Garrett, 80, a Durham, North Carolina, retiree who has invested in stocks for 40 to 50 years, said the latest meltdown on Wall Street has made him “very nervous.” He maintains that the volatile market is the second worst he has seen since stocks tumbled after the financial crisis in 2008. “I learned some lessons from 2008,” he says.

Today’s stock market activity has made him look more closely at the type of investments he should include in his portfolio—whether it’s stocks, cash, or fixed-income assets. “I want what works best for the well-being of my family,” says Garrett who has a wife, Wanda, 78, three grown children, seven grandchildren, and 10 great-grandchildren.
While he has become a more cautious investor, Garrett hunts for bargain stocks with strong long-term growth potential. Given the market’s volatile nature, his holdings have taken a wild ride. Consider, on July 24, Garrett’s investment strategy was “moderately aggressive,” and 75% of his investments were in equities, 10% savings, and 15% fixed income.

However on July 25, driven largely by stock market jitters and Congress squabbling over the debt ceiling, Garrett liquidated much of his stock and shifted his holdings to only 10% stock and 80% cash, and the remainder in fixed income.

Since then he has also changed his investment philosophy, becoming a self-professed “moderate” investor. On Aug. 10, after the debt ceiling compromise and stabilization of the market (at least for a few sessions), Garrett says he re-entered the market and boosted his stock holdings to 50% from 10% through his investment advisers, Piedmont Investment Advisors L.L.C. (No. 8 on the be asset managers list with $3.4 billion in assets under management). A sophisticated investor, the former CPA and lawyer has mostly blue chip stocks among his equity holdings, which make up 50% of his portfolio, 22% cash, and the remaining 28% in fixed-income investments. Stocks make up 40% of his portfolio’s value. “I’m very watchful with what’s going on now,” Garrett says.

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Garrett’s revised strategy—and those of hordes of individual investors—came about as equity markets were being hammered, largely dented by a combination of recent bad economic news: From Aug. 5 through Aug. 26, the Dow Jones industrial average dropped 1.40%, the Nasdaq composite index fell 2%, and the Standard & Poor’s 500 slid 1.88%, according to SNL Financial L.C., a Charlottesville, Virginia, financial services research firm. But gigantic swings of several hundred points in a short time have become the norm.

Wall Street has felt shocks from heightened fears about the sour economy, the possibility of a double-dip recession, and worries over the European debt crisis. Moreover, on Aug. 5 Standard & Poor’s slashed the United States’ credit rating to AA+ from AAA. Also in early August, the Federal Reserve pledged to keep interest rates super low for two more years making investors scratch their heads over the long-term impact of those events.

Well, expect more volatility. The market will continue to seesaw as a congressional super committee deliberates over the best way to shrink the federal deficit and the 2012 presidential contest heats up. Despite the unpredictable climate, a group of top-flight money managers says there are still some attractive places to invest your money—that’s particularly true for long-term investors willing to ride out some short-term bumps.

Stay calm and focus on long-term goals. Isaac H. Green, CEO at Piedmont Investment Advisors, says Garrett’s portfolio shifts were based on his risk tolerance and need for safety. He believes investors must realize in a turbulent market that short-term risks are magnified by market volatility. If a person has a long-term horizon, they can actually afford to not pay too much attention to market turbulence.

William H. Young, president and COO of Buford, Dickson, Harper & Sparrow Inc., a St. Louis-based portfolio management and financial services firm, agrees, urging investors not to panic: “Staying calm will keep investors from making knee-jerk decisions that they will regret when the market settles down.”

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Eugene A. Profit, CEO of Profit Investment Management L.L.C. (No. 15 on the BE Asset Managers  list with $2.07 billion in assets under management) adds it’s extremely important to understand long-term investment objectives—whether you are trying to build a nest egg or finance junior’s college education.

Stick with market leaders. Young recommends quality stocks with proven earnings track records and strong cash positions. Specifically, he recommends market leaders such as Apple Inc. (AAPL), McDonalds Corp. (MCD), FedEx Corp. (FDX), and PepsiCo Inc. (PEP). His reason: All have strong brands, solid products, and product development with consistent earnings. “These are the factors that should be considered when selecting investments,” he says.

Profit likes U.S. multinational companies with revenue streams that benefit from multiple geographic locations and offer downside protection. His firm is focusing on stocks in the technology and healthcare industries due to the need for such products and low investor expectations. He says equities that have become more attractive during the recent market activity include Google Inc. (GOOG), EMC Corp. (EMC), Aetna Inc. (AET), and Costco Wholesale Corp. (COST). “It’s a great time to buy high-quality, large, successful U.S. companies at what will be seen to be bargain prices in future years,” he says.

Look for bargains. Timothy Fidler, senior vice president, co-portfolio manager of focused-value strategies, and portfolio manager of mid-cap products for Ariel Investments L.L.C. (No. 6 on the be asset managers list with $5.5 billion in assets under management), agrees that market downturns offer some great opportunities: “If you’re a longer term investor, buying shares of very high-quality businesses at these prices will give you some attractive returns.”

He says Lazard Ltd. (LAZ), one of the world’s largest investment banks, falls into that class. The firm advises clients on mergers, acquisitions and restructurings, as well as operates an asset management business. Fidler says that unlike its rivals such as Goldman Sachs and JPMorgan Chase, Lazard is an independent firm without the balance sheet risks of its competitors with trading arms or mortgage portfolios. Moreover, Lazard is not being hounded by federal regulators regarding capital requirements. “What we like about the firm is that there is enormous pent-up demand for advisory services, particularly M&A, in the global economy,” says Fidler of Lazard, which at press time was trading around $26 a share from the mid $40s in May.

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Another firm Fidler likes is Jones Lang LaSalle (JLL), a global real estate services firm specializing in commercial property management, leasing, and investment management services. He predicts commercial real estate will grow much faster than residential as the economy fully recovers. The stock now trades around $60 a share versus $108 three months ago.

In addition to Lazard and Jones Lang LaSalle, Fidler is attracted to CBS Corp. (CBS). Currently trading around $23 a share, CBS is a “dirt cheap” stock given it’s now growing very rapidly and well-positioned to benefit from mammoth spending during the 2012 political campaign.

