Washington area wealth managers on stocks, bonds and emerging markets

It has been an eventful year for the area’s money managers. The U.S. stock market hit record highs despite the sequester, fiscal cliff and looming threat of default. Interest rates have been volatile — spiking in the beginning of the year, and falling again — and sell-offs in Brazil and India have complicated the picture for investments in emerging countries.

As a result, local wealth managers say this is a good time to revisit clients’ portfolios and make incremental changes. Here, a handful of local advisers share the top advice they are giving clients at the moment.

Ric Edelman, founder of Edelman Financial Services in Fairfax

It’s a dangerous time to make opportunistic bets. Rather than making big bets such as real estate or Twitter’s initial public offering of stock or any other seemingly attractive opportunity, we are encouraging our clients to stay invested with a long-term outlook.

We are also encouraging them to maintain globally diverse portfolios so that if something does go wrong — whether it’s a political problem or military issue or a natural disaster — their money is insulated.

Elizabeth Larson, principal at Evermay Wealth Management in Arlington

The one overriding piece of advice we are giving clients is that they need to reign in expectations. U.S. equities — where our clients have significant exposure — have been enjoying spectacular gains this year. We need to stay optimistic, but recognize that we have had an in­cred­ibly strong run. Twenty-three percent growth in U.S. equities will not continue ad infinitum.

Nobody should start dramatically changing the asset mix in their portfolio, but we are actively looking outside the U.S. equities market to other development markets and some emerging countries.

Dave Miller, associate vice president of the Brown/Miller Wealth Management Group of Wells Fargo Advisors in Washington

Right now, we prefer stocks over bonds and bonds over cash. Many people have cash sitting on the sidelines waiting for interest rates to go back up, but that’s not going to happen overnight. By the time interest rates are at a normal level, it may be 2016 or beyond, so sitting on cash with a 0 percent interest rate can be detrimental when inflation is at 2 or 3 percent.

The [stock] market has come up a lot recently, so if you have short-term goals — your child is 15 or 16 and getting ready for college, for example — it may be a good time to take the profits.

Dave Zier, chief executive of Convergent Wealth Advisors in Potomac

Generally speaking, in times of volatility, you want to stay the course and only reposition into things that you think are attractive.

Our biggest focus is making sure people are internationally invested. We obviously have a global portfolio, but this is certainly a time to be overweight on developed international markets — Europe, Australia, Japan — and emerging markets like Brazil and China. It’s not that there aren’t opportunities in the U.S., but there seem to be better opportunities outside of the U.S.

The other area to focus on is commodity stocks — some of the natural resource equities are very attractive both in the U.S. and globally. This is the time to buy them because they’re cheap and have just started an up-trend — that’s generally when we try to get in on things.

Bill Fisher, director at Orion Investment Advisors in McLean

With Europe emerging from recession and the improving economy in Japan, it’s time to invest in more developed international stocks.

We are in the process of taking money out of large-cap U.S. stocks — which we have been [invested in] for about the last three years — and putting it in international markets.

The second area where we’re making changes is [in bonds]. Obviously interest rates have been quite volatile this year — we saw them spike in the third quarter, but they are very likely to head higher in the next three to five year —and that’s tough for bonds. We are moving money [from bonds] to alternative investments like hedge funds and mutual funds — things that provide low volatility but can produce profitable returns.

Abha Bhattarai covers local banking, retail and hospitality for The Washington Post’s Capital Business section. She has written for The New York Times, The Wall Street Journal, Reuters and the St. Petersburg (Fla.) Times.
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