rule would impact only the jumbo market, a very high credit quality market. So, even there, George’s team assumes only a few loans would fall into this category of high LTV, ultimately having higher capital requirements. 

“We are assuming that the impact in the jumbo space is probably going to be slightly higher mortgage rates, as opposed to volume significantly shifting to the nonbanks,” George said in an interview with HousingWire. “Right now, there’s a gap between where banks offer rates on jumbo and where the securitization market needs to be. So, if we have rates go up by 5 or 10 basis points, it’s not going to move that away from the banks on the jumbo side.”

However, the regulatory proposal comes amid a shrinking jumbo market. The product has been a bank offering since the financial crisis due to these institutions’ need for deposits, but it suffered from recent bank failures. At HousingWire’s Mortgage Rates Center, data from Optimal Blue shows 30-year fixed rates for jumbos at 6.99% on Wednesday, compared to 6.74% for conforming loans.  

Inside Mortgage Finance (IMF) estimates lenders originated $37 billion in jumbo loans from January to March 2023, down from $58 billion in the previous quarter and $133 billion in the same period last year. First Republic Bank, rescued by JPMorgan Chase in May, Wells Fargo and JPMorgan were the top three jumbo producers in the period. 

Same market, different players 

Following the financial crisis of 2008, depositary lenders retreated from the residential mortgage markets due to higher capital costs and reduced profitability. Consequently, independent mortgage banks, which have less stringent regulatory requirements, now have nearly two-thirds of the mortgage pie.  

“We would expect banks affected by these proposals to lobby for a more even playing field vs. nonbank lenders,” Mario Ichaso, senior residential mortgage backed-securities strategist at Wells Fargo, said in a trading desk commentary on Tuesday night. “We would not be surprised to see changes to these proposals down the road, but participants should continue to monitor these developments for any spillover effects to the MBS market.” 

Big bank executives have started to publicly criticize the proposal to increase capital requirements on their mortgage loans. 

“I think there’s been a desire to finish up Basel III,” Brian Moynihan, chair and CEO of Bank of America, said in an earnings call with analysts on Tuesday. “They’ve [regulators] got to think through the downside of some of these rules, and that they could push stuff outside the industry to nonbanks (…) and the resilience of those institutions, is interesting to watch through cycles.”

Moynihan estimates that a 10% increase in BofA’s capital levels would prevent the bank from making about $150 billion of loans at the margin. 

JPMorgan Chase Chief Financial Officer Jeremy Barnum said, “All else [being] equal, higher capital requirements definitely are going to increase the cost of credit, which is bad for the economy.” And, in the mortgage space, JPMorgan might pull back even further if new rules are applied. 

“When you increase the capital requirements, it makes it even harder. So, that just becomes one of the areas where you’re in that tension between remixing versus pricing power that we talked about a second ago. And it might, in fact, mean that we do less credit available for homeowners and more regulatory risk as the activity moves outside the perimeter,” Barnum told analysts last week. 

On July 10, Federal Reserve Vice Chair for Supervision Michael Barr said the proposal’s more accurate risk measures would be equivalent to requiring the largest banks to hold “an additional $2 of capital for every $100 of risk-weighted assets.”

“For the banks that would need to build capital to meet the requirements, assuming that they continue to earn money at the same rate as in recent years, we estimate that banks would be able to build the requisite capital through retained earnings in less than two years, even while maintaining their dividends,” Barr said. 

Barr also signaled that capital requirements would affect banks with assets over $100 billion. It was undoubtedly influenced by the recent experience with institutions with assets between $100 billion and $200 billion collapsing. Several sources said it’s unusual for regulators to adopt risk weightings by bank sizes when the risk weighting traditionally applies to the asset. 

“I think that’s where the regional banks will likely be the hardest hit. And theoretically, it will drive some consolidation, which I think is odd given that they [regulators] have made bank mergers more difficult,” Pete Mills, senior vice president of residential policy at the Mortgage Bankers Association (MBA), said. 

