Investing For Your Security

Social Security reform, market fluctuations, and inflationary pressures mean you've got to take an active role in securing your finances. Our expert panel of money managers tells you what to do with your money now.

slow to 7% or 8% growth as we move toward the fourth quarter of 2005.

Ray: Essentially, we’re in a moderate-growth, moderate-inflation environment. I agree that we will have 3% to 3.5% GDP growth, and that’s fine in an environment where inflation is going to be roughly 2%. If those indicators are consistent during 2005, we should be able to grow the economy at a moderate rate and add an additional 2 million jobs. If that theory holds up, we should be able to keep interest rates fairly stable and we should see stabilization in the currency rates and energy prices. We had some spikes last year that negatively affected the market, and I expect things to trend back toward the norm.

Parrish: I think that 2005 is going to be a significant year for the larger-cap, multinational companies. Those companies have earnings persistence because of investments they’ve made throughout the downturn. Also, the weak dollar is going to be a boon for the multinational companies.

In 2005, everyone has already factored in high energy prices. I think they are going to be wrong on that. Energy prices are going to go down; oil prices will go back to about $35 a barrel and that is going to be a huge boon for consumers and corporations. It will really put more money in the pockets of consumers.

Jeffries: In 2004, it was primarily consumer spending holding up the economy, but I think we can look forward to corporations getting into the mix in 2005. We’re seeing business spending increases. What we need is for businesses to start putting some of those capital dollars into hiring.

BE: How can investors grow their portfolios in 2005?

Parrish: I don’t think individual investors should look to knock the cover off the ball in 2005. It’s not going to be a year where the money is going to be easy to make. You’re going to have to be very selective in the equities and look for 10% to 15% performance out of your stocks instead of 30% to 50%. I think the companies that are truly global are going to do extremely well because they aren’t totally dependent on the U.S.

Jones: My outlook for 2005 is a bit more muted. Because of slower corporate profit growth this year, that leads my firm to believe that a 3% to 5% return is most probable.

Individuals should not pay attention to any one forecast. If you are investing for your kids’ college expenses, your retirement fund, or to eventually open a business, you want your money to be compounding long term. You should own a fully diversified portfolio and adjust it over time. Certainly don’t time the market in and out. If you miss the best 10 days of the year, your return drops from 10% a year down to 2%.

BE: Where are the buying opportunities for 2005? Are there any sectors that really deserve attention?

Ray: I really like the large, diversified financials—Citibank, J. P. Morgan, and Bank of America are excellent

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