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Financial advisors urge caution, investing for the long term

With the economy in flux, financial advisors are urging caution and making some changes in their advice to clients. Several professionals in the Jackson area stress that it’s normal for the stock market to drop 10% once a year although it didn’t do that for the most recent five years.

Artie Finkelberg, managing director in investments for Wachovia Securities, tells his clients to stay in asset allocation — stocks and bonds — that they have proactively set.

“Just because the market is weak, you should not deviate,” he said. “Don’t let normal cyclical economic times affect your investments. But, it is normal for people to get anxious. A person who is prepared will weather these times better than others even though they won’t like it.”

Regarding investing, his three watchwords for clients are planning, preparation and understanding. “Focus on long time goals. There is always something to worry about,” he said. “The prudent investor will keep a cash cushion for emergency, allocate a stock-and-bond mix they can live with even in a down market and anticipate these drops will occur and not flee.”

Danny Chancellor, president of the Financial Planning Association Mississippi Chapter, also urges understanding and being properly diversified to his clients. In the business for 24 years, he is with Malachi Financial Group in Ridgeland.

“I recommend not being too aggressive or too conservative,” he said. “This seems like old times with what we had with oil in the 1970s and houses in the 80s. It’s a great time to buy in the market, but buy in moderation according to your goals and risk tolerance.”

With his firm having many retiree clients, Chris McAlpin of Financial Strategies Group Inc. says goals are different from the standard long-term investor or short-term trader.

“Therefore, we have been very conservative in this market,” he said. “We have decreased our equity positions and increased our short term bond positions. We are looking for good buying opportunities in the future.”

Danny Williams of Woodridge Capital says his firm is more active in portfolio management than some in the industry. “We tend to agree with MSNBC’s Jim Cramer who says that ‘buy and hold’ is not an investment strategy but an ideology and an excuse for not doing research homework,” he said.

Williams utilizes risk management techniques when the markets are working against investors. “During the first quarter of this year, we increased our cash levels because we were more concerned about preserving capital during a difficult market,” he said. “Since then, we have redeployed our cash into areas of strength so as to take advantage of our changing economic landscape.”

Where are investors putting their money these days? “We are seeing commodities, energy, emerging international markets and precious metals as areas of strength,” Williams said. “Last year, real estate was still showing up as an area of strength as was developed international equities. We are still using mostly individual stocks, but also utilize exchange traded funds, mutual funds and bonds. The amount of equities/stocks or bonds/fixed income depends on the investor’s investment objectives.”

McAlpin sees today’s market as a trader’s market. “The volatility creates opportunities. However, be aware that short-term strategies are risky,” he said. “For long-term investors, there are good buying opportunities for diverse portfolios, especially using a dollar-cost averaging technique. Good choices for future investments may be in the industries that have seen the worst losses in the past year. For example, the financial sector, but the worst may not be over for that sector.”

For investments in these changing times, Chancellor recommends mutual funds that have solid track records and large cap growth, the oil industry and looking at technology with Apple and Google coming back. “Just make sure you have the end in mind,” he cautions.

Mutual funds also get the nod from Finkelberg, who observes that investors are going to certificates of deposit, money markets and treasures — everything but stocks. “People think these things are safe,” he said. “But, it’s a marvelous time to get in the stock market with the caveat of being in for the long term. Things are volatile now so don’t let emotions alter a solid long time plan.”

Williams also finds that some investors want to be in cash, money markets or CDs. “We find that a ‘doom and gloom’ media slant on the market makes investors more conservative,” he said. “Often, we will see the market move up considerably before the news makes headlines. Once investors start hearing positive economic news, they will often change their risk tolerance from conservative to more aggressive. With CD and bond rates as low as they are today, those investments actually offer a negative real rate of return, after taxes and inflation.”

Contact MBJ contributing writer Lynn Lofton at llofton656@aol.com.


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