How to Win Favors and Influence Opportunity
Oh the power of “hello,” “please” and “thank you.” When they are used you often get better service, lower prices, maybe even a seat on a crowded plane.
When they are not employed, you’re put in the “rude” category and are faced with possible negative consequences.
My husband and I discovered just this when we traveled in France a few years ago. After an especially long day of driving we arrived at the hotel at which I was hoping to stay. I hadn’t made a reservation because I wanted to be spontaneous. Bone weary I walked up to the clerk and said, “Hi, do you have a room?” The clerk looked at me with disdain and said “no.” I immediately realized I had made a major faux pas. I had not greeted the man properly and I hadn’t spoken any French. I should have said, “Bonsoir monsieur. We have heard wonderful things about your hotel. Do you have a room available?” By saying the formal “good evening” in French and being complimentary I believe a room would have been available. Thankfully we were able to find a lovely hotel not far from our intended lodging. But we learned an important lesson.
We get so caught up in our little worlds that it’s easy to forget to acknowledge others and say “please” and “thank you.” But, it’s really annoying to service people when they are treated like a transaction rather than a person.
Did you read about the store owner who got so tired of rude customers that he is charging them more for a cup of coffee? He created a sign that lists the prices for a cup of joe. If you just say “One small coffee” it’s $5.00. But if you say “One small coffee, please” the price is $3.00. A “Hello, I’d like one small coffee please” and you’ll only pay $1.75. He wanted to make a point about the importance of acknowledging and being courteous to the staff.
A friend of mine has an internal customer service related job and she said employees will call her on the phone and often launch into their problem without a proper hello or any niceties – “My key card doesn’t work.” Sometimes they will say it angrily as if it’s her fault. All she asks is that they say, “Hi Jane, this is Joe Smith in the marketing department. I’m having problems with my key card and I’m wondering if you might be able to help me with it.” What a difference that would make.
Slow down my friends. Say “hello,” “please” and “thank you,” and give the person who’s helping you eye contact. In fact, I challenge you to look at the barista or sales clerk, or whoever is helping you, and notice what color his or her eyes are during your transaction. Make a point of acknowledging others and using those magic words your parents taught you. They really are magical.
Building a Better Index With Strategic Beta
Written by: Yazann Romahi, Chief Investment Officer of Quantitative Beta Strategies and Lead Portfolio Manager of JPMorgan Diversified Return International Equity ETF at J.P. Morgan Asset Management
With the global economy warming up, but political uncertainty remaining a constant, it’s more important than ever for investors to position their global portfolios to navigate long-term market volatility. That’s where the power of diversification comes in, says Yazann Romahi, Chief Investment Officer of Quantitative Beta Strategies at J.P. Morgan Asset Management and Lead Portfolio Manager of JPMorgan Diversified Return International Equity ETF (JPIN).
Not all diversified portfolios are alike
In their search for diversification, many investors turn to passive index ETFs, which track a market cap-weighted index. But these funds aren’t always the most effective way to steer a steady course through volatile markets—and there are two key reasons why.
First, traditional market cap-weighted indices are actually less diversified than investors may think. For example, in the S&P 500, the top 10% of stocks account for half the volatility of the index. Within sectors, while you might assume that sector risk is distributed across the ten major sectors fairly evenly, it is a surprise to many that at any point in time, one sector can be as high as 50% of the risk.
Second, cap-weighted indices come with some inherent weaknesses, including exposure to unrewarded risk concentrations and overvalued securities. So, while these indices provide investors with exposure to the equity risk premium and long-term capital growth, as is the case with any other investment, investors can also experience painful downturns, which increase volatility and reduce long-term performance. For investors seeking equity exposure with broader diversification—and potentially lower volatility—strategic beta indices may be better positioned to deliver the goods.
How do we define strategic beta?
Strategic beta refers to a growing group of indices and the investment products that track them. Most of these indices ultimately aim to enhance returns or reduce risk relative to a traditional market cap-weighted benchmark.
Building on decades of proven research and insights, J.P. Morgan’s strategic beta ETFs track diversified factor indices designed to capture most of the market upside, while providing less volatility in down markets compared to a market cap-weighted index. Rather than constructing an index based on market capitalization—with the largest regions, sectors and companies representing the largest portion of the index—our strategic beta indices aim to allocate based on maximizing diversification along every dimension—sectors, regions and factors. The index therefore seeks to improve risk-adjusted returns by tackling the overexposure to risk concentrations and overvalued securities that come as part of the package with traditional passive index investing.
So, how do you build a better index?
As one of just a few ETF providers that combine alternatively-weighted and factor-oriented indices, our disciplined index methodology is designed to target better risk-adjusted returns through a two-step process.
First, we seek to maximize diversification across the risk dimension. This essentially means that we look to ensure risk is more evenly spread across regions and sectors, which balances the index’s inherent concentrations. As uncontrolled risk concentrations are unlikely to be rewarded over the longer term, we believe investors should strive for maximum diversification when constructing a core equity exposure.
Second, we seek to maximize diversification across the return dimension. Research shows that there are a number of sources of equity returns beyond growth itself. These include risk exposures such as value, size, momentum and quality (or low volatility). When creating a diversified factor index in partnership with FTSE Russell, we seek to build up the constituents with exposure to these factors. We therefore select securities through a bottom-up stock filter, scoring each company based on a combination of these return factors to determine whether it is included in the index. These factors provide access to a broader, more diversifying source of equity returns as they inherently deliver low correlation to one another, providing diversification in the return dimension.
So, whereas traditional passive indices allow market cap to dictate allocations, the diversified factor index seeks to ensure that we minimize concentration to any source of risk—whether it be region, sector or source of return.
How are you currently weighted versus the market cap-weighted index, and how have your under- and over-weights enhanced risk-return profiles?
Crucially, our weightings don’t reflect specific views on sectors or regions and are instead, by design, the point of maximal diversification. It is important to remember that market cap-weighted indices typically carry a lot of concentration risk—for example, at various points in time, a single sector can explain half the risk of the index when left unmanaged. At the moment, three sectors explain two-thirds of the risk of the FTSE Developed ex-NA Index—these being financials, consumer goods and industrials. In contrast, the FTSE Developed ex-NA Diversified Factor Index—or strategic beta index, which JPMorgan Diversified Return International Equity ETF (JPIN) tracks—is explicitly designed to maintain balance and therefore these sector allocations range from 8% to 12%. In the short term, any concentrated portfolio can of course outperform a more diversified one, if the concentrated bet paid off.
Investing wholly in a single stock may outperform over short-term periods. At other times, it may significantly underperform an index. However, it is well understood that an investor is better off diversifying across lots of stocks for better risk-adjusted long-term gains. The same applies here. From a pure return perspective, if financials, for example, account for half of a cap-weighted index in terms of market cap and have a strong run over the short term, of course, this index would outperform over this period. Over the long run, however, it is fairly uncontroversial to suggest that the more broadly diversified index could achieve better risk-adjusted returns.
Seeking a smoother ride in international equity markets?
For investors targeting enhanced diversification through a core international equity portfolio, JPMorgan Diversified Return International Equity ETF (JPIN) targets lower volatility by tracking an index that more evenly distributes risk, enabling them to get invested—and stay invested.
Learn more about JPIN and J.P. Morgan’s suite of strategic beta ETFs here.
Call 1-844-4JPM-ETF or visit www.jpmorganetfs.com to obtain a prospectus. Carefully consider the investment objectives and risks as well as charges and expenses of the ETF before investing. The summary and full prospectuses contain this and other information about the ETF. Read them carefully before investing.
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