What sectors are growth sectors for 2013, and what sectors should investors avoid placing their money in this coming year?
Anthony Saffer, CFP, is a financial adviser and vice president of Coleman & Johnson Financial Advisors.
Right now, we are more focused on themes than sectors. Two areas of emphasis are: Companies with the willingness and cash flow to pay and increase dividends; and companies that earn revenue from the emerging middle class in developing countries. Often these overlap.
We are generally avoiding long-term treasury bonds because we don’t want to be stuck with low-yielding, overbought bonds when interest rates increase.
Investing into the emerging world does not have to mean buying a Chinese index fund and the inherent volatility. While having some broad exposure directly in the emerging markets can make sense, holding blue-chip companies that earn revenue from growth regions — no matter where they are domiciled — can help address growth objectives.
The over-indebtedness of many developed countries and lack of real fiscal solutions, matched against relative corporate strength and some improving economic numbers, highlight the importance of a diversified investment plan with tactical flexibility.
Investing within the context of timeframe and objectives is still a key to long-term financial success. Prepare for stability in retirement income by paying down debt and creating sustainable direct income sources — pensions/annuity streams, social security, rental income — to supplement investment income. Be prepared for the prospect of future higher inflation by considering reasonable exposure to real assets, such as commodities, metals and real estate.
The emotional roller coaster of headline news will try to sway investors, but I suggest sticking to the true principles of investing.
Michael Tedesco is a financial adviser with Morgan Stanley in its UTC office.
Morgan Stanley’s U.S. Equity Strategy Model Portfolio is overweight in health care and industrials, and underweight in discretionary, consumer staples and financials. Utilities, technology, materials, telecomm and energy remain market weight positions.
The portfolio is generally skewed toward the following themes: more cash and dividend growth exposure, and a retained bias toward mega caps and quality where possible.