Shifting Fortunes - Page 4 of 7

Shifting Fortunes

funds. At our age, we’re looking for growth in our investments.” Although this may seem aggressive, the Wades are actually more cautious today than they were a few years ago, when more of their portfolio contained aggressive stocks and no mutual funds at all. “We’re definitely more careful today in our investing,” says Terri. “We take our time rather than jump into hot stocks. Buying mutual funds and owning different kinds of stocks is a great way to spread your risks.”

Arnetta Tolley, an investment adviser at the Pasadena, California, office of Edward Jones Investments, a financial services firm based in St. Louis, agrees that focusing on stock funds makes sense for the Wades. “They can expect to have many good earning years ahead of them. They can afford to take more risk with stock funds from time to time, yet over a long period, they can expect higher returns from stock funds than from bonds or cash,” says Tolley. “What’s more, with interest rates low and expected to rise, I’m reluctant to put a lot of money into bond funds.” At Tolley’s recommendation, the Wades have invested in Hartford Stock (HSTAX), which owns large-company stocks, and Hartford Midcap (HFMCX), which holds medium-sized companies with excellent growth prospects. “These funds are well managed by a solid financial firm,” says Tolley.

The Wades currently have a significant amount of cash, the result of selling some investment property. “Instead of [them] putting all of it back into real estate,” says Tolley, “I’ll suggest that they diversify into different mutual funds, including Hartford Capital Appreciation (ITHAX) and Hartford Dividend & Growth (IHGIX).” Tolley says the Hartford family is a good fit for the Wades because its stock funds tend to be growth-oriented and on the cutting edge, and the Wades have many years to cash in on the potential appreciation the stock market has historically produced.

“For clients who are older—retirees and pre-retirees—I generally recommend American Funds instead,” says Tolley. “Many of those funds are team managed, with extremely long track records, and the [American Funds are] known for a conservative rather than an aggressive investment style.” For these clients, cash flow is provided by American Funds Bond Fund of America (ABNDX), which was yielding nearly 5% at the time of this article. Tolley says, “Among equity funds, I put conservative clients into [American Funds] Investment Company of America (AIVSX), Washington Mutual (AWSHX), Growth Fund of America (AGTHX)—all of which hold large U.S. companies—and New Perspective (ANWPX), which owns large growth companies from around the world.” All of these funds have 30- to 70-year track records.

Kevin Davis, a certified financial planner with Consolidated Financial Services in Dallas, also suggests American Funds to his clients: New Economy (ANEFX), which invests in media, telecommunications, and retail stocks; and American Balanced (ABALX), which holds both stocks and bonds. “American Funds might not have had the highest returns in the 1990s, but they held up better than more aggressive funds when stocks went into a down cycle,” Davis