Mills added: “There are a lot of conflicting regulatory pressures in the market. Regulators are worried about the growth of the IMBs market share, but they’re doing things that would appear to exacerbate it. IMBs are a very robust business model if there’s warehouse credit available. And we’ve got several public companies now. One of the strengths of our housing finance system is the diversity of business models – banks, nonbanks, REITs as holders of mortgage assets, credit unions, and community banks. Maintaining that balance is important.” 

Taylor Stork, Community Home Lenders of America (CHLA) president and Chief Operating Officer at Developer’s Mortgage Company, said that the new capital requirements proposed for the large banks, combined with the heightened interest rate risk of portfolio lending as rates have skyrocketed, would only likely to heighten the trend towards IMB mortgage dominance.

“Mortgage lending by Wall Street banks has plummeted since the 2008 housing crisis, as independent mortgage banks now originate two-thirds of all loans and decisively outperform banks in loans to minorities and other underserved borrowers,” Stork said in a statement. 

The secondary market is not immune 

If the new rule changes the mortgage origination dynamics due to higher capital requirements for these assets, it will be reflected in the secondary market. 

“The impact may be more profound at the regional bank level, which tends to have higher exposures to the whole loan residential market relative to those institutions with more than $700 billion in assets. This could result in more securitization activity from regional banks into the private label market as they look to shed some of their residential exposures,” Ichaso said. 

Mills particularly worries about the impacts on the MSR market and warehouse lending. 

“Banks could stop accumulating MSRs and sell servicing. And, if they sell servicing to improve their capital ratios, who will buy the servicing if other banks are facing the same punitive capital standards?” Mills said. “Banks are a critical source of liquidity for the market by providing warehouse lines to IMBs. We’re again concerned that a large increase in capital of 15% to 20% would discourage banks from participating in the warehouse lending business.”

A recent BTIG report from analysts Eric Hagen and Jake Katsikas also stated that the Basel III Endgame would incentivize banks to shred their MSR portfolios. 

“Broadly speaking, we expect banks could continue shedding MSRs if new capital requirements end up more restrictive than the 250% risk weight already in place through Basel. 

According to the BTIG report, the top three banks in agency servicing – Wells Fargo, JPMorgan and U.S. Bank – control upwards of $1.5 trillion in unpaid principal balance. 

“Beneath them, but still in the top 50, are dozens of community banks and thrifts with less than $10 billion of servicing, which we see as a potentially ripe source of supply for nonbank lenders and servicers to encroach on over time. It goes in-hand with long-duration MSRs also looking more challenging from an asset-liability management standpoint for franchises with shorter-term or more sensitive deposits, which could induce incremental selling activity.” 

Is the Basel Endgame coming soon?

The Federal Reserve, Federal Depository Insurance Corporation and the Office of the Comptroller of the Currency, which together regulate banks, are expected to unveil the Basel Endgame proposed changes on July 27, Bloomberg reported. 

Mills speculated that bank failures and rescues amplified the regulators’ desire to implement the Basel Endgame “more quickly than they would have otherwise.”

“It appears they’re going directly to a notice of proposed rulemaking. So, they’re skipping the advance notice process. Our other concern is, typically, when you have a significant change in capital regulations, they will do what’s called a quantitative impact study, a QIS. At least we haven’t heard anything to suggest that they are going to do that this time around,” he said. 

Overall, industry experts said higher capital requirements for mortgages wouldn’t be the remedy for problems like the recent bank failures. 

“The problems that the industry had with mortgages, in fact, a few months ago, had nothing to do with credit risk. It had to do with the interest-rate risk or that the assets on banks’ balance sheets had long-duration mortgages,” George said. “The new changes would address a problem or issue that came up much earlier when Basel III was being sort of implemented. From that standpoint, it seems like it’s solving a problem that isn’t currently a problem.” 

Michael Bright, CEO of Structured Finance Association, said, “I would like to know what problem would be solved because the market is pretty regulated right now. LTVs are still quite low. Home prices are quite high. The delinquencies are very low. The underwriting process has gone through a sea change over the last 10 years.”

Bright added: “Silicon Valley did fail, but it was very unique in a lot of ways, and to recapitalize the entire system focusing on non-agency mortgages just because of that, to me, seems like an overreaction.” 

