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Neighbors of Kane County

Market times or marking time

Aug 06, 2015 10:04AM ● By Neighbors Magazines

It certainly has been an interesting 15 years since the turn of the century. We have witnessed the Tech. bubble burst, the first recession, 9/11, wars as well fraud, the housing crash, over indebtedness, the great recession and here we are still standing. All things are not right yet, but direction is important. Employment is up but now wages need to improve.

Who knows what’s going to happen in the next months and years?

Interestingly enough here are some of the headlines so far this year.

“Europe heads into deflation” reported by The Economist in early 2015

The European Central Bank (ECB) commits to a new round of QE through Sept. 2016

With interest rates falling, the Economist reported that many countries in the Euro area are issuing bonds with negative yields. Why would anyone be willing to pay to invest in bonds with a negative yield? The Wall Street journal suggests that investors think yields will go lower.

Holding cash also has its negative impact since inflation erodes its purchasing power. The other problem with holding cash is you have to know when to get back in and that usually happens when you feel better. Unfortunately the train may have already left the station by that time and usually the upswings may happen already occurred.

Then we see what I call range trading shown by large up and down markets sometimes on a daily basis. Could be because of all the headlines or that some people just feel uncomfortable with what they see, feel and hear.

So what’s the answer? Well no one has a crystal ball.

I personally believe that a long term plan based on age, risk tolerance and objectives is still the best course.

My last article talked about the five investment portfolios and their objectives. We started with the most conservative which was Income with Capital Preservation. Up next is:

Income with Moderate Growth (below is an example of an Income with Moderate Growth portfolio. Keep in mind this is for illustrative purposes only):

This portfolio has a normal asset allocation of 40% stock and 60% bonds heavily diversified in both categories.

Stocks diversified between Large, Medium and Small cap. Foreign and domestic as well as growth and value stocks.Stocks that have a history of dividend payments (Although dividends are not guaranteed).

Bonds diversified by shorter term (less than five years) and intermediate (five to ten years). Long term bonds are not included since rising interest rates could have a magnified negative impact.

In addition to this mixture we could consider adding some alternate investments into the portfolio. Alternate investments are investments that have objectives not correlated to the stock market. In other words they are not designed to mirror the stock market. Investigation and advice is important here. Just because you pick the categories suggested above, you still need quality and education and investigation in these areas. Investors should consult their advisor concerning their personal financial situation.   

John Masus is an LPL registered principal with clients in 24 states. Securities offered through
LPL Financial, member FINRA/SIPC.

To contact Mr. Masus you can email or visit our website at His office has been located in downtown Batavia for 20 years.

The opinions voiced in this material are for general information and not intended to provide specific investment advice for any individual. No strategy assures success or is guaranteed to protect against loss.