Magazines Offer Investor Guide to 2006

By Jennifer Hopfinger
January 30, 2006 04:21 PM

For all those who resolved to improve their financial situation this year, several magazines this month offer guidance on what investors need to be doing as 2006 kicks off.

Kiplinger's Personal Finance magazine delivers financial advice for the year in its January cover story, "Where to Put Your Money Now." High energy prices have been the primary driver of inflation, writer Jeffrey R. Kosnett says, and as those prices fall, as they're expected to do, so will inflation, bringing the Fed's string of rate hikes over the last two years to an end. Kosnett points out that U.S. companies have delivered 14 straight quarters of double-digit earnings growth, but the many interest-rate increases have been a drag on the market, pushing stock valuations down to 12-year lows.

Now is the time to buy, especially for big companies, which are also paying big dividends. Kosnett quotes an analyst who sees blue chips returning 7 percent to 12 percent this year. He also likes the health care, heavy construction equipment and technology sectors. American Express, General Electric, Ingersoll Rand, Medtronic and Microsoft are among the magazine's picks for 2006.

In his story, "Look to the Land of the Rising Sun for Big Gains," writer David Landis suggests investors put a portion of their portfolios in foreign stocks, which are trading at discounts to U.S. stocks and stand a good chance of outperforming our domestic market. The outlook for Japanese stocks in particular looks brighter than in the past.

Meanwhile, Katy Marquardt advises bond investors in "Take a Short Ride on the Rate Wave ," saying they should stick with shorter maturities -- two years or less -- in 2006.

"Long-term rates remained consistently low for most of 2004 and 2005, despite a dozen Fed-engineered short-term rate hikes," Marquardt writes. "The result: a flat yield curve, with scant difference between yields on long- and short-term debt. But investors, who set long-term rates through their trading of bonds, are growing more concerned about inflation and are starting to push up bond yields."

By keeping maturities short, investors can reinvest at higher yields sooner, she says. Marquardt doesn't see junk bonds delivering much more yield for the additional risk this year.

SmartMoney magazine also decrees "Where to Invest in 2006" in its January cover story. Writer Russell Pearlman lists "six sectors ready to rally" -- including banks, biotech and wireless -- and "a dozen fast-growing, rock-solid companies that other investors are scared to own" -- including UBS, Amgen and Qualcomm. Why should you listen to SmartMoney? Their stock picks for 2005 were up 15 percent for the year, more than double the 7 percent overall return of the S&P 500 index.

In Money magazine, business writers provide a blueprint for "Your 10 Best Moves Now" in its January issue. In his story, "Just Do It," writer Jason Zweig has simple strategies for achieving your financial goals, including how to get out of debt, build retirement income, cut your tax bill and overhaul your portfolio.

The most important element of a new resolution, Zweig urges, is not to procrastinate -- do it now rather than later, and you could make and save a bundle.

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Copyright © 2008 Donald W. Reynolds National Center for Business Journalism