Source: housingwire.com

Apache is functioning normally

Lincoln Financial Group is a large insurance and financial corporation. It is a Fortune 500 company that provides a very diverse array of financial services and solutions to its business and consumer clients. The company has in excess of 9,000 employees and it is headquartered in Philadelphia, PA.

The name Lincoln Financial Group is actually the marketing name for Lincoln National Corporation, as well as its affiliates. The company’s shares actively trade on the New York Stock Exchange under the symbol LNC.

History

Lincoln Financial was founded back in 1905 – and it has thrived and grown throughout the past century. Today, the company holds very strong positions in the financial services industry, being #232 on the 2014 Fortune 500 list in terms of company revenue, and #26 in terms of assets. Lincoln is also listed as #218 on the Barron’s 500 2014 list for the most growth in revenue, as well as for the most cash returns.

As of the third quarter 2014, Lincoln Financial reported to have $215 billion in assets under management, with total adjusted statutory capital of roughly $8.3 billion. This places the company in a solid fourth place for all life and health insurance companies by revenue. However, Lincoln is ranked #1 for both total life insurance sales, as well as for variable universal life sales, according to LIMRA’s YTD rankings as of June 30, 2014.

Products Offered By Lincoln Financial

Lincoln Financial Group offers a wide variety of financial and insurance products for both businesses and consumers. These include life insurance, annuities, long-term care solutions, employee benefits, workplace retirement plans, group insurance, and executive benefit plans.

On the individual life insurance side, Lincoln provides the following options:

  • Term Life – Term life is typically purchased to provide “temporary” coverage. This type of policy can be obtained for one year, five years, ten years, or longer. It is considered to be the most economical form of coverage. This is because term life provides only death benefit protection, with no cash value build up or investment component. Lincoln Financial offers three different level term options to choose from.
  • Universal Life – Universal life insurance provides insureds with the benefits of traditional coverage. This means that they have death benefit protection, along with cash value. This cash grows on a tax deferred basis, meaning that there are no taxes due on the growth until the time of withdrawal. With universal life, policy holders have the opportunity to grow cash over time at a set rate, yet the flexibility to set the amount and the timing of their premium. Policy holders can also set the amount of their death benefit – within certain guidelines – when the policy is in force. Lincoln has several different Universal Life products to choose from, including the Lincoln LifeGuarantee UL, the Lincoln LifeCurrent, and the Lincoln LifeReserve.
  • Index Universal Life Insurance – Similar to regular universal life, index universal life also allows funds to grow tax deferred. However, growth is tracked by the performance of an underlying index such as the S&P 500 or the Dow Jones Industrial Average (DJIA). Lincoln offer several index universal plans, including the Lincoln Treasury Indexed UL, the Lincoln LifeReserve Indexed UL Accumulator, the Lincoln LifeReserve UL Protector, and the Lincoln WealthPreserve Survivorship Indexed UL.
  • Variable Universal Life Insurance – Variable universal life insurance offers flexible death benefit coverage, along with growth potential in the cash value component of the policy. The potential to grow the cash over time is based upon market performance of an underlying portfolio of “subaccounts.” The funds, however, are not invested directly in the market. It is important to note, however, that while variable life can offer the opportunity to grow funds due to market performance, the potential for poor market performance can also make this type of policy more risky. Lincoln Financial offers several options for variable universal life insurance. For single life plans, it offers the Lincoln AssetEdge VUL, the Lincoln AssetEdge Exec VUL, and the Lincoln VUL ONE. There is also a Survivorship Life option. These plans include the Lincoln PreservationEdge SVUL and the Lincoln SVULONE.

Lincoln Financial also provides a life insurance option as an alternative funding mechanism for long-term care expenses. This can allow an individual or a couple to forgo the expense of having to purchase a stand-alone long-term care insurance policy and instead just use the funds that are inside of a universal plan. This can essentially provide the policy holder (or policy holders) with the benefits of universal life and long-term care insurance combined.

It also helps to eliminate the worry of “not using” long-term care insurance policy benefits that are paid for over many years, but never utilized. Instead, this option provides coverage for long-term care expenses if the person needs it – but if they don’t, it offers either a death benefit or a return of their initial premium if they don’t.

