Rich Advice: What The Top Financial Advisors Are Saying About Investing

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I always enjoy reading Barron’s annual Top 1,000 financial advisors list. While, I am way too middle class to engage the ongoing services of a financial advisor (most of the top advisors service families/people with more than $5 million in net worth), it’s still interesting to note what they are saying about the future and where they see markets going.  Most of us may not be able to afford their services, but we can still benefit from their advice when deciding where and how to invest in the next few years.

The problems and risks that the top advisors see are nothing new and relate to troubles in the municipal bond market, uncertainty about taxes and government spending, subpar growth of the U.S. economy, stubbornly high unemployment and looming fears of inflation. However they do see some opportunities and provide advice that we can all take partake of; even if one does not have a multi-million dollar net worth.

  • With emerging markets (like Brazil, India and China) returns slowing down,  many are starting to allocate more money to large-cap, high quality, dividend-paying U.S. stocks that have underperformed compared with the broader stock gauges for several years. By one advisor’s reckoning, the domestic market is undervalued by 30%
  • “We’re so down on unemployment, but the risk is more for upside surprises than downside,” says top ranked advisor Robert Runkle. “I feel very good about the economic outlook for 2011. The U.S. will lead the rest of the world out of this downturn”
  • A number of advisors don’t recommend individual stocks for their clients. Instead, they prefer that clients use mutual funds, index funds or ETFs for equity exposure. For clients more comfortable with risk and sufficient capital, there’s another bucket that could include hedge funds.  See Morningstar for a list of top performing mutual funds and ETFs
  • Between the ages of 15 and 25, it is crucial to educate your children on how hard mom and dad have worked to create their wealth/savings and how important it is to protect it

Wiser Advisor

  • To help clients deal with the emotional trauma from the financial crisis, advisor Patrick Dwyer says the key is “…assemble a long-term strategy and stick to it. ” At the end of the day, the asset-allocation process works,” he says. “It’s not magic, it doesn’t exempt you from having to deal with the world, but it can ameliorate your downside risk”
  • Mike Strada,  believes commodities will be key in the near future, so he has been buying timber, coal, industrial-metals (no gold or silver) and natural-gas companies. He also sees interest rates rising at some point and has been recommending Treasury Inflation-Protected Securities, or TIPS
  • Most of the wealthy clients, started out small and middle class. For advisor Jeffrey Vincent, seven of his top 10 clients started out small. One of them opened an account 15 years ago with $5,000, buying oil-service stocks. That account eventually grew to over $70,000, then ballooned to $15 million after the client sold his businesses

One day it’ll be good to be on one of these top advisor’s radars. But until then, I can at least incorporate their sound advice into my financial planning

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