MANAGING YOUR MONEY : PREPARE YOURSELF : Where the Experts Say to Invest Money
The Dow Jones industrial index has tumbled nearly 20% this year, oil prices have doubled and the economy seems to be spluttering to a halt. Is it a wonder that so many individual investors are confused?
But there is some consolation: Many experts are nearly as befuddled. When eight investment professionals recently were asked to name their favorite investment for the average consumer today, several acknowledged their confusion. And most were cautious in their prescriptions. As to be expected, most offered their advice with two routine caveats: No investment is right for everybody, and investors shouldn’t sink too much of their money into any one vehicle.
Lewis Altfest, financial planner and president, L. J. Altfest & Co., New York . It’s too early to buy stocks and too late to sell them, says Altfest, who suggests a bond fund holding securities with maturities of no more than five years. Such funds offer relative safety and slightly better returns than cash--8% to 10% a year, versus the roughly 7.5% now offered by money market funds. These intermediate term securities get slightly higher returns than shorter-term notes and will get a nice price boost if short-term interest rates come down, as Altfest expects. Among specific funds, he suggests the Limited Maturity Bond Fund offered by New York-based Neuberger & Berman.
Victoria Felton-Collins, financial planner, Keller & Coad Investment Counsel, Irvine . Felton-Collins suggests a two-step strategy into a family of mutual funds. Now, while the future is unclear, she recommends investing in a money market fund or other cash equivalent. When the economy strengthens, she suggests moving into an international stock mutual fund. International funds offer access to some relatively fast-growing economies. For example, she notes, European economies are growing at an average 3.5%, while Japan’s is advancing at more than 4%. Meanwhile, the American gross national product is rising just 1.8% a year. She recommends Vanguard World Fund-International, Vanguard’s Trustees Commingled Fund-International Portfolio, DFA Continental Fund and DFA Japan.
Larry Cisneros, money manager and president, San Juan Capital Management, Huntington Beach . Cisneros is looking for safety in the stocks of medium- to large-sized companies. And he prefers companies that pay dividends above the median of the Standard & Poor’s 500 stocks. Cisneros says there are many grossly undervalued stocks, though he acknowledges that investors shouldn’t expect to see much price appreciation in the next few months. He likes such recession-resistant companies as Philip Morris, the cigarette and food company, and Service Corp. International, a big funeral home and cemetery chain. He’s staying away from troubled industries where dividends could be cut, such as banking and insurance.
John Rogers, money manager, Ariel Capital Management, Chicago . Rogers, daring to be a contrarian, believes that the smaller-capitalization over-the-counter stocks, many of which have fallen 30% to 50% in recent months, may now offer some good opportunities. Rogers likes Interface Inc., the country’s largest carpet tile manufacturer, now selling at a modest five times current earnings.
Lawrence A. Krause, financial adviser and chairman, Lawrence A. Krause & Associates, San Francisco . For investors seeking diversification, Krause suggests oil income limited partnerships to take advantage of a long-term rise in oil prices. Krause considers the recent run-up in prices a fluke, but he believes that the declining global supply guarantees that oil prices are headed upward over time. In addition, he notes that 50% of the income from such investments is tax-free for the next five years. With the cost of oil production now at $4 to $6 a barrel, Krause estimates that investors could realize returns of 24% if oil prices rose to $25 a barrel. Krause likes the Midland, Tex.-based Southwest Oil and Gas 1990-1991 Income Program, which requires an initial investment of $2,000.
Morrie W. Reiff, financial planner and president, Planned Asset Management, Encino . Reiff recommends a “multi-market bond trust” as a way that investors can secure a measure of safety while taking advantage of the higher interest rates prevailing overseas. Such funds buy U.S. and foreign bonds but limit maturities to three years or less to minimize price volatility. Reiff’s favorite is the Alliance Short Term Multi-Market Trust, whose portfolio is made up of 25% U.S. government securities and 75% foreign corporate and government bonds. The higher returns come from countries such as England, where short-term rates are now nearly 15%. The Alliance trust’s Class B shares have been returning slightly more than 10%.
Stacy Ann Schramm, financial planner, IDS Financial Services, Pasadena . Schramm believes that contracts called “flexible annuities” offer both safety and adaptability for investors. These contracts can be set up to keep the bulk of their assets in Treasury bills and other U.S. government securities during turbulent economic times. Later, when the stock market seems headed for recovery, some of those assets can be shifted to stocks. Karen W. Spero, financial planner and president, Spero Financial Services, Cleveland . For investors who can put aside money for at least three to five years, Spero thinks that this is a good time to buy some of the top blue-chip stocks: American Telephone & Telegraph, Walt Disney Co. and General Electric. Spero says General Electric, hammered from a 52-week high of $75 to a recent $50, “has promise for the future” because of the restructuring of recent years that has cut most slow-growing businesses. She believes that the recent oil price rise won’t keep visitors from visiting the theme parks of Disney, which has seen its stock slide from a 52-week high of $136 to a recent $91. And AT&T;, trading at about $34 recently, down from $47, “will benefit from all the big communications advances,” she says.
