Isolde Brielmaier

Born to Austrian and Ugandan parents in Seattle, Isolde Brielmaier always had a strong understanding of various cultures. First falling in love with dance and attending a public school where the arts were heavily integrated into the everyday curriculum, she got the artistic bug early. “I danced very seriously through my early 20s,” Brielmaier says, “and always tried to balance that with being a good student.” But while attending high school in Germany, the long-term performer decided she no longer had an interest in pursuing dance full-time. Instead, she chose to become a full-time student of history and sociology at New York’s Columbia University and spent her spare time at the Dance Theater of Harlem and Alvin Ailey’s dance studio. However, it was her courses in art history that would become a major component in her life and career.

Curating small exhibitions in the SoHo section of New York, Brielmaier was eventually asked to teach at Vassar University. What was supposed to be a one-time thing turned into a five-year career as a visiting professor. In the past, Brielmaier advised athletes and entertainers in purchasing contemporary art, but she now operates as the as the chief curator of SCAD (Savannah College of Art and Design). Today she also curates international art exhibitions in the SCAD community and beyond. BlackEnterprise.com sat down with the art guru who broke down the top five things to consider when looking to break into the world of art.

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Support What You Love: Black Culture
Understanding the importance of artistic expression in the Black community, Brielmaier describes the No. 1 way people of color to invest in and give back to the arts is by supporting the culture. “[SCAD] does a lot of outreach not only to our own students, but to the broader community living in classes that might not have full-blown art programs and access to the kind of work we have,” she says. “We have the Walter O. Evans [collection]; it’s one of the top African-American art collections in the country. I’ve come in on my weekends to take students through. You’re building little art enthusiasts in a way.”

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Don’t Just Buy, Give Back

Noting that museums are not the only place where art lives, Brielmaier explains the importance of understanding the impact of art institutions, and the to support both monetarily and physically—just as anyone would do with their alma mater. “Institutions are not getting the financial support that they were getting [before] the economy [was] really rough,” she says. “And by that, I mean support our cultural institutions. If you have the means and the time, join a board, and if not, go to an institution and inquire if they have a young contemporaries group or a young collectors group. It’s a great way to meet people; to build a community in the arts; and really get in on the backend and see behind-the-scenes. I think is key. It’s a great way to start moving into other realms of art if you’re interested in investing.”

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Get to Know Experts in the Art World

Driving home the relevance of getting involved with an institution or art group, Brielmaier reiterates the need to know an institution and the benefits offered when doing so. “When you’re just starting out, joining a museum or a young collectors group is one of the best ways to go: A) You get invited to all their events, including their exhibitions and all of their openings and B) You’re also in the mix with people of like mind where information starts getting exchanged,” she says. “You also get to go to events and exhibitions where artists attend. You can work with an art advisor or art consultant, and they can open up their Rolodex and take you to galleries and set up appointments and they will assist you with successfully purchasing the work. And they’ll buy the work for you with your money.”

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Only Buy What You Love

There’s a big difference between a piece that’s worth $400 and $40,000 besides the price, but that can be hard to determine for a novice. That’s why Brielmaier stresses the importance of being knowledgeable about what you’re buying and why. “If you spend a lot of time collecting, it’s really nice if you like the work,” she says. “That’s hard for [people] in business to wrap their head around because they want to know, ‘Well, what’s the return on the dollar here,’ and oftentimes if you’re talking about a blue chip artist like an Andy Warhol, you don’t know, especially with some of these younger contemporary artists.” Brielmaier suggests researching an artist from exhibition history to where he/she went to school before making a purchase. But ultimately, “Go with what you like. It has to have that appeal to you, particularly because it’s going on your wall.”

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Know a Bad Investment When You See One

Brielmaier notes that it would be hard for any one person to say one art purchase is worse than another because all purchases are not based on ROI (return on investment). “I don’t want to say what’s a bad investment,” she says, “but what I would not recommend is jumping blindly into something, particularly if you’re talking about purchasing a work that’s very valuable.” Hesitant to ever tell anybody what not to buy, Brielmaier continues, “If it’s $400, to some people that’s a lot of [money] but when you start getting into really high [numbers] ask around. Look at the work, don’t just look at that work by the artist but look at the range of work to see if there’s some kind of continuity. And think about buying from a reputable gallery or someone who’s reputable—it could be an individual—but someone who has a history and relationship and has a reputation. Cover as many bases as you can before you take the plunge.”

