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Financial advisors anticipating busy days in December

It’s nearly the end of 2005, and financial planners’ phones are ringing with questions from concerned investors.

Is the stock market going to go through a major “bear market” like it did a few years ago? What impact will the hurricanes have on fuel prices, construction costs, tax revenue and consumer spending? And when will the Federal Reserve stop raising short-term interest rates?

“One of the biggest questions we continue to hear is what impact high oil and gas prices will have on our economy and financial markets,” said John Mark Holliday, CFP, of EFP Wealth Management in Tupelo. “This issue is not only in the news on a daily basis, but we are reminded of it every time we fill up our vehicles at the gas pump.”

Investors are also talking about the increased level of business that manufacturing companies are doing with China and how that will affect American jobs.

“We try to stay focused on each client’s individual situation and goals and therefore, we tend to take more of a long-term perspective when answering many of these questions,” explained Holliday. “We believe the economy continues to be relatively strong overall and expect it to remain healthy in 2006. That doesn’t mean, though, that there won’t be some bumps and soft spots along the way. However, no one can predict with certainty what will happen to the economy and markets in the near-term. That is why we believe it’s important to have a solid diversified investment plan geared to an individual’s or family’s goals and not make knee-jerk reactions based on the daily news headline.”

J. Randall Mascagni, CFP, president of Mascagni & Company Inc. in Clinton, said he is sticking to his plan for clients and not altering his strategy because “we have planned with our clients all along for events or circumstances that could disrupt or deter their goals.”

Warren Wiltshire, J.D., vice president trust officer for Pinnacle Trust Wealth Management in Ridgeland, said the investment firm is taking a similar approach.

“We listen to our clients’ concerns and tweak plans as needed,” he said.

Caution lights

Investors are closely monitoring the stock market, which typically has a run-up toward the end of December.

“Mutual fund managers don’t want to put in a year-end statement showing a high percentage of cash,” said Wiltshire. “We’re still in the market, but there’s less emphasis on stocks. Typically, we might have 50/50 stocks and bonds. Right now, we’re probably unweighted in stocks, maybe 40/50/10 (stocks/bonds/cash) or 30/50/20.”

Financial advisers are also keeping an eye on General Motors (GM). Rumors have swirled the Detroit automaker will file for bankruptcy protection in 2006 even though GM CEO Rick Wagoner has called the speculation “just plain wrong.”

“It would certainly be a psychological blow,” said Wiltshire. “Going back to the ‘20s, everybody’s heard what’s good for GM is good for the country. You’d think the opposite would be true. I mean, the Japanese weren’t selling cars here then.”

Holliday said any time a well-known multi-national corporation is in the news because of financial difficulties, it catches one’s attention.

“We’ve learned that any company, regardless of its historical strength or size, can stumble due to any number of issues both in and out of its control,” he said. “That is one reason we believe a fundamental rule of investing is to have a well-diversified investment portfolio that isn’t heavily concentrated in the stock of any particular company or sector, regardless of its current strength or reputation.”

Year-end strategies

Holliday is meeting with clients for year-end strategy sessions to seek opportunities to reduce their 2005 tax liability, replace their investments because of performance or accommodate a change in their long-term goals.

“Some of the issues of concern to young professionals are funding their company retirement plan to the maximum extent possible, determining how much they need to set aside for emergency funds, establishing a systematic savings and investment plan, evaluating their insurance needs, and establishing a plan to pay off student loans and other debt in a timely manner,” he said.

Couples with children are focused on similar issues, but are also looking at saving for college, how much house they can afford and the best method of financing it while also seriously mulling their retirement fund growth.

“For a couple nearing retirement, the amount of resources they have set aside for retirement and the level of income these resources would provide become very important,” said Holliday. “It’s important to this person that these funds be invested in a manner that will not only provide sufficient current income, but also continue to grow in order to meet future increases in the cost of living. This person should understand all potential sources of retirement income, including social security and pensions, as well as what to expect from their retirement savings. They should also know how their death will impact the level of income available for their surviving spouse.”

Contact MBJ contributing writer Lynne W. Jeter at lwjeter@yahoo.com.


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