market observers are looking beyond the headlines to see other trends that are favorable. The same is true in today’s environment. Corporate profits remain strong and companies in the U.S. and elsewhere generally have solid balance sheets. Emerging markets are growing robustly and will likely help spur ongoing economic activity in other parts of the world, including the U.S. Prices for gasoline have moderated in recent weeks, boosting consumer purchasing power. Even in difficult times, seeds of future prosperity are planted.
#4 – Stocks may offer more attractive value than bonds
Many individuals have been pulling money out of the stock market and investing in bonds (or bond funds). Yet with interest rates on U.S. Treasury se- curities near their historic lows there appears to be limited upside. Worse yet, bonds paying extremely low interest rates can be risky for investors. If inter- est rates begin to rise, bondholders could be in for a negative surprise. That’s because bond prices decline when interest rates rise. Stock values, mean- while, remain well below the peak they reached in the fall of 2007 before the dramatic, 50 percent downturn occurred. At that time, the S&P 500 In- dex topped out at 1,565. Today the S&P 500 is 20 percent to 25 percent below that all-time peak. This indicates that upside potential remains over the long run, though the market will likely continue to suffer through ups and downs along the way.
#5 – Market gyrations should not over-
take your investment strategy Are you a long-term investor? Most everybody should be, at least with a portion of his or her port- folio. Even if you are retired or close to it, you may need to invest some of your money in stocks to help meet increasing income needs over the course of what could be a long retirement. If you are uneasy with your current asset mix, it is worthwhile to re- view your holdings and determine if there is a more appropriate solution for your circumstances. Keep well diversified, and avoid putting too much of your money into a single asset or asset class to limit the risk of a dramatic change in its price. Don’t let to- day’s headlines overwhelm your investment decision process. W
The views expressed here reflect the views of Ameri- prise Financial as of September, 2011. These views
may change as market or other conditions change. Actual investments or investment decisions made by Ameriprise Financial and its affiliates, whether for its own account or on behalf of clients, will not neces- sarily reflect the views expressed. This information is not intended to provide investment advice and does not account for individual investor circumstances.
The Standard & Poor’s 500 Index (S&P 500® In- dex), an unmanaged index of common stocks, is frequently used as a general measure of market performance. The index reflects reinvestment of all distributions and changes in market prices, but excludes brokerage commissions or other fees. It is not possible to invest directly in an index.
International investing involves increased risk and volatility due to potential political and economic instability, currency fluctuations, and differences in financial reporting and accounting standards and oversight. Risks are particularly significant in emerging markets.
There are risks associated with fixed income invest- ments, including credit risk, interest rate risk, and prepayment and extension risk. In general, bond prices rise when interest rates fall and vice versa. This effect is usually more pronounced for longer- term securities.
Investment products, including shares of mutual funds, are not federally or FDIC-insured, are not de- posits or obligations of, or guaranteed by any finan- cial institution and involve investment risks including possible loss of principal and fluctuation in value.
Diversification helps you spread risk throughout your portfolio, so investments that do poorly may be balanced by others that do relatively better. Diversifi- cation does not assure a profit and does not protect against loss in declining markets.
April Oliver, CFP® CERTIFIED FINANCIAL PLANNER™ practi- tioner Advisor is licensed/registered to do business with U.S. residents only in the states of CA, CO, FL, IA, MD, MI, MO, NC, NY, OR, PA, SC, TN, TX, VA.
www.womenwithknowhow.com OCTOBER 2011 19
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