Company Ratings

Lincoln Financial is a solid performer in terms of financial strength – and it has the ratings to show it. The company has received very strong marks from the ratings agencies:

  The Lincoln National Life Insurance Company Lincoln Life & Annuity Company of New York

A.M. Best A+ (2nd highest of 16) A+ (2nd highest of 16)

Standard & Poor’s AA- (4th highest of 22) AA- (4th highest of 22)

Moody’s Investor Services A1 (5th highest of 21) A1 (5th highest of 21)

Fitch Ratings A+ (5th highest of 19) A+ (5th highest of 19)

Advantages and Concerns

There are a number of advantages to going with Lincoln Financial as your company of choice. First, this financial services giant offers a nice variety of both term and universal policies, along with a very wide selection of optional policy riders to choose from. So, even though the company does not provide a whole life insurance option, there are a lot of other choices that can meet most other needs.

Lincoln also offers other popular policy features such as a no-exam term conversion (for those who qualify), as well as a level premium guarantee on its term life insurance plans, and access to the cash value on its universal life policies. It does not, however, offer a dividend option with paid-up additions.

The company is also very solid in terms of its financial backing and strength. Across the board, the financial rating agencies have provided Lincoln with strong marks. That, coupled with the company’s century old history, should give policy holders confidence that Lincoln will likely be there when they need them.

Unfortunately, no matter how nice the variety is in a company’s product selection is, it is always a wise plan to get more than just one policy quote before making your final purchase choice. Just like choosing a car or a computer, you wouldn’t just look at one and agree to the sticker price without first doing some comparison shopping.

When searching for life insurance, it is likely that the proceeds will be used for paying off large debt, replacing income, or some other important purpose in which survivors will rely. With that in mind, you will want to ensure that the amount of proceeds is correct, the premium is within budget, and the company is secure. To help protect your family further, looking into Burial Insurance is also a good choice.

Finding the Life Insurance Coverage That Meets Your Needs

If you are ready to begin searching for the right policy for your specific needs, we can help. We can assist you in several different ways. First, we can help you in determining the right type of coverage. In other words, is term, whole life, or universal life the proper coverage type for you? Next, we will also walk you through determining the proper amount of coverage for your needs.

Coming up with the right dollar figure can be daunting at times – especially if projecting out into the future. My preferred provider can help you in coming up with the coverage that can help get your loved ones through the tough times.  Get started with your own set of quotes by filling out the form on the side of this page.

They will also help you in reviewing the many different life insurers in the market place in order to find the one that is best for you. Root Financial works with the best life insurance carriers in the industry today, and can get you all of the important information that you need in order to make the right decision. Complete a major part of your personal finance plan today by getting quotes and coverage. We also have great tips for other insurance covers out there too, check out our post on the Best Auto Insurance Companies!

Source: goodfinancialcents.com

Apache is functioning normally

And who could blame them…what with their entire financial system in complete disarray.

The Greek situation is a mess, as you’ve probably heard. The government has fallen behind on its payments to creditors and citizens have made a run on the banks.

There’s apparently no money left to lend (probably no new mortgages) and maybe very little to withdraw.

In fact, the government limited cash withdrawals at ATM machines to 60 Euros per day for Greek residents.

Tourists aren’t limited, but with lines around the block and tapped out cash machines, they’re effectively in the same boat. Can’t wait to visit soon!

Greeks aren’t allowed to transfer money to foreign accounts either, and there are widespread reports of credit and debit transactions being declined.

A Greek once told me (true story) that they didn’t realize you actually had to pay credit cards back, which might explain why they’re in their current dire situation.

In a word, it’s a mess and it doesn’t appear to be getting any better unless a deal is made. Given all the chaos, you might be wondering how Greek homeowners are handling the turmoil.

Greek Mortgage Defaults Rising

As you might expect, more and more Greek homeowners are falling into arrears.

Kind of makes sense right? If your country isn’t even making timely payments, why should you?

Per a new report from Fitch Ratings, 17.3% of Greek mortgages were at least one month behind as of May.

That number is up from 16.9% in February and around 16% in January. And it’s expected to get worse.

Fitch painted a bleak picture, stating that, “a deteriorating economy and almost total absence of bank credit may have combined with retail borrowers withholding loan repayments during the extended period of uncertainty.”

