Advisers recommend taking ‘middle path’to protect portfolio

“Boring is beautiful” is the best mantra for investors in 2011, just as it probably should be in any year, area financial advisers said.

Conversely, the words “sexy and successful investing shouldn’t be used in the same sentence,´ said Nancy Stevens, chairman of First Western Trust Bank in Boulder.

“The key is to take ‘the middle path:’ a well-diversified portfolio comprised of U.S. stocks, both large and small caps, international stocks, both developed economies and emerging economies (China, India, Brazil), real estate, commodities, absolute return strategies and bonds,” Stevens said.

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It may sound too “Old School,” to hold a well-diversified portfolio, but in the last 10-year period, someone with a broad range of stocks and bonds may have earned a return of 30 percent or more, Stevens pointed out.

After two years of gyrations in the stock market, virtually all local advisers see more solid growth for the economy in 2011.

But one of the big questions this year is whether individual investors and companies will continue to sit on the sidelines with cash, as they have for the last year or so, or if they will start feeling more confidence to investing their money into projects that help the economy grow, said Sacha Millstone, an owner at the Millstone Evans Group of Raymond James Associates in Boulder.

“We’re constructive on the year, but no year is straight-up,” Millstone said. “We can invest with confidence … and not worry so much that this is the beginning of the end.”

One new strategy for investors this year is to look to international energy markets to make money, Millstone said. Such stocks are not necessarily cheap, but “the growth is there,” she said.

Another interesting play may be to invest in smaller companies in developing markets that cater to the growing middle class in those countries, Millstone said. In the United States, commodities look good and real estate is starting to shape up once again, she said.

“We are transitioning from an economy that people were worried would go into a ‘double dip’ to an economy that is solidly growing,” Millstone said. “It may not be growing as fast as we would like it, but it is solidly growing.”

Diversified Asset Management Inc. also agrees that the stock market seems to be calming down. But its investment advice remains conservative, said Robert Pyle, owner.

“We’re still recommending diversified portfolio around the world tilted toward value and small-caps and short-term high quality bonds, U.S.,” Pyle said. “Stick with your asset allocation and rebalance quarterly.”

How well the federal government’s continued “quantitative easing” works on the economy in the coming months is likely to be the key to whether investors get more confident or more cautious, said Dave Darmour at Cornerstone Investment Advisors LLC in Boulder.

“The Federal Reserve isn’t the end-all, be-all in impact and influence on interest rates,” Darmour said. “In some point in time, actual participants step in and ask real questions and have real concerns as to what the Federal Reserve is doing in pursuing this type of policy.”

Darmour remains cautious about suggesting the economy will improve in 2011 because of lingering issues having to do with foreclosures and unemployment.

What’s the most important investment advice from local advisers for 2011?

Even if you think you know what you own, or what you want to own in the future to grow your wealth, educate yourself, again.

“The most important thing for anyone to do is to pay yourself first,´ said Peter Braun, an adviser at UBS Financial Services Inc. in Boulder. “This strategy includes maximizing your contributions to your 401(k) and IRA accounts. It is good to do a self-assessment to determine your risk (or lack of risk) tolerance.”

Many investors have reconsidered what their risk tolerance is since the recent market turmoil started in 2008, Braun pointed out.

Darmour also thinks education is important.

“We spend quite a bit of time with clients every year educating them on what they own and why and the particular risks are for certain investments and the opportunities and understanding what you own is the first rule of investing.”

Finally, if you’re concerned about your estate, don’t forget the insurance piece, Pyle said. Estate planning certainly means looking at life insurance and disability plans as well as making sure your beneficiaries are correct, he said.

“The settling down of the market allows us to do more of the wealth-management piece, and it’s a very important part of the client’s plan,” Pyle said.