South Park Magazine

Your 2011 Resolutions


During these volatile economic times, it’s never been more important to protect your money and take advantage of smart investment opportunities. And to truly make your money work for you, strategic financial planning is imperative.

To help you navigate the choppy financial landscape, SouthPark Magazine consulted several wealth management experts, who tailored their advice to three stages of life: Single young professionals, families with kids, and baby boomers who are retired or heading that way.

Young single professionals

At this stage of life, building a career is usually the top priority – but the experts warn that starting to save should be just as important.

In addition to maximizing any 401(k) options, Karen Keatley, president of Keatley Wealth Management, LLC, advises young professionals to set aside as much in savings as possible. “It’s a good time to do to it before they have the obligations of children and education expenses.”

Because time is on their side, Keatley said people in their 20s and 30s can afford to be less conservative with their asset allocation. Equity investments, in which profits are realized through dividend payments and capital gains, outperform bonds when looking long-term, she says.

Keatley also recommends that young professionals invest in low-cost, no-load mutual funds, in which there is no sales charge or commission. To maximize earning potential, Keatley also suggests creating a diverse portfolio including international and emerging markets, as well as large- and small-capital funds, meaning a mix of both big and small companies. The advantage to this strategy, Keatley says, is it allows you to continue to invest and save money even during a downturn. “And the long-term impact of that is tremendous,” she says.

Maurice Wilson, president of Wilson Wealth Management Group, advises his young clients to aggressively work toward building a million-dollar portfolio, ideally before they’re 40. “And not so much for retirement, but to prevent against underemployment and unemployment that’s so prevalent in the current global economy,” he says.

One of the best ways to accomplish this, Wilson says, is to focus on inverse-exchange traded funds. This type of investment magnifies the return of the stock market. If the S&P 500 goes down two percent, for example, an inverse-exchanged traded fund will go up two percent, making them popular in a bear market.

Wilson said for every $100,000 a young professional accumulates, they need about $2 million saved for retirement. “And a basic 401(k) is not going to get it done. You have to be aggressive to get to that first million, otherwise you might find yourself on the wrong side the equation as you get into your 50s and 60s.”

Families with kids

Taxes and planning for their kids’ college educations usually dominate the concerns of this group.

Chris Hobart, president of Hobart Financial Group, says tax efficiency is very important with all investors, but especially families with kids. To help build a strong and stable investment foundation, Hobart advises his clients to look for fixed-index annuities, which is an insured investment. When the S&P 500 falls, the insurance company protects the principal against losses with a low but positive interest rate. “It’s something that gives you solid straight rate, or one that can go up with inflation, but the key is you can’t lose money.”

Bonds, an investment in which you essentially loan money to a company, offer stable, albeit lower returns than average stock market returns, said Hobart. For families, a smart alternative to bonds is a real estate investment trust (REIT). This is a tax designation for a corporate entity investing in real estate that reduces or eliminates corporate income taxes. “These are not publicly traded, so they don’t have a valuation that goes up and down, and they kick off a regular dividend that’s either monthly, quarterly, semi-annual or annual.”

An increasingly popular REIT investment, Hobart says, is in the health care industry, such as hospitals, medical offices and urgent care facilities. “You can invest in the trend of an aging population going to the doctor more often. You can own the buildings that doctors lease.”

Setting aside money for educational expenses is also important for families with kids. A popular strategy many families use is the 529 plan, which is a tax-advantaged investment plan designed to cover college expenses. But Wilson advises his clients that in addition to the 529 plan, they should consider a Roth IRA, which he said can help supplement additional costs like an unpaid internship or studying overseas. While saving for education expenses is vital, Keatley warns her clients not to neglect retirement savings. “This can be dangerous because when a kid finishes college, they have a whole lifetime to pay that off. But when you’re retired and finished with your working life, that’s it.”

Retirees and baby boomers

Many baby boomers have seen carefully-laid retirement plans implode during the recent downturn. They’re facing the triple threat of Wall Street, possibly rising taxes and the prospect of higher medical costs as aging brings health issues.

