Brendan T. Conry, financial advisor, Conry Asset Management, Berlin

Q. What new financial products are on the horizon for individual investors?

A. Given the concerns of many investors of outliving their assets, insurance companies and large investment management firms are collaborating on new annuity products that will provide a more predictable and in some cases guaranteed income stream. Buyer beware though as any product with “legitimate” guarantees will come with potentially higher costs and probably liquidity constraints. Guarantees are subject to the claims-paying ability of the annuity insurer. 

Q. How do you see the economy and markets performing for the remainder of 2010?

A. The economy is improving steadily which means corporate profits should come back in a meaningful way. As the economy gains traction it will however force the Federal Reserve to increase rates which will be a headwind for both the stock valuations and bond prices. Bear in mind since the low of March 9, 2009 the unmanaged Standard & Poor’s 500 Stock Index is up over 50 percent. This makes further substantial “short term” gains quite a challenge … not impossible… but a low probability. Past performance is not indicative of future results and the S & P 500is based on the average performance of 500 stocks monitored by the Standard & Poor’s Company.  

Q.  Over the last 15 years the major US banks have gotten into the securities business. Has the combination of selling both savings and investment products worked in their favor?

A. If you look at the largest U.S. banks and consider the losses they have taken since 2008, which now are close to $75 billion, one would have to conclude that new securities products only worsened banks profitability and therefore their shareholders have lost substantial sums. As far as how their customers have done it depends … on many things, but most importantly: Was the product appropriate for the customers circumstances, i.e. age, risk tolerance, time frame and liquidity requirements?

Q. Oil prices have been on the increase again. Are there still investment opportunities in the energy and natural resource sectors?

A. Despite oil now reaching $85 per barrel there is probably more upside but investors need to be very careful when entering a new investment or sector. The more hype around an investment idea or theme the more likely that this trade has become crowded, which leaves it vulnerable to quick and sometimes violent corrections. Investing in alternative investments may not be suitable for all investors and involves special risks. Investors must meet specific suitability standards and understand these investments are for along-term investment horizon.   

Q. Has healthcare reform helped or hurt the markets?

A. It’s really too early to tell. Interestingly though the market went up quite nicely the day after the bill passed and is up in general since then. Of course many factors have an impact on market direction, particularly over the short term with market sentiment and the appetite or lack thereof for stocks by professional & amateur day traders.

Q. What should investors be thinking about today?

A. Given all that has happened in the last two years “long-term” investors should be thinking about

A) how much exposure they should have to stocks, bonds, cash and potentially alternative assets 

B) how much of the portfolio should be allocated toward non-dollar (international) stocks and/or bonds?

C) how frequently the portfolio should be rebalanced, i.e. sell some investments that have outperformed and put that capital into an asset class that has under-performed. Rebalancing requires not only considering relative performance of individual positions and asset classes but also transaction costs and tax ramifications. Preferably gains should be taken in tax deferred accounts and losses if any in taxable (after-tax) portfolios.

Lastly, for those investors seeking tax free growth of retirement assets consider a Roth IRA conversion or a partial conversion.