Bruce McCain, chief investment strategist at Key Private Bank, said investors who are heavily exposed to equities should protect themselves from any unpredictable changes in the stock market. In the long run, though, he said he thinks equities are more responsible investments than government bonds.

“The best times to invest are the times when you feel least comfortable making the investment,” he said at a lunch hosted by the bank.

Because so many state and local governments are in financial trouble, the odds of them defaulting on bonds are higher than they have been historically. Also, if interest rates rise, the value of bonds will shrink, diminishing any financial gains for bondholders.

As the world economy grows, McCain said stocks have more lucrative potential for investments in the longrun. He said countries with emerging markets, including Taiwan, Vietnam, South Korea and Thailand, are probably good places to invest. Nations in Asia have better prospects for investment returns than European countries, according to McCain.

“We wouldn’t recommend that you diversify by investing in Greece,” he said.

He encouraged investors to put 10 percent of their portfolio in emerging markets because of the risks involved; they are more likely to soar and plunge.

McCain also encouraged investors to diversify by purchasing real assets, including commodities and real estate, and to explore alternative asset strategies like hedge funds.

“Many times, the best money is made in the darkest hours,” he said.

He said the economy is taking longer to recover from the Great Recession than it has from other economic crises because of how businesses and consumers have responded to it. Many businesses have cut their workers’ hours, which means that those employees have less money to spend, which would help accelerate the market’s recovery. Instead, growth has been slower than usual.

“It’s very sluggish by historical standards,” McCain said.

Another reason for the slow recovery has been competition from fledgling economies overseas.

McCain said inflation is also higher than some reports suggest. While the Consumer Price Index, which tracks the prices of household goods, does not seem to suggest the economy is facing inflation, other indicators show the contrary. The price of crude materials has been rising. Education and medical costs have also grown dramatically and many airlines are finding ways to charge extra fees, the most notorious of which is a charge for use of airplane bathrooms.

Tags: Key Bank

This entry was posted on Thursday, June 17th, 2010 at 1:31 pm and is filed under Education, Toledo Business Link.
You can follow any responses to this entry through the RSS 2.0 feed.
You can skip to the end and leave a response. Pinging is currently not allowed.