First Person From a Financial Adviser: Where My Money Is Going Now

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First Person: More Fun, Less Expense
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First Person: More Fun, Less Expense

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It seems as if I have been involved in finance and money all my life. For 25 years I was an institutional trader and now for the last 15 I have been focusing on helping everyday people to understand and cope with everyday financial issues. I have my own small Registered Investment Adviser firm in Connecticut, which means that I operate under a fiduciary standard to my clients.

For me, and my clients, the designed portfolios are meant to be held during headline news events, such as the recent conflicts between the Koreas, EU bailouts and any fallout that may come from the Wiki-leaks. That is not the same as saying that each and every investment is to be held through thick and thin.

I think that a portfolio that is basically 60 percent devoted to equities is plenty for most people over the age of 50, and within that the amount the money should be spread between capitalization issues and global regions. While not a naysayer about America, at times I think that our best days are in the rear view mirror and that investment capital needs to be deployed abroad.

In the domestic equity side I favor investments that pay cash dividends. With interest yields on AA quality five year corporate debt being less than 2.5 percent, I look for stocks or funds that pay a better dividend and have growth prospects. The SPDR S&P 500 Dividend ETF had a dividend yield in excess of 3 percent and has a strategy of being invested in companies with rising dividends. Altria Corp has a dividend yield in excess of 6 percent and a fairly good balance sheet. Due to the fact that its main product is tobacco many socially conscious people shun it. Coca Cola has a yield of 2.7 percent and has good growth prospects both in the US and abroad.

You cannot buy a stock solely on the dividend yield but must look at its growth prospects and its continued ability to pay dividends. Sadly many of the companies that paid great dividends were financial firms that are no more. Washington Mutual and Wachovia had attractive dividends and those banks were either closed or taken over. Citi had a very attractive dividend but was forced to suspend it in '09 in order to survive. GE was another company that slashed its dividend after decades of rising payouts. Research is definitely needed before buying a stock solely on yield.

Overseas I am a fan of the Asian area and am using Matthews Asia Pacific Fund and Matthews Asia Dividend Fund. These funds give me exposure to Japan, China, Hong Kong and the other nations in the basin.

Additional overseas exposure is gained through Dodge and Cox International, American Funds Euro Pacific and Harbor International. These are funds that have broader based regional exposure.

A small portion of most portfolios contains Oppenheimer Developing Markets and gives exposure to the emerging markets where the economies may benefit from well above trend economic growth and where many of the exports are commodities that will benefit from rising prices.

One of the things that I have learned in portfolio development is that there should not be a sense of "I need to do the trade today" but rather the mindset is, "how does this impact my portfolio?" Bearing that in mind, it can be fun to research some of the choices and make sure that the funds meet your objectives, that the fees are reasonable and that the change adds value to your portfolio.

For the quick buck there is always the lotto ticket.

Disclosure: As of November 29 the investment mentioned above were included in portfolios designed for my clients and may have been in my own portfolio.

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