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Business Q&A


Buy low, diversifyI consider home ownership to be one of the best long-term investments a person can make

Q: When someone comes to set up an investment account, what's the first thing you tell them?

What do you want this money to do? Retirement and college education are the two biggies. Saving for a down payment on a home is a third. Some want to come in and say, 'I want to do better than I do at a bank.' Sometimes we will and sometimes we won't.

If you can put a little money away a bit at a time, it's absolutely astounding how that adds up. The younger you are and the more time you have on your side, the better you are going to do. I'll pull out the calculator, we'll do some compounding and show the kind of things that can happen. If your money doubles roughly every seven or eight years in a fairly average stock mutual fund, the longer you have for the moneys to double and double again and double again - it's like the old adage of putting the grains of sand and doubling. the end of the checkerboard, you've got — inches of sand over the state of California.

Q: What do you do when someone has seen their portfolio value shrink?

There's an awful lot of people that have got hurt in this market over the last year and a half. And I certainly have some clients that were in technology funds or stocks that have gotten hurt, too. But what we have to do is look at each of those stocks or funds and say, 'Is this something we would buy now? Is the horse out of the barn and would we be closing the door too late by selling now?'

Q: What do you tell people who have recently inherited money?

That's going to become more prevalent. We don't put it all to work at once. We average into the market kind of slowly. If it's a $100,000 inheritance, we might put $10,000 away a month for 10 months. We may put some in stocks, some in bonds, some in mutual funds. If they want to keep some for a down payment on a house, we'll put some in a short-term investment. The key is diversity, patience and courage.

Q: The "Worth 250" list includes advisers whose average client net worth is $100 million or more. Most reflect an average worth of $1 million to $3 million. Your clients' average worth is listed at $500,000. What accounts for the difference?

Some may have two clients, and they're real big ones. I have maybe 600 clients and they range from very small ones - with kids, getting started - to some extremely large ones.

Q: What drew you into this business and what intrigued you about it?

It was a sixth-grade teacher, Mr. Grocer, who used stocks to teach us everything from fractions to graphics to economics. I can still remember some of the questions I missed on his quizzes.

All of his students would choose a hypothetical stock and follow it. I found that absolutely fascinating. Even though I was a journalism major in college, I found particularly fascinating the economics, the statistics, those kind of classes. Soon after I graduated, I went to work for a small regional brokerage firm in San Francisco. It all developed from there.

Then I spent about 10 years with one of the big mutual fund companies Franklin/Templeton. I was regional manager - for the Northwest first and then the Mid-Atlantic. Even though I lived in Medford, I never got to know it until 1994 when I hung up the suitcase and joined Strand, Atkinson. I went from advising advisers to advising retail clients.

Q: What would be the smartest move you've made or recommended to a client in the past 12 months?

To stay the course.

I tell my clients that the two most important aspects of investing are patience and courage: courage to buy low, stay diversified, invest regularly, and ride through the inevitable rough spots; patience to allow it all to work for you.

A great man once told me that all the wisdom in the world could be summed up in four words: "This, too, shall pass." Another great man told me that the most expensive four words in the investment business are "This time it's different." Remembering these thoughts - and repeating them over and over to my clients - gives us the confidence to have the patience and courage to stay the course.

Q: Other than a stock, bond or mutual fund, what kind of investment would you recommend?

Real estate. Inevitably, questions about real estate arise in my discussions with clients.

Perhaps it's a young couple saving for a down payment for their dream house, or a secure 50-year-old looking for a tax-favored income stream from rental property, or an elderly client considering a reverse mortgage. No matter what, every overall plan will somehow involve real estate.

Besides, I consider home ownership to be one of the best long-term investments a person can make. The growth is tax-deferred and may be tax-free. "Dollar cost averaging" is implemented as mortgage payments add to equity. Uncle Sam may help defray a portion of the interest expense. If you can be there for a while, to be able to form that equity in a home is extremely better than just paying rent.

To suggest a subject for this column, please contact business reporter Greg Stiles at 776-4463 or e-mail