Couple hears the beat: long-term investing
BOSTON — Market downturn? Lower returns? Shawn Splane isn't worried although he follows the market closely.
Mr. Splane is a talk-show producer with radio station KIRO in Seattle. He and his wife, Laura, a library technician with the University of Washington, have been investors since the early 1990s, almost entirely in mutual funds. Other investments include a home that they own in Seattle plus money-market and bank accounts.
But for the Splanes, investing is a long-term commitment, to be tracked over decades, not measured in weeks or months. Thus, the threat of momentary lower prices, becomes less important than ensuring the right investment plan for long-term goals.
Splane reckons that there will be some type of market correction within the next seven to 12 months, "if we are not in it now." Corrections, after all, go with the territory, he says. Even so, he expects an "up year" for investors in 1999, with market gains "in the high teens."
The Splanes recently readjusted their portfolio, trimming a few funds and taking a larger position in international funds.
Today, the Splanes have nine mutual funds: a European fund, an emerging-growth fund, a large-cap value fund, a large-cap growth fund, a mid-cap growth fund, two international growth funds, a short-term corporate-bond fund and, their largest holding, a total stock-market index fund. The latter fund is the core holding in Laura's 403(b) plan.
They have dumped several small-cap funds. Splane believes that the current market is oriented toward large-cap growth funds and will likely remain that way through much of 1999.
Of their entire portfolio, about 40 percent is in taxable funds, and 60 percent in sheltered funds, through retirement programs.
As a newsman/broadcaster, Splane believes that there is often misinformation about the stock market - much of it from overanalysis or shoddy reporting.
He focuses on underlying trends, including both corporate and economic fundamentals, such as valuation levels and monetary/fiscal policies, rather than day-to-day market gyrations.
While the press, for example, tends to focus on the 30-stock Dow Jones Industrial Average, comprising 30 large blue-chip companies, Splane follows the less-monitored Standard & Poor's 500 Index, comprising 500 large companies.
David Bendix, an investment adviser with Bendix Financial Group, Uniondale, N.Y., compliments the Splanes for diversifying among funds.
Still, Mr. Bendix suggests trading their corporate bond fund for one that invests in municipal bonds, since earnings can be exempt from federal taxes. He would also make sure that the Splanes hold their index funds - which tend to be very tax-efficient, given their low turnover - in taxable accounts, with "more aggressive funds held in their tax-sheltered retirement plans."
He also favors small-cap and emerging-market funds precisely because they have been so "beaten down" in recent years. Both types of fund, he says, show signs of future gains.