Posted on: Sunday, April 4, 2004
How would you invest $100,000 in today's market ?
Investment Portfolios
Advertiser Staff
One year ago, the Advertiser asked some of Hawai'i's financial professionals to create $100,000 investment portfolios for a theoretical client starting on April 1, 2003.
Today we report on how the portfolios have performed as of the close of the market on March 31 and what the professionals who built them have to say.
The professionals were asked to invest for a fictitious client who is 50 years old, a woman, married (husband is also 50 and both want to retire at 65), with a joint income from all sources of $150,000.
They have a net worth (including their home) of $1.3 million, and their assets owned for investment total $400,000. They are in the 31 percent tax bracket and want this $100,000 to be invested for growth.
These portfolios should not be viewed as recommendations. Selecting the right investment depends on your current situation, goals and tolerance for risk. Before investing you should consult with a professional and read all relevant prospectus.
The theoretical portfolios were limited to purchases of U.S. stocks, mutual funds and certain bonds. A flat $25 commission was charged on most trades and cash balances earn interest of 3 percent. Below we list a sampling of each professionals' holdings as of last week.
If you have any questions or comments, please contact: David Butts, business editor, 535-2453 or dbutts@honoluluadvertiser.com.
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The hypothetical couple in this game does not appear to need to invest aggressively. With this in mind, why take unnecessary chances? Portfolio design stems from a proper balance of risk and reward. Given the amount of uncertainty that surrounded the markets during the past year, this low-risk portfolio has given our hypothetical couple a nice amount of reward. Concerns of terrorism, instability in Iraq, and an upcoming presidential election would appear to be ingredients for uncertainty in the year ahead. I continue to advocate a well-balanced, diversified portfolio in order to provide growth opportunities and to reduce exposure to risk.
Even though this exercise has concluded, the investing process continues. Vince Lombardi said, "Winning is not a sometime thing; it's an all the time thing. You don't win once in a while; you don't do things right once in a while; you do them right all the time. Winning is a habit." Substitute 'investment research' for 'winning' in that statement and live by the statement. If you have the ability to research your investments and follow your unique individual requirements and guidelines you will give yourself a competitive advantage. Never hesitate to call in someone that can help you achieve your goals.
Congratulations for participating in this year-long exercise. We have seen a variety of styles, risk levels and methods used to address the needs of our hypothetical couple. Each had a good result and provided a worthwhile educational opportunity. Remember to stick to the basics. Have a purpose and a goal, stay conscious of risk, design a well allocated portfolio, tactically reallocate and stick to it! This was one year of a 35-40 year process. Who can foresee the next 40 years. Wonderful possibilities await us all. Have confidence! For now and the future, I toast to your good wealth.
My goal for participating in this challenge was twofold: To discuss financial planning techniques and demonstrate the investment strategy of buying good quality investments in appropriate amounts and holding onto them. In summary, have a realistic goal and a sound plan. Invest accordingly and diversify. Review at least annually. Make changes when prudent and stick to the plan. Be careful of expenses that can reduce your total return. Use tax reduction strategies as appropriate. Have enough life, disability and long term care insurance. Most importantly, seek competent advice. Mistakes can set you back many years and cost you dearly.