Additionally, the agency noted that some mortgagors “may already be strategically entering early-stage arrears.” In other words, strategic default, similar to what took place here in the U.S. when borrowers fell deeply underwater on their mortgages.

Apparently they’re choosing to make payments on other types of debt because they don’t believe the banks will come after them for their homes.

Heck, the banks may not be around in another year, just like the many U.S. financial institutions that got swallowed up during our housing crisis.

Fitch believes the number of late mortgages will rise and that the possibility of negotiating a third bailout program for Greece will be “challenging.”

It’s unclear what would happen to these borrower’s mortgages if Greece were to exit the European Union and return to the drachma, their original currency before the Euro.

Or what would happen if the banks holding the mortgages fail. But there’s clearly no urgency to keep making payments while uncertainty looms.

Greek Crisis Lowering Mortgage Rates in the USA

The good news, for us at least, is that the Greek crisis has pushed mortgage rates lower. Not significantly lower, but back below 2015 highs.

As I always say, bad economic news generally leads to lower interest rates. And that seems to have been the case this week as the Greek crisis continues to be front-page news.

Unfortunately, it also sent the stock market crashing, so the savings might be awash for some.

And the relief might be short-lived if there’s a strong jobs report released tomorrow (early due to the July 4th holiday).

Still, a mortgage rate an eight or a quarter of a percent lower will be welcome news to those looking to buy or do a rate and term refinance.

Thanks Greece…

Source: thetruthaboutmortgage.com

Apache is functioning normally

ETFs are tradable funds that investors can buy and sell on stock exchanges all day. They typically hold a basket of assets, such as stocks or bonds, and mirror the moves of another underlying index. Since its start almost three decades ago, the ETF industry has taken the financial world by storm, and there are thousands of different ETFs on the market that investors can choose from.

But each investor is different, and some ETFs likely won’t be a good fit for their portfolio or strategy. Learning to choose or pick ETFs that do fit your strategy can take some practice, but it’s good to have some guidelines in mind.

How Do I Pick an ETF?

There’s no right or wrong way to pick an exchange-traded fund (ETF), but you can follow a process to help you determine which securities may be the best fit for you. It starts with picking an asset class.

Step 1: Pick the Asset Class

Because the performance of an ETF is so closely tied to an underlying index, investors need to first decide which underlying asset class they want exposure to. The main asset classes are stocks, bonds, currencies, and commodities.

Risk is generally inversely correlated to return. So riskier assets have the potential to deliver greater returns, while safer assets tend to deliver reliable, albeit smaller, returns. Stocks are considered to be a riskier, more volatile asset class. Commodities even more so. Meanwhile, bonds tend to be safer but also deliver more muted returns.

Keep in mind, just because an investor buys an ETF that gives them exposure to one asset class, that doesn’t preclude them from buying another that invests in another market. In fact, it’s a healthy portfolio diversification strategy to allocate one’s money into different asset classes, a practice known as asset allocation.

Step 2: Narrow the Focus

Once an investor has chosen their asset class, they can dive deeper within that market. When it comes to stock ETFs, this usually involves picking an industry – like technology or financial – that they’d like to get greater exposure to. Equity ETFs may also focus on a specific attribute a stock can have. Or dividend ETFs, which hold shares of companies with regular payouts.

For bond ETFs, investors can decide between funds that invest in U.S. government-bond versus bonds issued by countries abroad, as well as investment-grade (higher quality) company debt versus high-yield (junk) bonds.

More recently, thematic ETFs have taken off. These are stock funds that tend to be much narrower than the traditional sector ETF. They can focus on a niche subsector, like robotics, electric cars or blockchain, or even modern trends, like the gig economy or working from home.

There are pros and cons to thematic ETFs: while they’re often marketed as a convenient way to wager on an investment story, they also tend to underperform the broader market. Thematic ETFs have also been criticized for being too narrow and not offering the wide breadth that ETFs were originally designed to offer.

Step 3: Explore Different ETF Strategies

ETFs began as a way to provide investors access to broad markets with a single investment. Since then however, the popularity of the industry has led to the creation of numerous different kinds of ETFs, some of which employ complex strategies.

