Posted on: Sunday, January 11, 2004
How would you invest $100,000 in today's market?
Investment Portfolios
By David Butts
Assistant Business Editor
The Advertiser asked six Hawai'i 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 markets on Friday, and what the professionals who built them have to say about the market.
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 is 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, assistant business editor, 535-2453 or dbutts@honoluluadvertiser.com. • • • Major U.S. stock market indices posted solid gains in 2003, and recent data indicate the U.S. economy is picking up steam. Many investors have recovered some of the losses sustained over the past few years. Knowing now what we wish we knew in 1999, it is an excellent time to rebalance your portfolio and evaluate your “vehicle.” Design your portfolio with risk tolerance and time horizon in mind. It might be time for something like a Volvo. Alexis de Tocqueville (1805-59), French social philosopher. "Democracy in America," vol. 2, pt. 3, ch. 13 (1840). Take the time to do tremendous amounts of research on the companies you own or may purchase. Form an information inequality that sets you and your holdings apart. Strive for the advantage of asymmetrical information.
Portfolios are vehicles. What are you driving? Motorcycles, for example, are fast but dangerous in a crash. A city bus is safe but oh-so-slow.
"However energetically society in general may strive to make all the citizens equal and alike, the personal pride of each individual will always make him try to escape from the common level, and he will form some inequality somewhere to his own profit."
Last week, after so many days of seemingly unending rain, we had a gorgeous weekend. Perfect. After three years of seemingly unending down markets, we had 2003. It was a profitable year for those with the foresight to maintain a well diversified portfolio. The equity, high yield, foreign bond, gold and emerging markets were up sharply. You only missed out if you stayed frightened out by the big bear of 2000-2002. The economy has proven its resilience, and the markets will likely have a good 2004. It’s never a straight path, but it tends to prosperity. Stay with your plan.
The start of the new year is a great time to review your investments. How did they do last year compared to: your goals and expectations, their peers, the index, other asset classes? Are your beneficiaries current? For those who are not yet retired, are you putting enough money into your retirement bucket to be able to retire comfortably? What can you generally expect your investments to do going forward? For instance when interest rates rise, bond values decline. Make your appointment with your advisor today to review your financial plan.