“These businesses are worth substantially more than where they are trading today,” he maintains. “Their (current) value gives you a sense of how quickly the market has nosedived in the last month.”

Seek out dividend-paying stocks. According to Piedmont’s Green, some companies have managed to significantly grow earnings over the past decade, generating free cash flow and starting to offer investors strong dividend yields. He maintains that companies with above-average dividend yields, moderate dividend payout ratios, and a history of growing the dividend are very attractive now.

Vast opportunities can be found in the consumer products world. Green points to major packaged food and beverage companies and household products firms manufacturing goods ranging from detergent and toothpaste to soda and cheese. Many food and beverage companies, household product manufacturers, and pharmaceutical firms offer annual dividend yields of 3% or 4%, he says. “That yield is going to grow with the growth rate of those companies,” Green says. “That looks like a pretty good investment to me right now.”

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Fidler also recommends healthcare firms such as Abbott Laboratories (ABT) and Merck & Co. Inc. (MRK) paying annual dividends of 4% and 5%. His reason: The dividends of both companies are sustainable for the long term as their earnings are much higher than the dividends they pay out to investors. (See “Stocks That Pay Dividends,” this issue.)
Treasuries remain among safe investments. Greg McBride, senior financial analyst at Bankrate.com, says the weak economy will keep interest rates low, but the downgrade will raise borrowing costs for Uncle Sam, consumers, and businesses. For example, riskier borrowers may see credit card issuers increase rates, but consumers with sterling credit are unlikely to see the same impact. For home loans, the weak economy is the key determinant of where mortgage rates are, McBride says. Eventually the downgrade will result in higher mortgage rates, but not until the economy picks up some speed.

If Treasury rates keep dropping says Mary Pugh, CEO and chief investment officer of Seattle-based Pugh Capital Management, expect 15-year and 30-year mortgage rates to also fall because those rates typically move in tandem. “If we end up with a very weak economy or in a double-dip situation, we could see mortgage rates dip 25 to 50 basis points below their current levels,” she says.

From a credit quality standpoint, Pugh says Treasuries still offer a risk-free credit investment. For instance, she says a 10-year Treasury note at 2.4% might seem low, but it’s a much better return when compared to a savings or money market account.

Even with the downgrade, investors continued to flock to government bonds as safe havens in the topsy-turvy market. Experts say these securities represent the world’s most solid investment—especially with the nagging European debt crisis. No investor holding U.S. Treasuries is expected to lose principal.

Glenn Beck‘s GBTV announced Tuesday that Amy Holmes—a well-known commentator on many cable news shows—is joining the Web TV network as its news anchor.

Holmes is perhaps most famous as a regular on CNN, where she played the right-leaning foil to a long list of liberal guests and panelists. Her official role for Beck will be as the anchor of several news segments on GBTV throughout the day. The segments will carry the brand of The Blaze, Beck’s news website.

Read more at Black Voices…

• Facebook: We’re Not Giving Out Your Number

Facebook has publicly responded to rumors that it is harvesting numbers from mobile phones and then making them public.

The source of the rumors is a misinterpretation of a feature called “Contacts.” When you download Facebook’s mobile app, this feature syncs your phone’s address book with your profile. From then on you can access all of the numbers in your phone from your Facebook profile.

Read more at Mashable…

• Time Warner Cable Creates New African-American Talk Show

Time Warner Cable has named four young and talented contest winners as hosts of a new African-American talk show titled Born To Shine.

In response to criticisms of the company’s lack of positive portrayals in their programming, they created a show that will attempt to “truly” showcase African-Americans in the community who are making significant contributions in entertainment, sports, and music industries.

Read more at NewsOne…

• U.S. Stocks Reverse Back, Up 4% on Economic Data

Once again, Wall Street went to extremes.

Stocks surged on Thursday, with the broader market rising more than 4%. It was the fourth day this week of major swings in stocks, following a drop on Monday, a sharp rise on Tuesday and steep declines on Wednesday.

Read more at the New York Times…

(Image: ThinkStock)

Brace yourself for stock market activity with all the twists, turns and plunges of the Intimidator 305 roller coaster ride. The roller coaster ride is evident with the impact of the Standard & Poor’s downgrade, which gave the markets the worse day since the financial meltdown of 2008: The Dow Jones industrial average dropped more than 5.5 percent, or about 630 points, while the S&P 500, a broader measure of stocks, plunged about 6.6 percent. Investors fled to the new safe haven of the day: gold, which soared to a record high price of over $1,700 per ounce.

From predictions of a double-dip recession to the unprecedented decision of Standard & Poor’s to downgrade the nation’s AAA credit rating, last week’s market performance left investors queasy. Each major index took a steep vertical drop: the S&P 500 plummeted 7.2%, the Dow Jones Industrial Average tumbled 5.8% and the Nasdaq fell 8.1%.

President Barack Obama was finally able to sign legislation to raise the debt ceiling and avert default by the Aug. 2 deadline. Putting an end to the ugly month-long battle between Democrats and the GOP over deficit reduction, the act did little to move the market.

Nervous investors sold shares responding to reports that American consumers had cut spending for the first time in 20 months and manufacturing barely grew in July. The news came a week after investors became jittery over the Commerce Department‘s announcement that the U.S. economy grew less than 1% for the first half of 2011. To make matters worse, a downbeat economic review from Federal Reserve Chairman Ben Bernanke and fears over a widening European debt crisis contributed to the Dow’s 513-point nosedive last Thursday, the largest point decline since Oct. 22, 2008.  Then Friday the Dow had another wild ride, a 416-point swing as investors in response to the better-than-expected jobs report, progress on the European financial front and news of the debt downgrade, which S&P announced after financial markets closed.

Informing the agency of $2 trillion error in its deficit projections, U.S. Treasury officials stated the miscalculation raised “fundamental questions about the credibility and integrity of S&P’s ratings action.” In a conference call with reporters on Saturday, the agency defended its move, asserting the debt ceiling stalemate demonstrated  “a degree of uncertainty around the political policy-making process which we all think is incompatible with a AAA rating.”

The downgrade from AAA to AA+ could lead to higher interest rates and borrowing costs on everything from credit cards to mortgages. And local governments may find access to funds much more expensive.