Conventional wisdom questioned how stocks could be so high when the economy was still widely perceived to be in a funk. In my opinion, the real wonder was why stocks hadn’t already gone to new highs—because the economy was already well on its way.

You read that statement correctly. Despite all the headlines and the real problems we have—unemployment, the European debt debacle, the housing crisis—the U.S. produced more wealth last year than ever before. First we’ll put numbers to the story and then examine why stocks and the economy aren’t always in sync.

Let’s focus on the economy and stocks over the last five years. The size of an economy is measured by its gross domestic product—the market value of all the goods and services it produces in a year. In 2006, the GDP of the United States was $13.3 trillion. Last year it set a record, an estimated $14.8 trillion. Over that five-year period, GDP cumulatively grew approximately 11%, but it never changed more than 5% in any one of those years and fell only once—a 1.7% drop in 2009. The stock market, represented by the Standard & Poor’s 500 Index, told a very different story. Since the end of 2006, the S&P 500 has been flat for the whole period, but made massive shifts in-between. In three of the five years, it posted double-digit moves, losing 37.0% in 2008, gaining 26.5% in 2009, and rising 15.1% in 2010.

So that’s the conundrum: If the economy and stock market are connected, how can one go up fairly smoothly more than 10% over a half-decade, while the other jumps all over the place but ends up going nowhere? After all, when you buy stock in a company you hold the right to the profits the business generates. And the S&P 500 Index does contain 500 of America’s biggest businesses—so if the economy is doing well, those companies are, too.

But as legendary value investor Ben Graham wrote in The Intelligent Investor (Collins Business; $21.99): “The stock market is a voting machine rather than a weighing machine. It responds to factual data not directly, but only as they affect the decisions of buyers and sellers.” His point is not that the market only tracks sentiment—fundamentals will win out over the long term. In the short term, however, stocks are heavily influenced by emotion, opinion, and so forth. So while a mature economy like ours rarely grows or shrinks more than a few percentage points a year, the stock market often makes double-digit moves.

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We can clearly see this relationship in the 2007–2009 bear market and subsequent recovery. During the Great Recession the economy contracted 5% while the bear market saw the S&P 500 Index fall 10 times that. Yes, some of that fall resulted from rational investors adjusting their estimates of business growth. But a lot of the drop was simply the result of panic—people selling falling stocks out of fear that they would fall further. In recovering from this overdone fall, stocks have more than doubled.

What does this mean to you, the individual investor? First, when you invest, stay focused.  If you’re buying a piece of a business, concentrate on whether the business continues to be profitable and grow—not on whether the stock is up or down over a week, month, or year.  Second, keep your emotions from being influenced by market behavior. If the market is up or down a lot, take a peek at GDP. If the national economy has only gone down 2%, does a market drop of 25% say more about the economy or about the psychology of the typical investor? And, as always, remember the long term. Over decades businesses tend to grow and the economy tends to expand, so for most investors it makes more sense to buy than sell when the business cycle temporarily contracts.

So, in September 2010, Tucker opened a ShareBuilder.com account and began investing $50 a month in individual stocks and bonds, including Standard & Poor’s depositary receipts and iShares Barclays Aggregate Bond Fund. Her contributions now total $200 per month and her online account is valued around $3,000.

A novice investor, Tucker used the first six to eight months to get comfortable with making buy-and-sell decisions, relying on tools such as a profile-analysis feature that helped determine her risk tolerance. “They asked about my goals and how risk averse I was,” she says. ShareBuilder (a service of ING Direct) then gave her investment suggestions. By getting a feel for what makes the market move and how to use ShareBuilder to track high-performing securities, Tucker says her comfort level has increased substantially.

