YOUR MONEY: Five experts offer 2010 strategies

Ahoy, a new financial year is on the horizon. In the wake of the roiling fiscal seas of last year, we asked five financial advisers to weigh in on what they see ahead in 2010.

Ahoy, a new financial year is on the horizon. In the wake of the roiling fiscal seas of last year, we asked five financial advisers to weigh in on what they see ahead in 2010.

They are: Cameron I. Beck, UBS Financial Services in Sacramento, Calif.; Jeffrey DeBoer, DeBoer Financial Group in Granite Bay, Calif.; Ray Harrison, Harrison Financial Group in Citrus Heights, Calif.; Rashida Lilani, Lilani Wealth Management in Roseville, Calif,.; and Kelly Brothers, of Sacramento's Genovese, Burford & Brothers.

Here are their takes:

What's your expectation for the stock market and/or economy in 2010?

Beck: You should be buying stocks like crazy. It's easy to do what everyone else is doing and right now everyone is not buying. There are bargains to be had and the market will prove once again to be a good place, just as it has over the last 100 years.


DeBoer: We are cautiously optimistic for 2010. Although the market has increased over 50 percent since March, it does not provide great relief for those who lost nearly a third of their investments since the market highs. ... We expect the economy to slowly improve, but if things turn around too quickly, the Federal Reserve might raise interest rates, which could throw cold water on the recovery.

Harrison: We're fairly bullish. We feel markets will be up in 2010 but won't be a straight line like we've seen since March this year. There'll be a lot more bounce.

Lilani: For the stock market, we can expect the recovery to continue with a correction sometime around late spring or early summer. But don't expect what we've experienced since March to continue. A modest 8 to 10 percent for the S&P 500 may be more realistic.

Brothers: Call it optimistic relief. ... We're (expecting) a 10 percent increase in the market. It will be choppy, not like this year (2009) where we fell off a cliff and came roaring back. ... This is what a recovery feels like: fits and starts. We have to take away the lighter fluid (stimulus spending) and let the briquettes (economy) burn on their own. There's a new appreciation for work and jobs ... that will eventually get us back on a path of sustainable growth.

What investment sectors look most promising?

Beck: For long term, we like commodities - metals, grain - because of global demand ... and emerging markets in China, India, Russia and Brazil. Within bonds, we like corporate bonds, global bonds, TIPS (Treasury Inflation-Protected Securities) and non-U.S. denominations.

DeBoer: Some of the promising sectors include technology, energy, commodities, U.S. dividend-paying stocks and emerging markets (both equities and fixed income).

Harrison: We still have a big focus on global, emerging markets, such as China, India and Australia. We're not big on Japan, their economy as a whole is stagnant. We're investing for yield. ... Yields in corporate bonds will outperform Treasuries in 2010.


Lilani: Next year will be more about size than sector but if I had to choose, I'd probably go with materials, technology, energy and health care. Large companies with foreign operations, cash and growing dividends will look quite appealing, compared to the smaller companies with high debt and poor quality stocks that performed well in 2009.

Brothers: We like emerging markets in China, India, Brazil, Russia. Local bond funds in those countries, priced in local currencies. There's a huge middle class in these countries that did not build up the debt that the American middle class did. That will be the true driver of growth in those markets. It makes up for the political risks investing in those countries.

We also like fixed-income corporate bonds, bought through ETFs (exchange-traded funds) and mutual funds. We're avoiding Treasuries.

Any changes in your 2010 investing strategies?

Beck: We've decreased our holdings in Treasuries and high-grade corporate bonds and shifted to TIPS because inflation will rise over the next couple years. We've also rebalanced a lot of portfolios: Back to 50/50 stocks and bonds, with TIPS part of that mix. We don't ever let the stock portion get too high.

DeBoer: We are in the midst of a long-term bear market that began in 2000. It will likely include several short-term bull markets such as we're currently experiencing. Bear markets are a great time to reduce risk. We recommend implementing asset allocation approaches that are specifically designed to avoid risk vs. keeping up with the market.

Harrison: Invest without emotion. Reassess the risk you're taking. You don't want to stay 100 percent in stocks; you have to have some balance.

Given the level of government spending compared to our GDP, we're driving down a road that isn't programmed on anyone's GPS. We have to have different strategies. Buy and hold is too risky. The decade we just finished shows us you can't rely solely on that going forward. You have to be nimble ... and have a risk-adjusted focus.


Lilani: Diversification is still key when it comes to sound financial strategies. Keeping a global perspective is crucial going forward. Fortunately, over 30 percent of S&P 500 companies have global operations and provide that exposure to domestic investors.

Brothers: In the old days, you could literally throw your money in municipal bonds and not worry about it. But California is in horrible shape and there will likely be defaults on city and county general obligation bonds. State GO bonds will be fine. If it's water or power bonds, you'll be fine. But there are various sectors in muni bonds that you can no longer throw your money into blindly.

Any financial New Year's resolutions for investors?

Beck: People should pay themselves before they pay their bills. Have a savings or rainy-day fund in an interest-bearing account. Pay off your highest interest-rate debt first, whether it's a car loan or credit card. If you're sitting on a variable rate loan, refinance. Interest rates will likely go up next year. And given that tax rates will likely rise, people should fully fund any tax-deferred accounts, such as a 401(k) or IRA.

DeBoer: Figure out what your goals are, then align your investment strategies with those goals. Most importantly ... don't panic or overreact during the year.

Harrison: 1) Organize your financial documents. Get rid of the financial clutter; clean it up so you've got a handle on things. 2) Check all your beneficiaries on insurance policies, IRAs, pension plans, annuities. People have divorced and still have their ex-wife listed. Or a spouse dies and didn't have the proper beneficiaries named. Instead of assets going directly to three children, they're going to probate court (where) it can take a year to complete and eat up 5 to 8 percent. 3) Review your estate planning. People spend more time planning their next vacation than planning (how to allocate the assets) they've worked their entire life to accumulate.

Lilani: I always preach: Keep your debt low, have at least three to six months worth of reserves, spend - but wisely - and put money away for your retirement. And teach your kids to do the same. It may help prevent another financial meltdown in the future.

Brothers: Consider a Roth IRA retirement account. Inflation is coming. Higher taxes are coming. Maybe not in next six months but in 18 to 24 months. Tax-free income will have even more value in years ahead. A Roth IRA isn't for everyone, but for some folks who are 10 years from retirement, it allows you to pay taxes now at lower rates. For parents or grandparents who want to open a Roth IRA for their kids, it makes even more sense. There are no required minimum withdrawals ... (and) that money passes tax-free to your heirs. It's like paying off the mortgage on your retirement account.

Government and corporate America are off-loading the responsibility for retirement planning. ... You better educate yourself or find a good adviser to help you understand how much you need to retire and live the life you want to live.

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