It also brings another element of uncertainty to the markets. Policy makers and investors are preparing for even more turbulence. Global exchanges had a negative reaction to the downgrade when markets opened Monday: Major Asian indexes in Tokyo and Shanghai were all down more than 2% after the opening bell. Treasury yields fell as gold hit a record.

Continue reading on next page…

(Image: ThinkStock)

Expect Wall Street to be just as volatile. And this seesaw activity will continue as markets react to every financial event, political upheaval, policy decision and economic report.  But even in this environment, you can still make basic moves to fortify your portfolio and protect assets. Studies have shown that African American investors have a greater tendency to avoid risk and volatility than their White counterparts. As a result, large numbers have pulled dollars out of the market, converting paper losses into wealth-depleting capital losses.

In most cases, it’s costly to get off the ride before it’s over. In fact, turbulent markets and economic downturns can present wealth-building opportunities for strategic investors. The following tips may help you find a smoother, more profitable course:

• DON’T PANIC: Our rule-of-thumb: engage in disciplined, long-term investing. It’s true the past can never fully predict future outcomes but it serves as a valuable reference. Note that the stock market crash of 2008 extended to two months of 2009 before equities began to rebound. Between the Great Recession market low of 6,547 on March 9, 2009 to the post-crisis market high of 12,810 0n April 21, 2011,  the Dow posted a spectacular 95% gain in a two-year period.
• LOOK FOR DIVIDEND STOCKS: With increasingly unpredictable environment, consider purchasing shares of companies that make cash distributions to shareholders on a quarterly basis. These stocks tend to be high-quality blue chips that can provide you with additional cash flow from a yield of 2% to 3% . Also, the capital gains taxes on qualified dividends are no higher than 15%.
• TAKE ADVANTAGE OF 401(k) PLANS: In our recent August issue, BLACK ENTERPRISE CEO Earl G. “Butch” Graves, Jr. stresses the value of contributing to employer-sponsored 401(k) and 401(b) plans in his Executive Memo column. For good reason, it’s a systematic way to build your retirement nest egg.  As many of you know, funds are deducted from your paycheck and you get to invest in an array of investment offerings with tax-free dollars. An added bonus is that in many cases your employer will match a portion of your contribution—the maximum is currently $18,500 per year. By doing so, you benefit from dollar cost averaging—the process of investing equal dollar amounts at regular intervals—which enables you to purchase more shares of quality companies when the stock price drops, a likely event in today’s capricious market.  Since these tax-deferred vehicles are designed for retirement, you’ll face stiff penalties and tax liabilities if you withdraw funds before age 59 1/2.
• GO INTERNATIONAL BUT BE PICKY: In diversifying your portfolio, you should still get some foreign exposure. Among our recommended financial power moves is making investments in emerging markets like China and India through mutual funds. Experts suggest such vehicles represent no more than 10% of your holdings, however.
• GET DEFENSIVE. Identify recession-resistant stocks. Companies in sectors such as pharmaceuticals, personal care, household products, food and consumer staples—products consumers purchase in economies weak or strong—will offer some portfolio stability.

U.S. Treasuries are still safe bets. As the debt ceiling battle in Washington came to a close, I asked Jason Tyler, senior vice president of Investment Research for Ariel Investments, L.L.C. (No. 6 on the BE ASSET MANAGERS list with $5.5 billion assets under management) whether investors should still flock to government bonds as safe havens.  He unequivocally asserted that these securities represent the world’s most solid investment—even with the downgrade. “People hold U.S. Treasuries because there’s extraordinary financial stability underneath it and that’s still the case,” he says, adding that the European debt crisis has made that continent’s securities less attractive. “U.S. Treasuries should continue to be seen as the safest place to park money. At the end of the day, nobody holding U.S. Treasuries is going to lose principal.”

Even though you employ these strategies, the market may still take you for a loop or two. Some days you’ll have to hold on tight. If you stay focused, however, when you return to terra firma, you’ll be richer for it.

Douglas Coe Managing Partner and Chief Investment Strategist Investment Banking/
Capital Markets, Moody Reid Financial Advisors Kansas City, MO
“We’ve just entered into the second phase of one of the strongest bull markets in U.S. history. Interest rates will remain low. Stocks still remain the dominant asset class of choice for wise investors who are seeking to keep pace with inflation. Again, U.S. stocks are still undervalued.”

Jacquette Timmons President and CEOSterling Investment Management | New York
“It’s important to remember that any market rally or boom is a reflection of either our collective fear or optimism. So, yes, the current rally will continue provided the United States government doesn’t shut down or become engaged in another war, oil prices stabilize, and private industry job growth continues unabated.”

Arnett Lanse Waters Principal
A.L. Waters Capital L.L.C. | Braintree, MA
“Oil will trade above $150 per barrel. Gold will trade above $1,600 an ounce. Unrest in the Middle East will spread. Unrest will take hold in China, too. U.S. corporate earnings will decline.”

Larry Seruma Managing Principal
Nile Capital Management L.L.C. | New York
“We at Nile Capital believe that the market rally is going to continue over the next year. In the next 12 months we do not see the Federal Reserve raising rates, which means the cost of capital will remain low, and earnings will continue to surprise to the upside. Unemployment will also continue to fall, and that will increase consumption and encourage growth. In fact, we have already seen capital flows returning from abroad as investors’ allocations to U.S. markets continue to increase. In our view the biggest risk remains a less accommodative stance by the Fed; however, we believe that such a policy is unlikely in the short term.”

Joe A. Gilbert CFA, Portfolio Manager
Integrity Asset Management L.L.C. | Cleveland
“I’m still positive on the market at current valuations. Earnings will grow because of growing sales. We are in a maturing bull market, which requires investors to be more selective. But opportunities remain. Economic expansions typically last seven years and we are only in the second year of this expansion. There is continued positive business momentum and the economy is still operating substantially below potential output levels. Bull markets historically die on optimism and grow on skepticism, and there is plenty of skepticism surrounding this market now.”

Ivory Johnson Director of Financial Planning
The Scarborough Capital Management | Annapolis, MD
“In response to the financial crisis of 2008, the Federal Reserve electronically created $2 trillion of new money that wasn’t backed by anything of value, and purchased Treasury bonds from the banks. The Fed presumed that once the large banks received this money, they would lend the additional currency to consumers so they could buy more goods and services, thereby boosting economic activity. The banks instead used the money to buy stocks. Once quantitative easing and the stimulus handouts to the states end in June, the rally may be tested.”