Like Tucker, many people think they don’t have enough money or knowledge to invest, but that’s often not the case. “An online platform will usually provide you with a lower cost or fee structure than would a full-service brokerage firm,” says M. Camille Winfrey, a financial solutions adviser with Merrill Edge, an self-directed online investing platform owned by Bank of America Merrill Lynch.

Moreover, online solutions typically provide access to extensive research and analysis, as well as tools to help you determine when to buy and sell.

Brown continues to stress to clients that maintaining a diversified portfolio decreases risk and increases wealth. Altfest invests only in no-load funds: those whose shares are sold without a commission or sales charge. “[At Altfest] we generally do not invest more than 5% in any one fund, so these funds would be part of our overall selections,” says Brown, a 10-year veteran with the firm. A retirement planning specialist, Brown selected a bond fund, a large cap, and an international fund for Black Enterprise.

Doubleline Total Return Bond (DLTNX) This fund, launched in April 2010, has performed well since inception, having earned a 15% return and an 8% yield. In comparison, the return reported by the Barclays Capital Aggregate Bond Index since April 2010 was 7.57%, and the one-year return was 7.84%. The no-load DLTNX may be young, but its well-regarded fund manager, Jeffrey Gundlach, DoubleLine Capital’s chief executive officer and chief investment officer, used this style of investing for more than 24 years when he managed the TCW Total Return Bond Fund. Brown likes this fund, “because of its consistent performance and the manager’s ability to make the right decisions for investors.”
One-year return: 9.16%
Three-year return: N/A
Five-year return: N/A
Minimum taxable investment: $2,000; IRA: $500
Expense ratio: 0.74%

Columbia Dividend Income Fund (GSFTX) This roughly $4.82 billion value-oriented large cap fund focuses on investing in companies with growing dividends. The five-year annual dividend growth was reported as 3.9%, which compares favorably against inflation at 3.4%. With a goal of a dividend yield of at least 50% greater than the S&P 500, this fund has generated a solid yield for fund owners. Brown says that “stands out when compared to the 2% average yield for the S&P 500.” Brown has great respect for the fund’s managers outperforming the benchmark with less risk (beta 0.83) since they took over.
One-year return: 6.96%
Three-year return: 12.76%
Five-year return: 2.06%
Minimum investment: $2,500; IRA: $1,000
Expense ratio: 0.79%

Oakmark International Fund (OAKIX) This value-orientated foreign large cap fund has a large exposure to Europe and Japan and holds about 50 stocks. These include BNP Paribas, Toyota Motor Corp., Canon Inc., and Daimler. Last year’s fund performance was hurt by the exposure to European financials such as Bank of Ireland, Credit Suisse, and Intesa SanPaola S.p.A. in the portfolio, and by the beating Japan stocks took after the earthquake, tsunami, and flooding in Thailand. Brown says a rebound in global economic activity could lead to higher share prices. The fund’s manager is confident about the medium-to-long term performance.
One-year return: -14.07%
Three-year return: 16.00%
Five-year return: -1.75%
Minimum investment: $1,000
Expense ratio: 1.06%

Having a hard time controlling your personal expenses, or could you be looking toward future security and providing for your family?  This weeks book bundles can help. We will be offering two personal finance book bundles and a retirement and estate planning book bundle. Each bundle will include three books.

Personal Finance One:

Financial Bailout by Cynthia Nevels

The Wealth Cure by Hill Harper

Get Real, Get Rich by Farrah Gray

Personal Finance Two:

Dare to Be a Millionaire: How Doing What You Love Can Make You Rich! By Dr. Robert L. Lawson

The Laws of Prosperity: Building A Divine Foundation of Success by E. Bernard Jordan

Killing Sacred Cows: Overcoming the Financial Myths that are Destroying your Prosperity by Garrett B. Gunderson.

Retirement and Estate Planning:

The Retirement Challenge: A Complete Do-It-Yourself Toolkit to Navigate Your Financial Future by Frank Armstrong, III with Jason R. Doss

The Living Trust Advisor: Everything You Need to Know About Your Living Trust by Jeffrey L. Condon, ESQ

Get It Together: Organize Your Records So Your Family Won’t Have To by Melanie Cullen with Shae Irving, J.D.