Here are some of the different ETF types:

•   Leveraged ETFs allow investors to make magnified bets on different assets or markets. So instead of replicating the move of the underlying index exactly, leveraged ETFs will produce a move that’s 2x or 3x.

•   Inverse ETFs let investors wager against an asset, so shorting or betting that the price of a market will go down. So if on a given day, the underlying market goes down, the inverse ETF’s price will go up.

•   Actively Managed ETFs invest in assets without following an index. While ETFs are usually a form of passive investing–the strategy of tracking another index–actively managed ETFs are like stock-picking strategies packaged into a tradable fund.

•   Smart-Beta & Factor ETFs use a rules-based system — such as stock weightings, valuations, or volatility trends — to choose the investments in a fund. These funds are often considered a hybrid between passive and actively managed ETFs.

•   Currency-Hedged ETFs are funds that let investors wager on a basket of overseas stocks, while mitigating the risk that stems from currency fluctuations.

Step 4: Look at ETF Costs

A fundamental reason why ETFs have become so influential is their low cost. Low ETF fees have compressed costs across the board in asset management. The average expense ratio of most ETFs has fallen over time. Expense ratios are a percentage of assets subtracted each year. So, an expense ratio of 0.45% means that the charge is $4.50 for every $1,000 invested each year.

Because the vast majority of ETFs tend to be passive, they tend to be much cheaper than mutual funds, many of which are still actively managed. More complex ETFs like leveraged funds, or actively managed ones, tend to have higher expense ratios. But some passive ETF fees have hit rock-bottom levels.

Step 5: Other Ways to Analyze ETFs

What about how well an ETF has done? Should that matter? While profitability can make an investment look more attractive, it shouldn’t be the only factor investors use when determining which ETF to buy. That’s because in investing, past performance is not indicative of future results.

For ETFs, another key measure of performance is how well it tracks the underlying index. Tracking errors, when a move in the ETF veers from one by the market it’s designed to track, can come up from time to time, particularly in leveraged funds or ones that invest in stocks overseas.

Looking at the assets under management (AUM) can be a helpful way to pick an ETF. A larger AUM can signal an ETF’s popularity, which in turn makes it more likely that it’s liquid, or easy to trade without impacting prices.

How to Find an ETF’s Holdings, Prospectus, and Fact Sheet

Another touted perk of ETFs is their transparency. Investors can look up what’s exactly in a fund by going to the ETF provider’s website and searching for the fund. Contacting the ETF provider directly for this information is also possible. ETF providers are required to update this information regularly.

Securities and Exchange Commission (SEC) regulation also requires that ETF providers make easily available an ETF’s prospectus. The prospectus has information about the ETF including its investment objective, the risks, fees, as well as expenses. For investors interested in an ETF, one of the most important things they can do is research the fund by carefully reading the prospectus.

Similarly, ETF fact sheets act like quick summaries of the fund, giving key information like performance, the top holdings, and other portfolio characteristics. ETF providers typically produce fact sheets every quarter and make them available on their website.

The Takeaway

Choosing an ETF from the thousands out there can seem daunting, but taking a step-by-step approach can help individuals sort through the multitude of options. A key step investors can take in researching ETFs is reading the fund’s prospectus, where they’ll find vital information on the investment objectives as well as potential risks.

Considerations include which asset class an investor wants to invest in; how broad or narrow of an exposure they want; costs — which are usually shown as expense ratios; and lastly, an ETF’s size can give clues on the popularity and liquidity of the fund. One ETF, on its own, can provide some diversification. However, some people choose to use a number of ETFs as building blocks to assembling a well-balanced portfolio.

Ready to invest in your goals? It’s easy to get started when you open an Active Invest account with SoFi Invest. You can invest in stocks, exchange-traded funds (ETFs), and more. SoFi doesn’t charge commissions, but other fees apply (full fee disclosure here).

For a limited time, opening and funding an account gives you the opportunity to win up to $1,000 in the stock of your choice.