Lee Baker CFP
Apex Financial Services Inc. | Tucker, GA
“I expect the market rally to continue over the next year for a number of reasons. First, the Federal Reserve will continue to do everything in its power to create fertile ground for the market to adhere to its upward trend. In addition, we will see dollars that had been sitting on the sideline last year continue getting into the game. Currently, the bond market is an unappealing place to put new money due to inflation fears. As a result, that leaves stocks as the most likely landing place for those dollars. The U.S.’s position in the global economy isn’t what it used to be, but all paths still lead to, or perhaps through, America. The ongoing global economic expansion will ultimately benefit our domestic markets. One cautionary note: Sustained upheaval in the oil-producing regions could eventually put the brakes on consumer spending. This would be a result of higher prices at the pump and the grocery store.”

J. Michael Salley Registered Principal
Salley Wealth Advisors Group L.L.C. | Summerville, SC
“Several important factors point to higher stock market valuations: We are fully entrenched in an economic recovery in the U.S. Gone are the sentiments and opinions about the possibility of a double-dip recession. The health of corporate America is very strong and will continue to improve. The majority of companies are reporting earnings above Wall Street’s estimates. I believe this trend of improving earnings will persist. Consumer confidence and sentiment are growing stronger. I recently read in a news article that this improvement is more evident in the African American community, based on several survey results. Lastly, there are trillions of dollars still sitting on the sidelines in a near-zero interest rate environment. These assets will soon be forced to move into equities as the picture continues to brighten.”

Gilbert

Like most investors, Joe A. Gilbert pays close attention to a company’s business fundamentals and financial performance before he makes an investment. But as a self-described “catalyst-driven investor,” Gilbert also likes a stock with a compelling story to tell. “There are always inexpensive stocks, but some are cheap for a reason,” says Gilbert, one of five portfolio managers of Integrity Asset Management’s Veracity Small Cap Value Fund (VSCVX). “We’re looking for a catalyst of some kind—whether it’s legislation or new developments in the industry—anything that’s being underappreciated by the market that will allow the stock to move upward in a timely fashion.”

With Gilbert’s help, the Veracity Small Cap Value Fund posted a total return of 29% last year, compared to the S&P 500 index’s total return of 15% over the same period.

Gilbert believes the economy and financial markets can continue their recovery-related advances in 2011. “We see double-digit gains again in the market,” he notes, “and slow, gradual improvement in the economy and job market. That should give investors more confidence in investing in the market.”

This year, Gilbert likes the story freight and trucking companies are telling. Freight and trucking firms—those that help transport products and materials— have historically seen a large increase in activity when the economy goes through a recovery, Gilbert notes. black enterprise talked to Gilbert about three companies whose shares are likely to benefit from the new growth.

1 OLD DOMINION FREIGHT LINES (ODFL)
is a truckload carrier. It has a good management team. More important, its top competitors have enacted pricing increases. It gets volume and secondarily it gets pricing. There have been tonnage improvements in the overall industry, meaning more goods and materials are being shipped. That’s a good tailwind for Old Dominion. The company is small, commanding about 5% of the market. But the company’s revenue growth has been up 6% compounded over the last five years, while the rest of the industry has been shrinking. Effectively its operating margin is about 9% versus 2% for the industry. FedEx Freight, Conway, and YRC Inc. are its main competition.
PRICE: $30•  P/E: 22.95

2 WABASH NATIONAL CORP. (WNC)
designs, manufactures, and sells truck trailers and other transportation equipment. The stock was the best performing stock in the S&P 500 in 2010. It was up more than 500%. In July 2009 it was trading at 60 cents. People were pricing it for bankruptcy. Volumes went away for Wabash during the recession. Management has done a massive restructuring. It produces 24,000 trailers per year. It brought back workers that had been previously let go. Profitability should be better this time around given that it has improved the balance sheet. There is now an industry backlog in orders for Wabash’s products. Regulatory changes in trucking could demand a third axle for some trailers—meaning that trucking companies will have to place orders for new trailers from Wabash.
PRICE: $11  •  P/E: N/A

3 THE GREENBRIER COS. (GBX)
makes railroad cars. There’s a lot of need for railcars. It’s more energy efficient to use rails for transport. And as retailers across the country continue inventory restocking in anticipation of a continued recovery, we see an increase in the need for railroad companies to order new equipment. So, Greenbrier should be busy in 2011. In fact, the last four months of 2010, it received three high-volume orders. It has the largest backlog of any company in the industry. There are many big tailwinds for Greenbrier. Looking at the price-earnings ratio, this stock appears expensive, but the P/E is only high because the company is coming off of a depressed earnings base. We believe they’re about to rebound.
PRICE: $24  •  P/E: 140

How often have you heard that the stock market is “like a roller coaster?” In some ways, the comparison is perfect and obvious. The market’s precipitous fall in 2008 was followed by a dramatic rise in 2009 and then another increase, though less spectacular, in 2010. Many investors would easily liken the journey to a hair-raising ride—although less fun than the ones in amusement parks. And there’s no question that the volatility of the market has been augmented in the past few years—the hills it has climbed have been steeper and so too have the descents. This instability has led to risk-aversion. Risk has subsequently become a four-letter word—the kind you don’t want to say in mixed company. But here’s where the roller coaster analogy does not connect. For most riders, the roller coaster is scariest at the top and somewhat calming at the bottom. Yet, during market swings, investors feel reassured and enthusiastic when stocks are popular and expensive, scared and running for the exit when they bottom out.
As Barron’s so aptly noted in quoting a Wall Street market strategist, “investors ‘will go to great pains to avoid repeating the most recently made mistakes. Today, this shows up as investors’ extrapolating of the historically highest volatility’ of 2008 into [the future].” As a result of this flawed reasoning, perceived safe havens have reigned supreme as evidenced by huge flows into bonds, gold, U.S. Treasury bills, and hedge funds. I put emphasis on perceived safety because such large asset flows have at the same time inflated values and inadvertently amplified risk.
Of course, this generals-fighting-the-last-war movie has run many times before. The name for it is risk homeostasis. The idea being, if you believe conditions are less risky, you’ll take more risk. If conditions seem more risky, you’ll take less risk. The problem here is that investors typically sense less risk when the market is flying (which is in fact a riskier time to buy). Conversely, there is a perception of more risk when stocks are cheapest.
So these déjà-vu moves have left investors missing big gains in the stock market since its March 9, 2009 low.
I won’t promise that you’ll be perfectly comfortable watching your retirement account balance drop sharply during a stock market downturn. But there are three steps you can take to stay the course.
First, develop an asset allocation plan that balances your own personal risk tolerance with your goals. Both Morningstar and the Vanguard Group have excellent tools to help you create a plan. I have my own personal recommendations, too. In your middle years, strive for a 60% to 80% stock weighting, a 20% to 40% bond stake, and keep cash below 10%. As you near retirement, pare back to 40% to 60% stocks, balanced with 40% to 60% bonds, and cash between 10% and 20%.
Second, resolve to stick to your plan and hold stocks, especially during a downturn. Finally, dollar-cost-averaging does a world of good. When you contribute automatically to a 401(k) plan, 403(b) plan, or IRA, you will avoid loading up too much when stocks are at their most expensive, and you automatically keep buying while stocks are cheap.                        —Mellody Hobson