Visit our BE Rewarded site for your chance to win!

One professional seeks to turn this popular craze into productive (and lucrative) lessons on investing, promoting financial literacy among those who love sports and brackets. Robert Wilson, vice president at Blazer Capital Management L.L.C, has created March Money Madness, an investing-focused game that allows players to put stocks head to head.

BlackEnterprise.com caught up with Wilson on how he linked a love of sports with advocating financial literacy, how his celebrity sports clientele inspired his idea and how youth can learn more about investing in creative ways.

BlackEnterprise.com: What inspired you to create the March Money Madness?

Robert Wilson: In my financial advisory practice, I work with professional athletes and entertainers. I also speak to kids a lot about financial topics, but I found that all they wanted to talk about were my celebrity clients. Instead of pushing back on that, I decided to fight fire with fire by trying to find a way to leverage their interest in sports and entertainment to teach them about important financial topics.

That’s how March Money Madness was born. I developed the game in an effort to leverage the popularity of the NCAA basketball tournament and brackets that so many people fill out before the tournament. It’s estimated that 40 million people fill out at least one bracket for March Madness, so I felt as though there was a huge interest that I could play off of.

How exactly does March Money Madness work?

Players sign up for the bracket challenge and pay a $5 entry fee. The top prize this year is 50% of the entry fees, so the more people play, the more the winner can take home. I have an ambitious goal to educate 100,000 people this year. If 100,000 people join the challenge, someone can walk away with $250,000 to pay off debt, go to school or start the business of their dreams.

After each round, the players receive an e-mail and video recap of the market action from the week including an analysis on why each particular stock won (or lost) its match-up and the factors that led to the outcome.

Today, the list and pairings of the 64 stocks included in the challenge will be announced, and players can begin making their picks.

Players must make their picks for the first round by 9:30 a.m. (the time the stock market opens) on March 12.

The challenge works in a round-by-round format. This means players make their picks for each round, rather than picking the winners for the entire tournament up front. This allows players who didn’t have many correct picks the first round, for example, to still be engaged in the competition since their entire bracket will not be ruined by a bad first round. Because points increase for each round, anyone can win.

To further explain this: Let’s say two first-round match ups were Apple vs. Microsoft and Google vs. Yahoo, and the winners of these two match-ups will play in the second round. You picked Microsoft and Yahoo to win their first round games, however, Apple and Google were the actual winners. You would get no points for your incorrect picks for those first round games, but because the game is in a round-by-round format, you can pick between Apple and Google for the second round match-up. If you had to make all of your picks for the entire tournament up front, you would not have an opportunity to get points on this second round match-up because neither team that you picked in round 1, made it to round 2.

Note: Players do not actually “buy” stocks in their account with March Money Madness.

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Robert Wilson, creator of March Money Madness

What types of stocks are included in this and how are the match-ups chosen?

The bracket is broken down into four sectors: technology, financial, consumer, and industrial. Sixteen stocks from each sector are chosen for the competition. I choose the stocks in an effort to have some that are widely familiar to people (Nike, Apple, General Electric, etc.) mixed in with a few stocks that are less familiar and will require research. (See the entire list of 64 stocks from last year’s bracket here.)

How does one choose which stock will do better than the other?

This is what makes the game challenging and fun! Just like the games in the NCAA tournament, the outcome of these short-term match-ups are somewhat unpredictable, but doing your homework will help you make an educated prediction.

For example, if a company is releasing their quarterly earnings during one of the rounds and you expect that they will beat estimates, then you probably want to pick that stock because its price will likely go up.

If there are negative news stories affecting a company, then you may not want to pick that stock, as the news will likely negatively affect the stock price.

What can people learn about investing from March Money Madness?

What’s great about the competition is that you can test out your hypotheses about what makes stock prices move in the real market, and this experience can help you become a better investor.

