Is there a financial planner in the house? Average investors, concerned about the uncertain 1992 economic and investment outlook, are ringing up planners for advice. Not all of their worries have easy answers. And not all of the experts agree on solutions.
"There's a concern about income, as investors seek to replace low certificate of deposit rates with something else," related Norman Boone, president of the San Francisco chapter of the International Association for Financial Planning and owner of San Francisco-based Associated Planners. "People are also scared about the possibility of the U.S. stock market dropping, and exhibit a real nervousness about buying at a high point."
He's also hearing from more and more baby boomers who are becoming serious about their children's educations and their own retirement goals.
Regarding low interest yields, Mr. Boone tells clients that CDs offer them not only a guarantee that they'll get their principal back, but "a guarantee that they won't keep up with inflation either." So he's recommending conservative high-yield bond funds, some with returns of 9 percent to 11 percent. Favorites are American High Income Trust, at 9 percent, and Kemper Diversified Income Fund, at 10.4 percent. Remember that the investment value will fluctuate.
Deeming the U.S. stock market "dicey" and capable of a 10 percent decline in the next three to six months, Mr. Boone prefers overseas stock and bond funds. Recommendations include Scudder International Bond Fund, EuroPacific Growth Fund, Templeton Foreign Fund and Harbor International Fund.
Although those who like liquidity will frown, Mr. Boone believes real estate offers a long-term opportunity. He suggests limited partnerships on the secondary market sold through brokers, such as Hutton/ConAm Realty Investors '84, which at $235 per )) unit offers an 8.5 percent current yield and chance for appreciation; and Insured Income Properties '85, which for $405 per unit offers an 11 percent current yield on an investment in fast-food restaurants in 35 states.
Low interest rates also offer opportunities.
"I tell people concerned about low rates that the single best investment move they can make today is to pay off any and all debt they have," said Sally Button, president of Button Financial in Denver. "If they have a child headed for college, I recommend U.S. Series EE Savings Bonds because of their guaranteed return of 6 percent if you hold them five years."
Investors need a reality check these days, she said. Over the next 10 to 15 years, they should expect an 8 percent annual return from blue-chip stocks, 10 percent from growth stocks and 12 percent from small capitalization stocks.
Some gradual portfolio adjustment is a good idea, with a typical goal of 30 percent to 50 percent in stocks and real estate; 20 percent in cash; and the rest in intermediate- to long-term bonds. She'd consider selling some municipal bonds coming due in 1993 to 1995, since she believes rates will remain the same or decline. About one-third of equities in a portfolio should be international, she recommends, her favorite fund being Harbor International Fund.
Some planners favor other approaches for yield-seekers.
"I'm recommending to clients that they obtain double the return of money-market funds by choosing closed-end funds investing in adjustable-rate mortgage pools," said Margaret Starner, first vice president and financial planner with Raymond James & Associates in Coral Gables, Fla.
Her favorite is American Adjustable Rate Term Trust '97, a closed-end fund trading on the New York Stock Exchange. She's also recommending choice utility stocks, including Florida Progress and Florida Power & Light.
Growth-oriented investors should look to a beaten-down closed-end fund such as Global Health Sciences Fund or the open-end SoGen International Fund, she said.