• Douglas Coe
• Managing partner and chief investment strategist
• Investment Banking/ Capital Markets, Moody Reid Financial Advisors
• Kansas City, MO
• YES.
• “We’ve just entered into the second phase of one of the strongest bull markets in U.S. history. Interest rates will remain low. Stocks still remain the dominant asset class of choice for wise investors who are seeking to keep pace with inflation. Again, U.S. stocks still are undervalued.”

• Jacquette Timmons
• President, CEO
• Sterling Investment Management
• New York, NY
  YES.
• “It is important to remember that any market rally or boom is a reflection of either our collective fear or optimism. So yes, the current rally will continue provided the United States government doesn’t shut down or become engaged in another war; oil prices stabilize; and private industry job growth continues unabated. But even if unforeseen political or economic factors interrupt the current market rally, there’s every reason your “personal market rally” can continue.
• How? By making a commitment to five practices frequently abandoned at the first sign of market duress: a) Choose your investment selections based on best available information, not your feelings, b) Continue to invest in your taxable and tax-deferred portfolios using the discipline of dollar-cost-averaging, c) Match your investment strategy and products to your short- and long-term goals, d) Rebalance to take advantage of the inherent benefit of buying low and selling high, and e) Create stop-gap procedures to help you resist the temptation to let your feelings rather than your goals and what you want your money to do for you–drive your financial choices.

• Arnett Waters, Principal
• A.L. Waters Capital, LLC
• Braintree, MA
• NO.
• “Oil will trade above $150 per barrel. Gold will trade above $1,600 an ounce. Unrest in Middle East will spread. Unrest will take hold in China too. U.S. corporate earnings will decline.”

• Larry Seruma
• Managing Principal
• Nile Capital Management LLC
• New York, NY
• YES.
• “We at Nile Capital believe that the market rally is going to continue over the next year. In the next twelve months we do not see the Federal Reserve raising rates, which means the cost of capital will remain low, and earnings will continue to surprise to the upside. Unemployment will also continue to fall, which will increase consumption and encourage growth. In fact, we have already seen capital flows returning from abroad as investors’ allocation to US markets continues to increase. The biggest risk in our view remains a less accommodative stance by the Fed, however we believe that such a policy is unlikely in the short term.”

• Joe A. Gilbert, CFA, portfolio manager,
  Integrity Asset Management, LLC
• Cleveland, OH
• YES.
• “I’m still positive on the market at current valuations. Earnings will grow because of growing sales. Admittedly, most of the ‘easy’ money has already been made and the returns from here will be more modest but this does not portend to a declining stock market. We are in a maturing bull market, which requires investors to be more selective. But opportunities remain. The outcomes from geopolitical events are more binary but oil at $105 is untenable hence I believe that once oil corrects the market will go higher. Economic expansions typically last seven years and we are only in the second year of this expansion. The Federal Reserve is continuing to provide liquidity and the Obama administration has introduced more simulative policies (i.e. payroll tax cuts, accelerated depreciation). Additionally, the NFIB Small Business index has increased and the unemployment rate has just started to recede. Businesses have started to hire again and reinvest in capital equipment after a period of under-investment. There is continued positive business momentum and the economy is still operating substantially below potential output levels. Bull markets historically die on optimism and grow on skepticism and there is plenty of skepticism surrounding this market now.”

• Lee Baker, CFP
• Apex Financial Services
• Tucker, GA
• YES.
• “I expect the market rally to continue over the next year for a number of reasons. First, the Federal Reserve will continue to do everything in its power to create fertile ground for the market to continue its upward trend. In addition, we will see dollars that had been sitting on the sideline last year continue getting into the game. Currently the bond market is an unappealing place to put new money due to inflation fears. As a result that leaves stocks as the most likely landing place for those dollars. The United States’ position in the global economy isn’t what it used to be but all paths still lead to (or perhaps through) America. The continuing global economic expansion will ultimately benefit domestic markets. One cautionary note: sustained upheaval in the oil producing regions could eventually put the brakes on consumer spending. This would be a result of higher prices at the pump and the grocery store.”

• J. Michael Salley
• Registered Principal
• Salley Wealth Advisors Group, LLC
• Summerville, SC
• YES.
• “There are several important factors that point to higher stock market valuations:
• A. We are fully entrenched in an economic recovery in the US, gone are the sentiments and opinions about the possibility of a double-dip recession. As this recovery advances, albeit slowly, the stock market will continue to forecast this improving growth of the economy.B. The health of corporate America is very strong and will continue to improve. The deleveraging and strengthening of balance sheets has had a dramatic positive impact upon corporate earnings. The majority of companies continue to report earnings that are above Wall Street’s estimates. At the end of the day, it is earnings, or the lack thereof that mostly influences stock prices. I believe this trend of improving earnings will continue.C. Consumer confidence and sentiment continues to improve. In fact, a week ago I read a news article that pointed out that this improvement was more evident in the African American community, based on several surveys that were taken D. Lastly, there are trillions of dollars still sitting on the sidelines in a near zero interest rate environment, because of the fear and anxiety generated by this latest severe economic downturn. These assets will be forced to move into equities as the picture continues to brighten.”