After playing the game, players should be able to:

—Read and understand stock market information in the newspaper (USA Today, local paper, etc)

—Know where to go to find information on the market (Black Enterprise, WSJ, Barrons, Smartmoney)

—Know how to research past stock prices (Google Finance, Yahoo Finance, Morningstar)

—Understand issues that affect stock prices (revenue, earnings announcements, interest rates, unemployment reports, etc.)

—Gain a comfort level with the movement of stocks in the market (less fear of investing)
Know where to go to open an brokerage account if they want to start investing.

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What’s your response for people who might liken this to gambling?

Some people feel as though the stock market in general is like gambling. However, your odds making money on your investments are much better than your odds of winning at the casino, especially when you do your homework and research the stocks that you want to invest in.

I don’t view this challenge as gambling at all. People join the challenge because they want to learn about the market, or they have some level of knowledge of the market and want to test their ability. This is no different than someone going to buy a book at Barnes and Noble because they want to learn about investing. I’ve just turned a traditionally boring subject, into a fun, educational, social experience and have given individuals an incentive to learn by providing prizes.

You did this last year. What was the outcome for the winners?

Many people who have played the game in the past knew nothing about the stock market.  Joining the challenge pushed them to read the Wall Street Journal and other financial publications and Websites in order to do the research needed to make their picks. They began watching the market and gained some level of comfort with seeing stocks go up and go down. Ultimately many of them decided to open brokerage accounts with eTrade, Schwab and other firms to start investing in the market with real money.

How does social media play a role in promoting, marketing, and participation in MMM?

Absolutely! I am using Facebook, Twitter and e-mail marketing to help reach my goal of 100,000 players. Since I’ve created an incentive where the more people play, the more the winner can take home, there is an inherent incentive to share information on the challenge and to get friends to play along with you. I will also be partnering with a few individuals with large social media followings by making them “VIP Players” in the challenge that folks can match wits with and compare scores. For example, author and businessman Gary Vaynerchuk (@garyvee) has close to 1 million followers on Twitter and he will be a VIP player in the game that individuals can play against. His inclusion in the game and promotion of it via his social media accounts should help with the popularity of the game.

Games have become inherently social, and I hope that MMM is no different. Because people can form groups to play against their friends, my aim is to create a social experience where people can learn about the market together and encourage each other to become more knowledgeable about their finances.

Dameon Proctor isn’t one of them. Proctor hopped on the bullion express two years ago. The 35-year-old information technology consultant in Washington, D.C., who just completed his M.B.A. in finance at Johns Hopkins University, says he was persuaded to buy gold after he examined its historical value. “I talked with two friends about gold, and it seemed to make sense in the aftermath of 2008.” Proctor moved 25% of his IRA portfolio into shares of the SPDR Gold Trust ETF (GLD), which stockpiles bullion.

Proctor is quick to point out that he is a very moderate investor, rarely touching his 401(k) account allocations. But when it comes to his IRA and ShareBuilder accounts, valued at $8,000 and $5,000, respectively, he has a higher risk tolerance and is a more active trader. He uses analytical tools and resources such as Investors.com to screen his stock picks. Until very recently he regularly added to his gold position with monthly $100 purchases using ShareBuilder, an online stock trading account. He is currently researching and mining his next prospect. To date, he has $4,000 in total invested in gold.

Indeed, in the last few years, gold bugs have had the upper hand. Gold reached a high of $1,921 per ounce in September; moreover, it’s been increasing in value for more than 10 years.

Demand for gold increases when investors are worried, especially that the dollar and other major currencies may fall in value. So, it comes as no surprise that a series of shocks—the 2008 crash and concerns about massive budget deficits and the possibility of inflation in the U.S. and other large Western economies—have contributed to gold’s recent run.

But that’s not to say that the gold ride has glided along smoothly in one direction alone. In September 2011, the price of gold tumbled 11%.

Certified financial planner and chartered financial consultant Ivory Johnson remains bullish on gold when it comes to his clients. “The U.S. budget deficit, the euro crisis—there are several reasons why investors have to plan for the possibility of additional volatility going forward,” says Johnson, director of financial planning at Annapolis, Maryland-based Scarborough Capital Management, a wealth management firm managing more than $1 billion in assets. “If that comes to pass, you want some assurance in the form of hard assets that won’t lose value like paper currency.”

