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Archive for Friday, March 13, 1992

LONG-TERM STRATEGY CAN MODERATE RISK, FUND EXECUTIVES SAY

March 13, 1992

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The sharp drop in interest rates last year gave many people cause to consider investment options other than bank deposits, two executives of Waddell & Reed Financial Services said Thursday.

"It is a time for people to re-evaluate their investment position, particularly people who are in a fixed-rate position," said Carl Shortino, Waddell & Reed's vice president for marketing.

Shortino, who is based in Waddell & Reed's home office in Shawnee Mission, and John Martin, a division manager based in Topeka, were in Lawrence to speak to Waddell & Reed's annual meeting of local shareholders in the company's United Group of Mutual Funds.

Shortino said that when interest rates on deposits settled at about 4 percent, investors had to seek other vehicles to offset inflation, which also stands at about 4 percent.

The stock market's growth during the 1980s, as well as the Individual Retirement Account market, which got more people thinking about financial planning for retirement, also alerted consumers to the benefits of building a nest egg, he said.

ALTHOUGH Martin said many investors have become more open-minded, he cautioned against chasing short-term yields by plunking money into investments that have performed well in the past without giving the move careful consideration and seeking advice.

Given last year's boom in the stock market, many people who now are tempted to buy equities may have unrealistic expectations for quick returns, he said.

"Invariably what happens is that that stock or mutual fund doesn't perform as well as it did last month or last year and they get discouraged," Martin said.

Shortino said people who consider investments in stocks and mutual funds, which generally carry greater risk than fixed-rate investments, should be prepared to let their money work over time.

"The longer the period of time you invest money, the less risk you take," he said.

SHORTINO and other Waddell & Reed representatives said their industry is seeing many people who are considering market investments as part of financial planning for retirement, college tuition for their children and the care of elderly parents.

"The earlier a person starts, the better chance you have of meeting your investment objectives," Shortino said. "The most important investment objective is to get to financial independence."

He noted that many people from the baby boom generation, generally people who now are in their late 30s to mid-40s, want to retire well before they're 65.

Martin said that plan leaves them with a "blackout period," between the time they retire and when they turn 65 and are eligible for full Social Security benefits.

Shortino noted that many baby boomers haven't considered the fact that life expectancies are increasing.

"We're going to have a lot of baby boomers who are going to be retired as long as they worked," he said.

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