Opus News & Insights

Wealth Management Guide 2015
Tuesday, February 17, 2015

Local financial experts are offering time-proven advice to investors about what to expect from the economy this year, and how to behave in coming months when the daily and weekly business news becomes frightening.

Four who were interviewed by Cincy Magazine are not so much warning their clients, but instead reminding them, that dramatic daily market changes - plunges of 200-300 points, or similar sweeps upward - are a normal and natural part of the way markets work.

They’re making that point because all of them, in separate interviews, say they expect 2015 to feature more market volatility than investors have come to expect in recent years as stocks have trended steadily upward.

“Typically, if you have an up stock market year, you may have six up months and six down months, but it ends up being an up year,” says Kevin Whelan, vice president and portfolio manager with Opus Capital Management downtown. “Whereas what’s happened over the last six years or so is literally this just steady upward climb. We expect that to change going forward.”

Jim Gore, founder and chief investment adviser at THOR Investment Management in Anderson Township, agrees.

“Our advice is: Don’t get spooked,” Gore says. “Make sure you have a reserve and you have your portfolio set up for the volatility that you can withstand. And don’t think that things are always going to go up.”

Valerie Newell, chairwoman and managing director at RiverPoint Capital Management downtown, emphasizes market fluctuations are good and natural.

“There’s a famous saying about short-term market fluctuations, and it goes like this,” Newell says. “‘The market is a voting machine, not a weighing machine.’ I like that saying because I think it really helps people understand that the market is just the result of people voting on a daily basis, whether they want to buy, or whether they want to sell.”

She and the others completely understand why market volatility can trigger the urge to panic, given the daily business reports - positive and negative.

“Media like to have drama,” Newell says. “Media like to make a big deal about day-to-day fluctuations and ups and down, and changes in prices because that’s what makes news.”

Gore offers this: “I think the Federal Reserve will raise rates sometime this year, and no one knows how that’s going to affect the market. So it’s important to be diversified and expect volatility this year. It’s definitely going to come back.”

Jason Farler, portfolio manager with Johnson Investment Counsel, Inc., in Green Township, says the stock market remains a good place to be invested, even at historic highs. But investors need to be selective, he and the others caution.

“Whether or not stocks should have a sound representation in the portfolio is always going to be valuation-based, but, longer-term, it is going to also be the best insulation against inflation, which, for our clients, from a planning perspective, is very important,” Farler says. “When we have a retiree come in to our firm, or recently retired, we have to think out 20, 30, sometimes 40 years, depending on when they retire, and so the purchasing-power protection is very important, and really the best way to do that is with owning stocks, longer-term.”

Whelan and the others believe large cap investments make good short-term investments now, while international stocks, particularly in emerging markets, are good for those wanting to hold onto them for three to 15 years. Energy stocks also are good deals now.

With large-capitalization firms, “valuations just seem a little more reasonable there than what I’d call the small-cap market,” Whelan says. For the longer-term investment, “valuations in international and emerging-market stocks are very attractive.”

With those emerging markets, price-to-earnings ratios “are more in the 13-14 range, rather than upper teens in the United States,” Whelan says. “I would say it’s just mathematically setting up for those asset classes being good places to accumulate capital over the next 10 to 15 years, if you put your money in now, with the realization that they had a very, very poor 2014 and they very well could even have a poor 2015, especially if the dollar strengthens.”

And there’s this bit of good news, which, if it holds true, could buoy the economy throughout the year.

“If oil prices stay at a lower level, there’ll be a bit of a tailwind to the consumer space, also,” Farler says. “So, our economy being two-thirds the consumer, lower energy prices, lower gas prices have very stimulative effects to the overall economy.”

Words of Advice From the Pros

Jason Farler, portfolio manager with Johnson Investment Counsel, Inc.: “Know what you invest in, know why you’re invested the way you are, and always stay educated, meaning market volatility is always going to be ever-present. It’s always there. It’s always in the background, it’s always there to remind you that it’s important to have a balanced portfolio.”

Valerie Newell, chairwoman and managing director, RiverPoint Capital Management: “You should be updating your wills and your trusts every three to four years. It’s not a complete rewrite. And it might not be a change. But it is checking in with your advisers - your financial adviser and your attorney - to see if there are any changes that need to be made.”

There are many reasons to do this: Do you really want your former spouse to be listed as your IRA beneficiary, or if you suddenly die, your children’s guardian to be someone you haven’t spoken with in years?

Also, Ohio in recent years changed its laws for health-care directives, “and so people want to know they’re using the latest suggested health-care-directive documents, because then their relatives, friends and whoever needs to be involved will be able to get access to information, will be able to make directives to health-care providers,” Newell says.

Newell’s final tip: After speaking with your attorney, when you receive the big packet of documents, don’t put off reviewing and signing them, even though they’re no fun to read: “Make sure you just do it, from A to Z, it’s all done, and signed, sealed, delivered. It’s a great feeling.”

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Written By Mike Rutledge | Cincy Magazine | Source Article


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