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Jonathan Burton's Life Savings
Oct. 26, 2009, 12:01 a.m. EDT · Recommend (4) · Post:
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Quick ways to rebuild retirement portfolios
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Legg Mason's inactivity wooed activist Peltz
By Jonathan Burton, MarketWatch
SAN FRANCISCO (MarketWatch) -- Stocks have been sailing swiftly this year, but many investors missed the boat by clinging to defensive positions set in the depths of the downturn.
Rather than regret lost opportunity, make sure your portfolio is ready for 2010. That will likely mean putting money in places that already have enjoyed tremendous returns. Sure, many experts caution that the global economy is anemic at best, and top-performing markets have come too far, too fast. Maybe these sprinters are due for a breather, but you can't ignore them.
Two weeks into the latest flood of financial results, where do we stand? Alec Young, equities strategist at Standard & Poor's, gives his perspective in an interview with Dow Jones Newswires' Simon Constable.
"Don't be afraid of a weak recovery; that's not going to be a shock to anyone," said Alec Young, equity market strategist at Standard & Poor's. "Don't be afraid of a weak consumer. Things that everyone's talking about don't move markets."
Here are five places to consider putting your money now to set you up for a happy new year:
Talk about a wall of worry. As stocks headed up, individual investors got out. In the five weeks through Oct. 16 alone, investors pulled $15 billion from U.S.- and international-stock mutual funds -- and pumped almost $60 billion into less-risky bond funds.
Investors are "missing the forest for the trees," Brian Belski, chief investment strategist at Oppenheimer Asset Management Inc., wrote in an early October research report. While stocks' potential returns "compared to earlier this year will not be as violently positive over the intermediate term, they remain positive."
In the coming year, look to shares of large-cap U.S. companies with global reach and market leadership. Ideally, choose value-style stocks that offer a dividend greater than the roughly 2% yield on the Standard & Poor's 500-stock index /quotes/comstock/21z!i1:in\x (SPX 1,068, -11.28, -1.04%) . Dividends add safety and pad total return.
Dividend-focused exchange-traded funds include SPDR S&P Dividend /quotes/comstock/13*!sdy/quotes/nls/sdy (SDY 44.79, -0.44, -0.98%) , iShares Dow Jones Select Dividend Index /quotes/comstock/13*!dvy/quotes/nls/dvy (DVY 41.80, -0.47, -1.11%) , Vanguard Dividend Appreciation /quotes/comstock/13*!vig/quotes/nls/vig (VIG 45.32, -0.35, -0.77%) and the Dow Diamonds /quotes/comstock/13*!dia/quotes/nls/dia (DIA 98.78, -1.05, -1.05%) .
Mutual funds with a dividend bent include T. Rowe Price Equity Income Fund /quotes/comstock/10r!prfdx (PRFDX 20.55, -0.29, -1.39%) and Vanguard Dividend Growth Fund /quotes/comstock/10r!vdigx (VDIGX 12.73, -0.18, -1.39%) , both of which are rated "Analysts Picks" by investment researcher Morningstar Inc.
Money manager Hugh Johnson of Johnson Illington Advisors in Albany, N.Y., recommends four key sectors.
For consumer stocks, he favors retailers Target Corp. /quotes/comstock/13*!tgt/quotes/nls/tgt (TGT 49.09, +0.06, +0.13%) , Tiffany & Co. /quotes/comstock/13*!tif/quotes/nls/tif (TIF 41.44, -0.01, -0.02%) and Staples Inc. /quotes/comstock/15*!spls/quotes/nls/spls (SPLS 22.81, +0.21, +0.92%) . In industrials and technology, his picks include 3M Co. /quotes/comstock/13*!mmm/quotes/nls/mmm (MMM 76.70, -1.12, -1.44%) , General Electric Co. /quotes/comstock/13*!ge/quotes/nls/ge (GE 14.95, -0.25, -1.64%) , Google Inc. /quotes/comstock/15*!goog/quotes/nls/goog (GOOG 552.52, -1.17, -0.21%) , Apple Inc. /quotes/comstock/15*!aapl/quotes/nls/aapl (AAPL 202.69, -1.25, -0.61%) and Hewlett-Packard Co. /quotes/comstock/13*!hpq/quotes/nls/hpq (HPQ 47.84, -0.73, -1.49%) In the basic-materials sector, he uses an ETF, Materials Select Sector SPDR /quotes/comstock/13*!xlb/quotes/nls/xlb (XLB 30.85, -0.70, -2.22%) . An ETF trades on an exchange like a stock.
ETFs covering the consumer sector to consider include Consumer Discretionary Select Sector SPDR /quotes/comstock/13*!xly/quotes/nls/xly (XLY 28.07, -0.18, -0.64%) and Vanguard Consumer Discretionary /quotes/comstock/13*!vcr/quotes/nls/vcr (VCR 44.61, -0.28, -0.63%) . In industrials, research iShares S&P Global Industrials /quotes/comstock/13*!exi/quotes/nls/exi (EXI 43.24, -0.48, -1.10%) and Vanguard Industrials /quotes/comstock/13*!vis/quotes/nls/vis (VIS 49.40, -0.59, -1.17%) . And two technology-sector ETFs worth noting: Technology Select Sector SPDR /quotes/comstock/13*!xlk/quotes/nls/xlk (XLK 21.21, -0.12, -0.56%) and Vanguard Information Technology /quotes/comstock/13*!vgt/quotes/nls/vgt (VGT 51.12, -0.24, -0.48%) .
Said Johnson: "We've moved past the easy money stage of the bull market into a more challenging stage. Buy stocks where investors believe that prospects are improving, and those are stocks that are beating the S&P 500."
Both developed and emerging international markets have rebounded even faster than the U.S. -- Latin America funds, for example, are up more than 100% on average so far this year.
- Usnzth | 2:22 a.m. Today2:22 a.m. Oct. 26, 2009
Nelson Peltz and his constructivist investing philosophy are about to shake up Legg Mason Inc., the fund manager known for its value investing style and fierce independence, writes David Weidner.
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