• J. Dennis Jean-Jacques
• Author
• Five Keys to Value Investing
• NO.
• “The market rally cannot continue at the current pace over the next year. Increased government involvement in the general market makes this a very delicate time period, thereby making a continued stock market rally more unlikely. Needless to say, it is hard to ascertain whether the level of froth in the market is born from sustained economic growth or artificial stimuli. Indeed, the government has always played a role in the markets such as changing tax policies or lowering interest rates at the first sign of unwelcome economic news. Such interventions often “prop up” equity markets until sustained economic growth is restored. It can be tricky for investors to navigate as the economy becomes less dependent on artificial injections because this period produces very difficult, and often volatile, stock market environments. The time at which such transformation begins and how long the purgatory will last are the unknowns; but after TARP, tax relief, mortgage relief, QE1, and QE2, a transition must happen at this stage of the government’s prolonged intervention—which will most likely have a negative impact on the market. This is why investors should be extremely cautious during this time as this market rally is expected to take a much needed pause.”

• Ed Fulbright, CEO
• Fulbright Financial Consulting
• Durham, NC
• YES.
• I have five reasons to be positive: The economy is improving; banks are starting to lend–but slowly; more people are becoming optimistic and are starting to spend; CEOs and CFOs are starting to loosen the purse strings and are launching big projects; and commercial building projects are starting up.

50 Cent's recent tweets may result in an SEC investigation (Photo by Lonnie C. Major)

Curtis “50 Cent” Jackson knows a thing or two about the influence of technology, announcing the release of his Sleek headphones at the 2011 International Consumer Electronics Show, but his latest Sleek-related announcement via Twitter might cost him.

Recently, Jackson took to the social networking site to convince his 3.8 million followers to buy shares in H&H Imports, a Clearwater, Florida company. He tweeted, “HNHI is the stock symbol for TVG [sic] sleek by50 is one of the 15 products this year. If you get in technically I work for you. BIG MONEY.” The Queens-bred rapper didn’t stop there, adding: “Ok ok ok my friends just told me stop tweeting about HNHI so we can get all the money. Hahaha check it out it’s the real deal.” Lastly, he encouraged his followers to “get in now.”  Those tweets alone increased H&H Imports by 290 percent and brought 50 Cent a reported $8.7 million.

However, the following Monday, Jackson’s tweets bigging up the company were nowhere to be found; in fact, they were replaced with a pair of decoy tweets that read: “I own H&H stock [sic] thoughts on it are my opinion. Talk to financial advisor [sic] about it,” and “HNHI is the right investment for me it may or may not be right for u! Do ur [sic] homework!”

As a major investor and shareholder—owning 30 million shares of the penny stock—will the Securities and Exchange Commission (SEC) investigate the emerging entrepreneur?

The SEC has declined to comment on the situation, with a representative telling Fox411, “We can neither confirm nor deny [an investigation],” which is the typical procedure for pending investigations. BlackEnterprise.com checked with Ivory Johnson, the director of financial planning at the Scarborough Group Inc., to see where 50 stands.

“It’s solicitous,” says Johnson. “He’s telling people, if you do this, I’m guaranteeing you’re going to make money.  You can’t guarantee people large gains.”

On top of that, Jackson is an insider—owning 13% of the company—so his mentioning of undisclosed information could warrant an inspection, suggests the financial planner. If the upcoming products he mentioned in his tweet aren’t available in any publicly disclosed documents, that action can fuel the release-of-inside-information argument.

Some have speculated the tweets were an attempt at a “pump and dump” tactic; nonetheless, no proof has been released stating Jackson has dumped any of his shares after they spiked. Currently, the stock has declined greatly. If the CEO of G-Unit escapes SEC investigation and a lawsuit, then the most he will possibly receive is a fine.

Let us know what you think about 50 Cent’s decision to tweet about H&H Imports in the comments section.

For related content, read:

• 50 Cent Talks Headphones and potential Maybach Deal
• 50 Responds to Criticism Over Flaunting His Cash on Twitter
• Behind the Scenes of Our 50 Cent Cover Shoot

Pipeline for Women in Peril
Women M.B.A. graduates lag behind men right from their first job and do not catch up, show findings of the latest Catalyst study, Pipeline’s Broken Promise. Even after taking into account experience, industry, and region, women start at lower levels than men, make on average $4,600 less in their initial jobs, and continue to be outpaced by men in rank and salary growth throughout their careers.

Response to Haiti
Following the earthquake in Haiti, Americans swiftly made donations or said they planned to help those affected by the catastrophe. Almost as many blacks as whites made donations, but more blacks than whites said they planned to give money. Mobile giving exceeded $40 million through late February, according to the Mobile Giving Foundation, a nonprofit organization that aids other nonprofits in raising funds through mobile. Some 14% of people gave money via text message compared to 12% by telephone call, reports the Pew Research Center.

D.C. Residents Are Thriving
More than half of the residents of the Washington, D.C., metro area, 58.7%, have been categorized as “thriving” by a Gallup poll survey of the nation’s 52 largest metropolitan areas, meaning they rate their current and future lives as at least a 7 and an 8, respectively, out of 10. The city is No.1 on be’s list of Top Cities for African Americans.

This article originally appeared in the April 2010 issue of Black Enterprise magazine.

Living and traveling abroad gave Dominique Moore a firsthand view of overseas investment opportunities. (Photo by Kevin Allen)

First, the good news. The stock market crash of 2008 lasted through March 9, 2009, but things improved rapidly after that. From March through July of last year, Standard & Poor’s 500 stock index gained 35.62%, enjoying its best five-month run since 1938. For the entire year, the average U.S. stock fund returned about 33%, and virtually every category of mutual fund tracked by Morningstar wound up with positive results.

Now, the not-so-good news: Even the strong rebound of 2009 couldn’t make up for 2008’s crisis-fueled losses—and the rest of the decade’s abysmal performance. The 2000s, in fact, were the worst decade in almost 200 years of recorded stock market history. The S&P 500 lost an inflation-adjusted average of 3.3% each year between the end of 1999 and November 2009. For the entire decade, the average U.S. stock fund returned about 1.8% a year. You would’ve done better (and spared yourself a lot of heartburn) by simply rolling over bank CDs for 10 years.