Johnson, who is one of the friends Proctor consulted, believes that gold should be part of a well-diversified portfolio of investments—stocks, REITs, and mutual funds—spread across various sectors. He currently recommends that his clients place roughly 20% of their portfolios in gold because of the debt crisis in Europe and the possible political impasse regarding the U.S. government’s debt. He says that investors with a higher risk tolerance should keep an eye on gold and other precious metals.

Naysayers see it differently. “Because it’s close to impossible to put a value on gold, it’s difficult to say what role gold should play in a portfolio,” says Christine Benz, director of personal finance for Morningstar, the Chicago-based mutual funds research firm. “I don’t think gold is a ‘must-own’ for most portfolios. To the extent that investors own gold, I’d probably rather see them do it within the context of a broader commodities investment.”

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For this reason, Benz says one option is the iPath DJ-UBS Commodity Index TR ETN (DJP), which spreads its assets across a basket of other commodities—oil, copper, and corn—in order to track global markets for natural resources and raw materials.

There are several approaches to investing in gold on the market depending on your overall aims. One is to hold exchange traded funds such as GLD that trade like stocks and invest directly in gold bullion. That works best if you’re looking to hold a stake in the precious metal itself as a way to protect your portfolio from inflation or panic in the financial markets.

A second tactic is to buy shares in gold mining companies, essentially a bet that growing demand for gold will translate into profits for companies such as Barrick Gold (ABX), Newmont Mining (NEM), Goldcorp (GG), and AngloGold Ashanti (AU). The ETF Market Vectors Gold Miners (GDX) is one way to spread your money in all the major mining companies. Mutual funds are also an alternative for the sector. Two, First Eagle Gold (FEGOX) and Tocqueville Gold (TGLDX) have earned four-star ratings from Morningstar.

Both offer investors exposure to both miners and bullion. The downside to this strategy, however, became apparent this year when fuel and labor costs dragged miners down. A Morningstar category average for equity precious metals funds was down nearly 21% for the year, a far cry from the run-up in gold prices over the same period.

Johnson remains steadfast. He points out that inflation could develop soon since Western governments including the U.S. are busy accumulating debt. “Paper money isn’t backed by anything of value,” he wrote in an article in October. “It should strike [investors] as ominous that when a real asset was in demand, gold was held in the highest regard.”

She was not referring to your social, romantic, or family life. Instead, she was talking about your individual financial well-being. In general, I have found there are way too many African American women who focus on everyone else—except themselves. As a result, they are placing their own future in jeopardy.

I was shocked to read recent statistics on the wealth status of women of color. According to a 2010 study on women and money, single black and Latino women retain only a penny of every dollar of wealth held by men of their own race. And such comparisons to their white counterparts are just as startling: Single white women have a median wealth of $41,500 versus a mere $100 for single black women. Moreover, 57% of single white women are homeowners compared to only 33% of single African American women.

As the father of twin daughters who will be graduating from college this spring, I’m extremely concerned about this crisis. It is imperative for young black women to take control of their financial destiny now, and be as vigilant about money matters as they are in updating their social media pages.

I am alarmed by the number of my personal friends and colleagues—many of whom have graduated from the nation’s leading colleges and who work for some of the world’s largest corporations—that have opted not to save or invest but would rather wear their assets or carry them in a designer purse.

My message is simple: It’s no longer acceptable to claim that you lack resources to save and invest. Instead of making an investment in a new pair of Christian Louboutins, set financial priorities by paying yourself first and then sticking to a comprehensive, consistent plan of saving and investing. In fact, once my daughters leave college and become full-time workforce participants, I will give them no choice but to save a percentage of their income toward the purchase of their own homes within a five-year period. They will also seed their respective retirement funds by investing through a company-sponsored 401(k) plan or an IRA—an activity that a disturbing percentage of black professionals, including women, have decided to forgo.

