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ARCHIVED  July 2, 1999

Financial advisers encourage investors to hold

Few financial advisers consider themselves to be fortunetellers, although their success depends on their ability to amass and retain their client’s fortunes. And so, when asked to foretell the future of the stock market, only a handful of professionals are willing to peer into their crystal balls.

In fact, there is no consensus among Northern Colorado financial professionals on what will happen to the so-called “bull” stock market after the Y2K panic subsides and writing checks with the year ’00 instead of ’99 becomes second nature. And while the stock market may not collapse at the sound of the clock striking midnight on Dec. 31, 1999, most financial professionals believe that a downturn will occur. The only question is when and to what degree it will affect the market and investors.

“It’s been proven that bad times are short-lived, and that the good times always return,´ said Paul Haummel, a chartered financial consultant for Home State Bank in Loveland.

As long as investors can hold out and keep their money in investments, they usually come out better off than they were in the first place, he said. The key to any good investment is to be patient.

However, many investors play the market by gauging its highs and lows, and buying and selling accordingly. In fact, for some investors, dips in the market, which open the door for bargain prices on stocks, represent a good opportunity for purchases. Some of these “players” do quite well, but industry analysts say that the best way to benefit from the market is long-term investment.

“My theory is to buy and hold,” Haummel said. “You just cannot successfully time the market otherwise.”

Overall, the stock market, despite its volatile nature, is one of the best ways to invest money, say financial professionals. And one professional pointed out that there are few profitable alternatives to it. But after eight years of a strong market, the inevitability of a dip looms ahead.

“Nobody knows when the stock market is going to change direction,´ said Thomas Flanagan, president of Union Colony Bank in Greeley. “And how you plan for the total unknown is beyond me.”

While planning for the unknown would be a challenge, financial advisers can protect their clients from losing too much money from one investment by creating portfolios that represent high- and low-risk investments.

Flanagan, who admittedly does not know what will happen to the market, believes that the longer the expansion continues, the chances are greater for a recession or pullback in the market.

“The clients we see have been investing in mutual funds to reduce their risks,” he said. “Diversification gives protection from one stock going down.”

John Haeck, a certified financial planner in Denver, echoes Flanagan’s concern about the pending downturn but adds, “The market is overvalued by any historical measure, but the economic health and sustenance of the economy is close to being unmatched. I’m hard-pressed to advise anybody who can bear the risk to stay out [of the market]. But I always tell them to be wise.”

And being wise about investments includes looking at all sectors of the stock market, and judging stocks on their merits instead of merely on popular demand.

Today, the market’s most-popular stocks are growth-related stocks, while at one time value reigned supreme. For example, Internet and technology stocks are popular on the market today, even though few of the companies have generated profits. Meanwhile, several undervalued stocks 9 those that have not been followed by Wall Street or have fallen out of favor ­ have low “value” on the market but continually generate profits.

“Over the next five years, I think that there will be a rotation from growth to value-oriented stocks,´ said Dan Palmer, an investor services professional with Vectra Bank of Colorado (previously Independent Bank) in Kersey. “There’s a lot of new money in the market right now, and the new players are buying popular technology stocks and having fun because they’re doing well. It will be interesting to see what develops when those stocks begin to dip.”

Palmer, who recently joined Vectra Bank after spending several years with a brokerage firm, believes that mutual funds allow for better diversification of an investor’s portfolio.

The rule of thumb among financial advisers, regardless of outside influences, is to learn a client’s long-term goals, assess the individual’s risk tolerance and create a balanced portfolio.

“If you have five years or more as a time horizon (for your investments) you need to own stocks,” Haummel said.

Few financial advisers consider themselves to be fortunetellers, although their success depends on their ability to amass and retain their client’s fortunes. And so, when asked to foretell the future of the stock market, only a handful of professionals are willing to peer into their crystal balls.

In fact, there is no consensus among Northern Colorado financial professionals on what will happen to the so-called “bull” stock market after the Y2K panic subsides and writing checks with the year ’00 instead of ’99 becomes second nature. And while the stock market may not collapse at the sound of the clock…

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