The U.S. stock market is sinking. Some overseas mutual funds are under water for the year. And the relentless rise in real estate prices – at least in Colorado – is a memory.
What’s an average investor to do?
Plenty, financial experts say.
“The stock market isn’t the only game out there,” said Albert Woodward Jr. of Greenwood Village-based Woodward Wealth Management.
He advises investors to rebalance their portfolios to ensure an appropriate blend of bonds and value and growth stocks, and even toss in revenue-producing investments such as nonpublic real estate trusts.
Investors also should “weed out” poorly performing stocks – even if that means taking a loss, said Fred Taylor of Denver-based Northstar Investment Advisors. He suggests selling speculative stocks – such as some risky technology ones – and companies in industries hamstrung by higher interest rates, such as homebuilders.
Investors should then park the cash in a money-market fund until the Federal Reserve appears ready to stop raising interest rates.
“If you can earn almost 5 percent minus the risk, that seems to be the best bet,” Taylor said.
The market downturn doesn’t mean investors should “take a weed whacker” to their portfolios, said Jeff Tjornehoj, a senior analyst with Lipper Inc. in Denver.
“Do not attempt to time the market unless you have a track record of doing that,” he said.
A few additional investment strategies to consider:
CDs. Right now certificates of deposit offer a hefty – and guaranteed – rate of return. Just make sure you don’t need the money until the CD matures, or you’ll likely pay a penalty.
Tax-free bonds. These funds can return more than 2 percent per year, and here’s the kicker: You won’t pay federal income tax on the interest, and if the fund buys Colorado-issued bonds you avoid state taxes.
Large-capitalization, dividend-paying stocks. While these companies are far from bulletproof, they are safer bets than small-cap stocks, which have plunged during the recent downturn.
Staff writer Will Shanley can be reached at 303-820-1260 or wshanley@denverpost.com.