Wilson is advising this group to put as much of their retirement funds as possible into a Roth IRA conversion, which doesn’t impose any tax upon withdrawal in retirement. Wilson said this is important as most forecasters expect taxes to rise for many income brackets due to shrinking government revenues.

Since most baby boomers and retirees rely on their portfolios for their living expenses, Keatley recommends they maintain three to five years of living expenses in a safe, liquid asset, such as short-term bond funds or money market funds – “as long as that part of the portfolio is completely immune from fluctuations,” she says.

“You never want to be in a situation where you’re forced to sell stocks to meet living expenses at a disadvantageous time.”

Hobart stresses that for this group, tax efficiency and protection from market volatility is crucial. “For boomers and retirees, their main concern shouldn’t be about how much they can make, but how much they can keep.”

Fixed-index annuities represent a good vehicle to preserve assets, as they are a principal-protected annuity in which you are guaranteed a minimum rate of return with opportunities for earnings above the guaranteed minimum as the stock market rises, Hobart says. “Preservation of assets increases tremendously at this point and you need to make sure the ‘money snatchers’ of taxes, Wall Street and health care are properly planned for.”

Looking ahead

In 2011, Wilson says investors should take a second look at the “buy and hold” philosophy, which is a common long-term investment strategy based on the view that in the long run financial markets give a good rate of return despite periods of volatility or decline. “We believe that it works the majority of the time, but like we’ve seen over the past few years, you have to be careful.”

An alternative is target-date funds, which adjusts the asset mix (stocks, bonds, cash) to become more conservative as you get older, Wilson says. “We’re still roughly 20 percent below where we were in October 2007. So ‘buy and hold’ works great when you’re younger because you have less money to lose.

“But when you start getting older, a two-percent drop is a lot. So it’s better to play it safe, and sacrifice some gains rather than go through psychological drama of losing say $100,000 or more and worrying every day that you might not get it back.”

New Year’s resolutions

Single young professionals: Evaluate your 401(k), start putting away even more savings; diversify portfolio by investing in international and emerging markets, as well as big established companies and promising new start-ups; consider inverse-exchange traded funds.

Families with kids: Supplement your 529 with a Roth IRA for college expenses; for a guaranteed return, consider fixed-index annuities; look into a real estate investment trust (REIT).

Retirees: Adjust portfolio so it includes 3 to 5 years of expenses in liquid assets; consider a Roth IRA conversion; look into fixed-index annuities.


No-load mutual funds: An investment in which there is no sales charge or commission because you buy shares directly from the investment company rather than going through a secondary party. Recommended for knowledgeable do-it-yourselfers.

Large and small capital funds: This refers to the size and value of the companies in which you can invest. Large capital funds are in the Dow or S&P 500 and generally have a market value of at least $8 million. Small capital funds are usually valued under $1 million. Typically, most advisors will tell you to have a mix of both, as big companies are less risky, but small-capital funds can often offer more growth potential.

Inverse-exchange traded funds: This investment is designed to react inversely to market fluctuations. For example, if the S&P 500 goes up two percent, an inverse-exchanged traded fund will go down two percent, and vice-versa. Because their value rises in a declining market environment, they are popular investments in bear markets.

Fixed-index annuities: These are insured investments in which you’re guaranteed a minimum rate of return with opportunities for earnings above the guaranteed minimum as the stock market rises. So you earn less than if you invested directly in the index itself, but you also lose less when the index drops.

Real estate investment trust (REIT): A tax designation for a corporate entity investing in real estate that reduces or eliminates corporate income taxes.

Asset mix: The combination of assets within a fund or portfolio. Assets are classified as stocks (equities), bonds (fixed income), and cash and real estate. The asset mix is usually shown as the set of percentages every asset class contributes to the total market value of the portfolio.

Lifelong adviceThe Certified Financial Planner Board of Standards, Inc., a Washington, D.C.-based non-profit, is a resource for financial planning. As part of the organization’s 25th anniversary, it released in November Lifelong Financial Strategies, a four-part initiative detailing investment strategies and tips for all stages of life, from early wealth accumulation to retirement. The advice covers such crucial issues as how to replace employment income once you retire, how to pay for education expenses, and how to take advantage of creative tax planning. The information is available via videos, audio podcasts and other platforms at