Where To Invest For The Next 5 Years

With u.s. equities markets as volatile as ever, where do you go to find growth before the end of this decade? Our expert panelof money managers tells you what will be hot in 2010.

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Alston Paige: Long term, we believe that you first have to have a diversified portfolio because it’s the lack of diversification that created the bubble of the late ’90s. Everyone had over 30% to 50% of their portfolio in technology stocks, so if everyone was a believer in the diversification, not as many people would have gotten hurt.

Outside of that, we believe the business cycle tells us exactly which sectors we should be in every three years. We have research going back more than 20 years that shows us over and over again which sectors and which industries within those sectors we should be in. Then we focus on our stock-picking abilities. We want to buy companies where things are getting better, where the estimates are going up, where they are beating the consensus estimates, and where analysts are increasing their estimates. We want to sell companies where things are getting worse. We also buy companies where things have stopped getting bad and possibly will get a little better. Very simple.

BE: Is there any final advice for our readers about investing in the current environment and long-term investing, overall?

Johnson: For individual investors, over the next 12 to 18 months, it’s most important to be patient and stick to your investment discipline. It’s important, too, from a bond perspective, to be more defensive in this environment and to build more yield into your portfolio. Overall, just be consistent, set objectives, stick to those objectives, and diversify your portfolio to gain access to various sectors of the market.

Phelps: When you’re looking at stocks, you want to see two years of revenue growth and two years of earnings growth. We suggest a strategy of choosing eight to 12 stocks and then place the rest of your portfolio in ETFs or mutual funds. Don’t ignore what the smart money is doing, and pay attention. Be disciplined, and be ready to sell when you need to sell. All your stocks don’t need to be winners. You just need a few that really take off. Don’t let the losers kill you.

Payne: I’ll borrow a line from Nike and say just do it. I know a lot of people read BLACK ENTERPRISE every month and they still haven’t done it. Sometimes, they see the market down and they say, ‘Well, I’m glad I didn’t do it yet.’ They justify that in their minds. But you have to pull the trigger and you have to do it with a realistic set of expectations.

The markets give an 8% return, on average, year over year. Sometimes you’re going to make 20% but, understand that last year the Dow was up 3%. The point is, you have to invest with a set of realistic expectations and you have to be committed.

Alston Paige: We think the outlook for stocks, over the next 12 to 18 months, is good. Over the next five years, it is also good. The main thing investors want to do

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