It is imperative that you establish your own credit rating even if you are married. There are certainly no guarantees you’ll remain hitched for a lifetime. Having your credit status tied to an ex-husband or deceased mate could prove disastrous, especially if you’re unaware of exorbitant bills, missed or delinquent payments, liens, or other irresponsible acts.

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In order to fully strengthen your financial position, you must also learn to become a savvy, relentless negotiator. In salary negotiations, demand what you’re worth. When you make consumer purchases, never settle. For the African American women who represent the fastest-growing segment of entrepreneurs, ask for the big contract. Mothers: Manage your personal financial life with the same ferocity as you would fight for opportunities for your children. Never be complicit in giving anyone the upper hand by caving in to intimidation due to lack of confidence or information.

You simply can’t afford to be a passive observer when it comes to maximizing your dollars. In dealing with financial professionals, don’t let them use their knowledge and credentials to bully you into making decisions. Remember they work on your behalf and that you have the final word. It’s up to them to explain and justify their approach to managing your money. In the same manner that you keep up with your loved ones, take the same painstaking approach to detail in reviewing financial statements.

Every woman must take nothing for granted and map out a long-term plan. By applying sound financial principles, and understanding the great value in short-term sacrifice, you will be well on your way to achieving your ultimate life goals.

1 AGL Resources/Nicor (GAS) This recently merged entity created the nation’s largest natural gas-only distribution company. Before the two companies announced their merger in December 2010, AGL Resources and Nicor separately provided dividend yields of greater than 4%. Don’t expect spectacular growth, but look for continued dividends to smooth out the ride. There will be continuity at the top since AGL Resources Chairman, President, and CEO John Somerhalder II will head the combined company; Nicor CEO Russ Strobel has retired. Somerhalder has promised that the cost of delivering natural gas won’t increase for three years. Natural gas is a commodity, so its costs change in response to supply and demand. Longer term, expect natural gas to increase market share which should only help this new entrant to the S&P 500. Target price is $47.50.
PRICE AT REC.: $41.04  •  P/E: 15.78

2 Apple (APPL) Look around you—Apple products are everywhere and influencing competitors in areas of style, software, use, and service. And Apple won’t be disappearing anytime soon, despite the death of its visionary leader, Steve Jobs. Investors will expect Apple to keep chugging along, as it updates and tweaks new products for the foreseeable future. Baker says that everyone in his house owns something made by Apple, and that’s increasingly likely in your home and office, too. Apple has a pretty significant cash position, and one can expect continued growth from iPhones, iPads, and iTunes. Although more tablets have entered the market, the Cupertino, California-based company should do well even with a smaller share of a bigger pie. At a price above $400 a share, it’s a dollar-cost average buy anytime it drops. It is worth the present pain, for long-term gain. Target price is $505.
PRICE AT REC.: 421.73  •  P/E: 15.24

3 ExxonMobil (XOM) While oil will remain the most widely used fuel, overall energy demands will be reshaped by a continued shift toward less carbon-intensive energy sources—such as natural gas. With a current P/E ratio of 10.04 this stock looks undervalued. ExxonMobil’s sheer size gives it tremendous economies of scale. The company has a solid track record of dividends and a strong management team. Truly a global brand, ExxonMobil gets only 31% of its revenues from the U.S. This diversification is a buffer to economic risk from volatile markets. Target price is $92.
PRICE AT REC.: $85.50  •  P/E: 10.30

“For at least the last five years, my investments have lost money or been stagnant—even before the economic downturn,” says McMullen of his thrift savings plan, Roth IRA, and the mutual funds in his brokerage account.

He was so discouraged during the Great Recession of 2008–09 that for several months he stopped contributing to his brokerage account. “I watched it go as low as $14,000 at one point, when it had been worth $28,000,” he says. “I wanted to pull out all my money to protect it from a complete loss.”

But McMullen, who spent several years in the Armed Forces, is not one for backing away from challenges. He knows discipline gets results, and socks away $400 a month into his Roth IRA and about 10% of his salary of approximately $75,000 into the retirement plan at work.

