Reach investment goals despite the economy

"The $64 million question(s) everyone's asking (are): 'Where should my money be? Should I move to safety or ride it out?'" Most of her clients, who are close to retirement or already retired, are looking for safety rather than growth, even with lower yields. "They don't like it, but when push comes to shove, they'd rather have safety."

Gary Goldberg, CEO of Gary Goldberg Financial Services in Suffern, N.Y., says retired or near-retired investors are mostly concerned they'll outlive their assets because they can't get any yield at the banks, so they're stepping out of their safety zones to get more income. And that's dangerous.

So is there any safe haven that has some yield? Simpson and Goldberg say it's not in bonds, though Masters says that doesn't necessarily mean investors should abandon bonds altogether. He believes they're an important diversifier in a balanced portfolio.

Both Goldberg and Simpson are seeing a surge of interest in annuities, which can guarantee a set income for life, but at a cost, either in lost upside earnings potential or in fees.

Goldberg likes a managed variable annuity that guarantees an income for life with the remainder going to heirs, but that can come with high fees. Simpson's clients are interested in the fixed-index annuities, which are pegged to a specific market index. Investors can get a guaranteed minimum return (typically between 1 percent and 3 percent) or whatever the market is returning, less a percentage for the annuity company.

Investors shouldn't allocate their total portfolio toward annuities, say Goldberg and Simpson, but a portion may make sense if they're craving safety and in need of income. It's important to fully understand annuities and research them before buying. Many have early-surrender charges, so they should be considered long-term solutions.

Goldberg also likes high-dividend, high-quality stocks. His firm has researched and selected 15 top-performing stocks from the Standard & Poor's 500 index that they offer to clients. "We call them dividend aristocrats because the dividends go up every year."

Simpson suggests market-linked CDs, a hybrid product that provides the safety of a CD with a guaranteed return and some of the upside potential of a market index. Once again, you'll sacrifice upside earnings for the guarantee of safety. There could also be lockup periods (typically five years) and penalty fees for early withdrawal. Plus, you'll pay tax on interest earned.

Opportunities, but with risk

There's opportunity in every market scenario, and for those with a stomach for risk, some long-term strategies might pay off with higher overall performance in your portfolio. Just don't bet the farm on them. Masters believes that unless they're very rich, most investors can't abandon growth equities in favor of safety. There still needs to be balance, even if the equity portion of your portfolio isn't as robust as it was during the bull market.

Simpson sees room for growth in precious metals, commodities and somewhat in emerging markets. Goldberg sees opportunity in international stocks and emerging markets.

But the main takeaway in these turbulent economic times, whether we go into a double-dip recession or are in for a slow slog of a recovery, is not to panic and ditch your investment plan. Keep your sights on your investment goals.

"Don't be a trader," says Goldberg. "If you have a solid foundation, you can take some risk, but you have to be able to sleep at night."


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