reevaluate goals and determine if current strategies are working. For instance, he urges future home buyers to open money market accounts or low-risk mutual funds to save for the purchase. Save a consistent amount monthly based on your original financial plan and purchase time horizon.
For parents concerned about college tuition, Wilson suggests opening a state-sponsored 529 savings plan that allows families to save tax-free dollars. It works like the Coverdell Education Savings Account, formerly the Education IRA. Under this plan, savings are tax-free until the account is debited to pay for qualified expenses.
Wilson also recommends taking stock of life insurance policies and income protection. For example, an individual earning $30,000 should be insured for $300,000 — 10 times his or her income. “We really need to educate people on different things that are available to them, so they can pick what’s best and do what they need to do,” says Wilson.
Tweaking Your Investment Strategy
For investors looking to tweak their plans midyear for the promise of fourth-quarter gains, Steve Washington, managing director of Cleveland-based SBK-Brooks Investment Corp. (No. 8 on the BE INVESTMENT BANKS list with $11.9 billion in total managed issues) and one of the founders of The Black Wealth Network, says energy-related companies should be a prime investment target. But he cautions investors to be choosy. “We like energy,” Washington maintains. “The only reason I’d be reluctant to say it’s a favorable sector is the 18-month run-up in energy stock, which forces you to be a little more selective.”
He recommends that investors focus on individual names that create value based on their business model. And he’s especially optimistic about companies in the oil-refining business.
In the aftermath of Hurricane Katrina, about 20% of the nation’s oil-refining capacity was crippled, causing a surge in gas prices. Today, with spikes at the pump caused by increased foreign demand, getting more oil refining capacity online has become a key issue in stabilizing energy costs. “There is value for those companies that are accelerating their investment in [refinery] infrastructure,” he says.
Washington also believes the Federal Reserve may put the breaks on interest rate hikes as the economy begins to pick up steam in the second half of the year. He anticipates that no action may be taken at the next scheduled meeting in August. And if there’s a pause in rate hikes, Washington says interest-sensitive stocks such as banks, brokerages, and insurance companies should benefit. Investing in those types of firms might make sense as well.
Getting Professional Help To Reach Your Goals
Steve Washington, managing director of SBK-Brooks Investment Corp., stresses that investors should consult their financial planner to assess the risk involved and how the new investments fit into an overall strategy before they make any major moves. “We have found that, especially among African Americans, many people don’t have access to a planner,” Washington says. And in many cases, since the amount of assets they have under management dictates how much access they really have to their broker, “a lot of self-education is