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2006: A look back - A look ahead  
  The stock market rocked between overbought and oversold in 2006, so we asked four experts for a view toward 2007.
CDs & investing
 Personal finance calendar  Personal finance calendar 

CDs & investing: A look ahead from 4 top experts

Jason Flurry Jason Flurry: "Everything revolves around inflation"
Jason Flurry is a Certified Financial Planner, president and founder of Legacy Partners Financial Group in Woodstock, Ga. Flurry specializes in conservative asset management for clients with higher than average net worth. Flurry is a firm believer that a portfolio with the correct asset allocation needs only fine tuning as the years go by.

Expect rates to hold fairly steady from where they are right now. I think the Fed went one step too far. I don't expect a recession -- I think we're in for a soft landing, but if growth slows too much there could be some negative repercussions and then rates would come down quickly. The Fed has to maintain credibility and they haven't really established that for themselves yet. Its inflation-fighting credibility is an issue for the markets -- mainly the stock market.

There's a lot of overseas interest helping our economy. They're financing the national debt through dollar-based investments. If they decide to get away from the dollar it could throw us into economic havoc. A lot of foreign money is moving to corporate bonds rather than Treasuries and that may be a reason why we're seeing rates stay so low.

Everything revolves around inflation. Rates are a gauge or a guess about future inflation. As long as it stays this way rates don't have to move up. The temptation is to load up on teaser rates at the bank; get 5 percent or 6 percent for a year or 18 months. Given that rates are fairly flat it goes to the laddering idea. If you're happy with 5 percent for a year why be happy with it for five years? It's making a guess about inflation.

Certificates of deposit and short-term Treasuries have kept up with inflation in most cases. Short-term maturities have an anticipated inflation expectation priced into them. Long-term CDs and Treasuries can be badly hurt by inflation. You don't need stocks to hedge inflation; you do that with bonds or CDs. Use stocks to build wealth.

When you play golf you carry more than one club in your bag. You have different clubs for different situations. In a portfolio, different asset classes are designed to do different things. What's the shot you're trying to take? If you're trying to get incomes, use a CD or a short-maturity fixed income investment. Have a little bit of this and a little bit of that and control how much you have based on risk tolerance.

I tell my clients, the best portfolio is one I can keep you in for 20 years. If you look at chart after chart of a mutual fund you'll see investment performance. Most people get investor performance. They buy and sell, get in and get out. They get a much more reduced experience than they would have had if they'd bought and held.

-- Posted: Nov. 1, 2006
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