He’s counting on these investments to fund his dream of being able to retire by age 55. His other goals include having the financial wherewithal to travel abroad once a year, and save for the college education of his 1-year-old son.

McMullen, a lieutenant in the United States Navy, serves as a naval science instructor for the University of South Carolina’s Naval ROTC unit. Although he offers guidance to students, McMullen admits that he also needs direction, “so that I can improve the performance of my investments and get the kind of growth I’m looking for.”

For the most part, his finances are on track. He has $37,000 in a money market account (which also represents his emergency funds), $5,300 in checking, additional savings of $3,000, and $92,000 invested in equities. He’s not drowning in debt—his only obligations are $2,300 for furniture, his car loan of $23,000, and $111,000 for his two mortgages.

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McMullen concedes, however, that his expenditures could be better organized: “I don’t track daily, small expenses very well. I put most everything on my American Express, so I can see where I spent my money. But with so many purchases, when I get my statement it’s overwhelming. I haven’t updated my budget in awhile.” Some of his larger bills are set up on automatic bill pay to eliminate guesswork.

Motivated by his son, McMullen is looking to fine-tune his approach to saving and investing. “I want to be able to start saving for his education, not just college, but maybe during his formative years. I want to be able to handle whatever life throws at me financially.”

The Advice
Black Enterprise and Robert Rowell, financial adviser and vice president of investments for Wells Fargo Advisors L.L.C. in Charlotte, North Carolina, devised a plan to help McMullen get the most out of his  investments and reach his financial goals.

• Diversify portfolio: McMullen’s track record calls for a closer look at his holdings. “He has all his Roth IRA contributions in large-cap stocks. He has all his eggs in one asset class and is missing out on other asset classes, such as [midcap], small-cap stocks, real estate securities, emerging markets, commodities, high-yield bonds, international stocks, investment grade bonds, etc. Rowell recommends putting 65% in equities or stocks; 32% in bonds or fixed income; 2% in commodities; and 1% in cash alternatives. “From one year to the next, one class can have a higher rate of return, and you don’t want to miss the growth opportunities,” explains Rowell. He also recommends that McMullen max out his thrift saving plan contributions and make sure he has a broad brush of assets, including bonds and international investments.

• Reinvest dividends: McMullen was so disappointed with the lack of growth in his brokerage account that he started receiving dividends. Rowell advises that he reinvest them. “When they are paid in a down market, you are more likely to invest at cheaper prices,” says Rowell

• Build savings for son’s education: Rowell suggests two options: a 529 plan or the Uniform Gift to Minors Act. With a 529 savings plan, your investment grows tax-deferred and withdrawals are tax-free, as long as the money is used for college-related expenses. The UGMA allows money or other assets to be given as a gift to a minor child while you maintain control of it. The money doesn’t have to be used only for college, Rowell says.

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“Jeremy seemed to like this because the money could be used for many purposes. He should explore the trade-offs of both,” says Rowell, who recommends McMullen talk with a tax professional to help him make a choice. Rowell suggests using the $2,000 contest winnings to seed the college fund and then saving $100 a month systematically. If he starts with $2,000 and adds $100 a month, assuming a 6% average rate of return annually, he would have nearly $40,000 in 17 years.

• Protect and prepare for the future: While McMullen has a $400,000 life insurance policy through the Navy, he’s vulnerable. “He should consider an additional, outside policy. He recommends that McMullen consider an $800,000, 30-year policy, which would cost $80 a month. “He’s young, healthy; a term policy would be inexpensive and help take care of his son’s needs,” says Rowell. “He has a 1-year-old son and no will. If something happens to Jeremy, the state will determine what happens to his son. He needs to speak with an attorney and get his will and trust done.”

Rowell also suggests McMullen consider buying a long-term care policy now obtain disability insurance through his employer.

• Tighten budget: There are several online tools offered by Wells Fargo or websites such as Mint.com that will help keep him on track to meet his financial goals. Rowell recommends McMullen find a good financial adviser and meet at least once a year for an annual checkup to determine adjustments to his finances.

–By Karen Thomas