SoFi Invest®
The information provided is not meant to provide investment or financial advice. Also, past performance is no guarantee of future results.
Investment decisions should be based on an individual’s specific financial needs, goals, and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . SoFi Invest refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.
1) Automated Investing—The Automated Investing platform is owned by SoFi Wealth LLC, an SEC registered investment advisor (“Sofi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC, an affiliated SEC registered broker dealer and member FINRA/SIPC, (“Sofi Securities).

2) Active Investing—The Active Investing platform is owned by SoFi Securities LLC. Clearing and custody of all securities are provided by APEX Clearing Corporation.

3) Cryptocurrency is offered by SoFi Digital Assets, LLC, a FinCEN registered Money Service Business.

For additional disclosures related to the SoFi Invest platforms described above, including state licensure of Sofi Digital Assets, LLC, please visit www.sofi.com/legal.
Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform. Information related to lending products contained herein should not be construed as an offer or prequalification for any loan product offered by SoFi Bank, N.A.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Investment Risk: Diversification can help reduce some investment risk. It cannot guarantee profit, or fully protect in a down market.

Exchange Traded Funds (ETFs): Investors should carefully consider the information contained in the prospectus, which contains the Fund’s investment objectives, risks, charges, expenses, and other relevant information. You may obtain a prospectus from the Fund company’s website or by email customer service at [email protected] Please read the prospectus carefully prior to investing. Shares of ETFs must be bought and sold at market price, which can vary significantly from the Fund’s net asset value (NAV). Investment returns are subject to market volatility and shares may be worth more or less their original value when redeemed. The diversification of an ETF will not protect against loss. An ETF may not achieve its stated investment objective. Rebalancing and other activities within the fund may be subject to tax consequences.

Claw Promotion: Customer must fund their Active Invest account with at least $10 within 30 days of opening the account. Probability of customer receiving $1,000 is 0.028%. See full terms and conditions.

SOIN0523097

Source: sofi.com

Apache is functioning normally

Research and Markets stated that the global real estate software market will grow significantly in 2023, from $10.07 billion in 2022 to $11.24 billion in 2023 at a compound annual growth rate (CAGR) of 11.6%. This growth is a direct result of the increasing demand for automation and efficiency in real estate companies. Research and Markets also forecasted the commercial real estate software market will reach $16.41 billion by 2027, growing at a CAGR of 9.9%.

Per the Real Estate Software Market Global Market Report 2023, the main types of real estate software include:

  • customer relationship management (CRM) – with a global market projected to reach US$79.40bn in 2023.
  • content management – with global revenue projected to reach US$20.95bn in 2023;
  • financial management;
  • real estate contracts, and others.

The extensive adoption of these tech solutions is driven by artificial intelligence (AI) and machine learning (ML) used to develop applications that help real estate companies with marketing campaigns, managing property portfolios, leasing, accounting, operations, etc.

The report also details the COVID-19 impact on the real estate software market. Moreover, the Russia-Ukraine war disrupted the chances of global economic recovery from the COVID-19 pandemic, impacting the global real estate software market, too. 

The Real Estate Software Market Global Market Report 2023 will help real estate professionals and industry analysts:

  • Gain an in-depth perspective into the global state of the commercial real estate software market.
  • Understand the COVID-19 impact on the real estate market.
  • Assess the Russia – Ukraine war’s impact on agriculture, energy, and mineral commodity supply and its direct and indirect effects on the market.
  • Measure the impact of high global inflation on market growth.
  • Create regional and country strategies based on local data and analysis. The report covers Asia-Pacific, Western Europe, Eastern Europe, North America, South America, the Middle East, and Africa. 
  • Identify growth segments for investment.
  • Outperform competitors using forecast data and the drivers and trends shaping the market.
  • Understand customers based on the latest market shares.
  • Benchmark performance against key competitors.

The real estate software market presents ample growth opportunities, driven by the commercial and residential real estate activities surge. Leading real estate companies increasingly adopt software solutions to streamline operations, reduce errors, improve task allocation for large-scale projects, enhance communication, and optimize financial management. 

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Mihaela Lica Butler is senior partner at Pamil Visions PR. She is a widely cited authority on public relations issues, with an experience of over 25 years in online PR, marketing, and SEO.She covers startups, online marketing, social media, SEO, and other topics of interest for Realty Biz News.

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Source: realtybiznews.com