For investors who applied the old textbook lessons of diversification (that is, managing risk by filling your portfolio with a variety of investment vehicles and holdings from different industries and global regions), the strategy paid off. Over the last 10 years, international stock funds have done much better than domestic funds, returning more than 3% per year. And, by comparison, diversified emerging markets funds were excellent performers, delivering annualized returns greater than 9% during the 2000s:

Let’s put that performance in perspective. If you had invested $10,000 in the average U.S. stock fund at the end of 1999 and kept your money there, your stake would have been worth about $13,250 by year-end 2009. By comparison, the same amount placed in the average diversified emerging markets fund would have grown to roughly $22,250. What’s contributing to this outsized growth? While industrialized nations struggled to escape the recession in 2009, emerging markets such as Brazil enjoyed economic growth of more than 4%; China’s economy grew by more than 9%.

Many in the U.S. are beginning to catch on to the international investment flight. In 2009, Americans invested a record $64 billion in foreign mutual funds, and more than half of that flowed into emerging markets equity funds; the rest went into foreign bond funds. Shaba Lightfoot was among those investors who looked beyond U.S. borders for investment opportunities last year. Lightfoot, a 27-year-old student affairs coordinator at the Association of American Veterinary Medical Colleges, a nonprofit in Washington, D.C., started investing in emerging markets when her employer switched retirement plan providers to AUL OneAmerica last winter.

After conferring with an AUL investment counselor, Lightfoot decided it was time to diversify her holdings. She placed about $5,000 in the American Funds Euro Pacific Growth Fund (A EPGX). The fund has nearly 29% of its assets in Asian, Latin American, and other emerging economies, with holdings in small firms as well as large corporations. The aim of the fund is to provide long-term growth. In 2009, the fund grew roughly 39%. “I had all my eggs in one basket,” she says. “I could have suffered a major loss if the performance was poor, but now I’m diversifying and developing a solid retirement plan.

Growth Prospects
Market experts are equally optimistic about emerging markets. “It’s not reasonable to expect another year like 2009,” says Bill Rocco, a senior analyst at Morningstar. “However, emerging markets funds are likely to reward long-term investors.” Simply put, developing economies are expected to grow more rapidly than the economies of the U.S., Western Europe, and Japan. There are literally billions of people in the emerging markets whose standard of living is improving. That mass movement toward the middle class is likely to lead to hefty profits—and higher stock prices—for the companies in those countries. The world’s largest emerging economies are Brazil, Russia, India, and China. Others include Argentina, Mexico, Poland, South Africa, South Korea, and Turkey. What all these countries have in common aside from transformational economies are large populations and abundant resources.

Lee Baker, president of Apex Financial Services in Tucker, Georgia, agrees that growth in the U.S. is likely to lag. “We’re industrialized and our economy is mature,” he says. “We’re not going to see huge investments in infrastructure, relative to our population.” Emerging markets, by contrast, are in the beginning stages of industrialization. “They’re building bridges and roads and airports. Those projects create good-paying jobs, so the emerging markets are starting to have the kind of middle class that we’ve had for years. Billions of people will be buying more goods and services.”

Modern technology makes a huge difference, notes Ivory Johnson, director of financial planning at Scarborough Capital Management Inc., an investment advisory firm in Annapolis, Maryland. “Now, people in the emerging markets have the same access to information we have in the U.S.,” he says. “That makes those countries even more competitive.”
Outsourced jobs from larger industrialized countries also influence growth in emerging regions. “Manufacturing jobs keep going over there because of the cost advantage,” Johnson says, “and they’re not coming back.” He notes that the U.S. dollar may continue to weaken as a result of the increasing national debt, and a weaker dollar will probably add to the returns of foreign investments, including those from emerging markets.

There are myriad reasons why investors look to emerging markets. Dominique Moore, 42, an attorney in Baltimore, became convinced of the viable investment prospects abroad after seeing a few of these vibrant markets up close. “I lived in South Africa for four years, and I traveled throughout the continent. I got to see how trade works, with raw materials going out and finished goods coming in,” says Moore. “Now that I’m back in the U.S., I notice that most of the things we buy come from other countries. I think the emerging markets will probably continue to have high growth, compared with developed economies.” Putting her investment dollars behind her beliefs, Moore has owned Driehaus Emerging Markets Growth Fund (DREGX) for several years. The widely diversified fund’s holdings go beyond the more familiar emerging countries to also include stocks from places such as South Africa, Egypt, Indonesia, and Israel. In 2009, the fund gained more than 70%.

Justin Garrett Moore (no relation to Dominique Moore), an urban designer with the New York City Department of City Planning, is investing in growing economies out of a sense of moral obligation to help less developed markets, in addition to the projected financial benefits. He has invested in a number of emerging overseas markets through his 457 retirement plan. The 30-year-old holds the TIAA-Cref International Equity (TRERX), the Aberdeen Global SRI Equity Fund, and New Alternatives (NALFX) fund, all of which have roughly 12% of their holdings in emerging markets. Although investing overseas was once seen as high risk, Moore recognizes the superior growth prospects. Besides, he says, “I’m young, so I can take on more risk.” Moore also devotes a small portion of his investment dollars to microfinance ventures in developing nations.

Multiple Choices
If emerging markets appeal to you, there are several types of funds in which you can invest:
Diversified emerging markets funds. As you’d expect, these funds buy companies based anywhere in the world, outside of the industrialized nations. Recently, the funds in this category invested largely (14.36% of assets) in Brazil, followed by China (13.55%), South Korea (9.34%), Taiwan (8.03%), and South Africa (6.21%). “For most investors, the best way to participate in emerging markets is through a diversified fund,” says Rocco. “Let the manager decide on the countries and stocks that seem most attractive.” Large mutual fund families often have researchers and analysts who focus on a specific emerging nation or region.

Latin American stock funds. These funds have been extraordinary performers. The average 10-year annualized return in this category is 15.23% through the end of January 2010. “They’re basically Brazil and Mexico funds,” says Rocco, “because most of the assets in these funds are invested in those two countries, especially in Brazil. They’ve profited recently from the strength in oil and metals companies based there.”

Pacific/Asia ex-Japan funds. Except for Japan, all Asian countries may be considered emerging markets; holdings in this category differ but they tend to focus on China, Hong Kong, India, and Korea. For the past 10 years, the average annual return for this category was 8.41% through January.

Investing in emerging markets, Garrett Moore believes, is a social responsibility. (Photo by Lonnie C. Major)

Rocco is generally not enthusiastic about regional or single-country emerging markets funds. “They may be more volatile than diversified funds,” he says. The Asian financial crisis of 1997–1998 punished regional stock funds there, while Latin American funds have posted losses in five of the past 12 years, including a 59% slide in 2008.

Do regional emerging markets funds ever make sense? “Perhaps,” says Rocco, “if you have a large portfolio that already includes domestic stock funds, an international fund for developed markets, and a diversified emerging markets fund. In that situation, you might invest a small portion of your portfolio in a region or country that you believe will do better than the rest of the world. But you should treat a regional or single-country emerging markets fund like a stock that might do very well or very poorly.”

Emerging markets bond funds. Government and corporations in emerging markets may borrow money via bond issues; several mutual funds hold these securities. These funds offer generous yields (the category average is now around 5%, compared with domestic bond funds, which average 4.42%) as well as the chance for capital appreciation.

Over the past 10 years, emerging markets bond funds have returned 11.07% a year, which was higher than the average for diversified emerging markets stock funds. They’ve been less risky than the stock funds, too: In 2008, when emerging markets stock funds lost nearly 55%, the bond funds lost only 17.64%.

Even though emerging markets bonds have been strong lately, Johnson is unmoved. “With any bonds you have exposure to interest rates. If rates rise from today’s low levels, your bonds will lose value. With emerging markets bonds, prices may fall rapidly if there’s any sign of political unrest.” Rocco agrees that emerging markets bond funds tend to be more volatile than other types of bond funds, but says they might be suitable for some portfolios. “Just as some investors might want to hold an emerging markets stock fund as part of their equity allocation, so an emerging markets bond fund might fit into a fixed-income allocation,” he says. “Along with the volatility, there is the chance for substantial returns.”

Playing the Percentages
Many observers like the growth prospects for emerging markets but caution against overloading there because of the risk of downward swings. Johnson says his clients typically invest 10% of their portfolios in emerging markets. “I like inexpensive, well-diversified funds,” he says. “If you buy one country or one region, you might be too dependent on one commodity or too exposed to a local economic problem.”

Apex’s Baker recently recommended to Marlene Blaise, 41, a cardiologist in Alpharetta, Georgia, that she invest 3% of her portfolio in Vanguard Emerging Markets Index Fund (VEIEX). The Vanguard fund’s low expense ratio is the key to its appeal: It charges 0.40% of assets per year, while the average diversified emerging markets fund charges 1.77% a year. “The cost advantage of this Vanguard index fund is so great,” says Baker, “that other funds will have a difficult time matching its performance over the long term. As for asset allocation, Baker says that Blaise’s 3% commitment is moderate for his clients. “Some conservative clients have no emerging markets at all, while others have as much as 5%. Down the road, I might suggest that Blaise increase her emerging markets allocation to 5%, perhaps by adding a country-specific fund focused in Brazil, India, or China.”

Blaise believes that venturing into an emerging markets fund will be worthwhile. “Emerging markets have tremendous growth potential,” she says, “probably more than developed markets have now. In addition, diversifying your investments makes sense.”

By diversifying into asset classes such as emerging markets, which don’t always move in sync with U.S. stocks, you may get valuable noncorrelation. In 2007, for example, the average U.S. stock fund returned less than 7% while diversified emerging markets funds returned nearly 37%, on average.

“When determining how much of your money to invest in an emerging markets fund,” says Rocco, “check to see how much of your portfolio is already invested there.” Suppose, for example, you want a 10% allocation to emerging markets. You own a foreign stock fund that invests mainly in developed markets; that fund makes up one-fifth of your portfolio. If that fund has 15% of its assets in emerging markets, you already have a 3% (15% of one-fifth) exposure to emerging markets through that fund. You could invest another 7% of your portfolio in an emerging markets fund to bring your allocation up to 10%. The experts who talked to black enterprise for this story recommend that no more than 10% of your portfolio be invested in emerging markets.

Patience is prudent. Emerging markets will probably deliver good returns over a 15- or 20-year time period because of underlying economic growth, but there may be sharp declines along the way as a result of economic crises, political instability, and other problems that developing nations can encounter. “You need a long time horizon,” Rocco says.

“I’m in for the long haul,” says Dominique Moore. “I reinvest all distributions back into the fund. I have no intention of selling. If the fund goes down, I plan to ride it out. I don’t watch over this fund too closely because checking too often doesn’t help my peace of mind.”

Slow and Steady
Rocco warns that investors should be cautious about investing in an asset class that has enjoyed as much recent success as emerging markets, because there’s a risk that you’re buying near a market top. He suggests investing gradually, using dollar-cost averaging, perhaps every month or quarter. That approach reduces the risk that you’ll invest a large sum just before prices plunge.

“There are some other ways to benefit from the expected growth of emerging markets,” says Johnson. “For example, China has more than 20% of the world’s population but has less than 15% of the world’s arable land and about 7% of its potable water supply. As emerging economies develop, the people in China and other nations will be eating more, and someone will have to feed them. That’s likely to increase demand for companies in businesses related to agriculture.”

Therefore, Johnson recommends that his clients own Van Eck Market Vectors Agribusiness ETF (MOO), an exchange-traded fund that holds stocks such as Monsanto and Deere, which provide farm-related products and services. Similarly, Johnson’s clients hold managed futures, which may deliver excellent returns if demand from emerging markets drives up commodity prices, including agricultural commodities. Rydex Managed Futures Strategy (RYHFX) is a mutual fund focusing on futures contracts. As billions of people in developing nations eat more food, drive more cars, and make more cell phone calls, you’ll want to hold some funds designed to capture the investment returns that are bound to emerge.

—Additional reporting by LaToya M. Smith

This article originally appeared in the April 2010 issue of Black Enterprise magazine.