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Spring, 2005
 Content: • Take charge of your financial future
Jay Durand is a registered representative and research director at True North Financial Services in North Adams. He joined the firm in January 1998, first as an intern, then full time in September 1998 after he graduated from Massachusetts College of Liberal Arts with a degree in business. Durand is a native of Shaftsbury, Vt., and currently lives in Adams. He was interviewed recently by Berkshire Eagle reporter Christopher Marcisz. QUESTION: What are the current trends people should keep in mind when thinking about personal investing? For example, are stocks better than bonds now? ANSWER: Probably the most important thing to keep in mind is that most investors should keep stocks and bonds. You don't want to own one without the other. Even somebody who is relatively young and relatively aggressive, such as myself, receives a lot of benefits from owning a small amount of bonds because they do a tremendous job of reducing volatility, reducing the month-to-month fluctuation in portfolio value. With that said, I think stocks are going to do better than bonds over the long term, probably by a pretty good amount, and I think in the next 12 month stocks are likely to do quite a bit better than bonds. The economy is continuing to grow at a reasonable clip, which doesn't always show in North County, but by and large on a national scale it’s doing pretty well. Corporate profitability has been pretty good, we’ve seen a lot of earnings growth, inflation is still in check, and valuations are pretty moderate. Conversely, bonds are looking a little scary. Interest rates are incredibly low. We have been expecting them to go up for a while, which hasn't really happened. But it seems inevitable that it will and when it does, bonds are probably going to be under a lot of pricing pressure. Q: Have there been any changes to the tax code, or new state or federal laws, in the past year that investors should keep in mind? A: Not really in the last year but in the last couple of years, there have been some pretty significant reductions in the tax rate on dividends and capital gains, and that's had a big impact on investors. Also, the amount you can contribute to retirement plans ... has been increased pretty substantially, and investors over the age of 50 can make what are known as "catch up" contributions. What has really been making the news over the past year, hasn't been so much new rules or regulations, but greater enforcement of existing rules and regulations. We’ve seen that especially with New York Attorney General Eliot Spitzer, who is probably the most controversial figure in our industry, who has been looking into industry practices that were not always savory. Some of the problems he uncovered were pretty minor, but there were things that were pretty severe, and that’s made some people uncomfortable. But at the end of the day, holding investment companies to higher standards is in everybody’s best interest. Q: With college costs continuing to rise so sharply, what is the best advice to give parents about planning for eventual tuition costs? A: The best thing you can do is start as early as you can. For example, I have a 4-week-old baby girl, and I'm opening up a 529 plan for her, and I’m putting away as much as I can for her college. College is going to be expensive, there is no way around that, and it is likely the rate of increase is going to continue to be pretty high. The best that we can do is to save as much as we can as early as we can and take advantage of the tax preference plans that we have. Q: Is real estate still a good investment? A: With the caveat that I'm not a real estate expert, real estate as an investment makes me a bit nervous. The industry tends to be very cyclical and when we start looking at it from the numbers we look at things, like the relationship between average home prices and household incomes, that make me nervous. What’s been allowing [high prices] to occur is that interest rates have been so phenomenally low. We’ve begun seeing short-term interest rates go up, which is beginning to hurt people who have adjustable rate mortgages. If long-term rates go up, that is likely to [cause] additional pressure. We also look at real estate stocks. If you had perfect foresight five years ago, one of the places you would have invested in would have been [real estate stocks]. When I see an asset class outperform for five years in a row the contrarian in me gets a little nervous. I don't think anybody really expects real estate is going to collapse, but I’d be cautious. Q: With all the current talk about changes to Social Security, what are the most important things to keep in mind about planning for retirement? A: Again, the most important thing is to save as much as you can as early as you can, taking advantage of IRAs. And if your employer offers a 401(k) plan, put money into it and do what you can. Be willing to take on a prudent amount of risk in order to get a little higher long-term returns. Most importantly, don't rely on the government. We don’t know what Social Security is going to look like in 20 or 30 years, but we know it is going to be different somehow. There are significant demographic challenges facing the program. So to the extent you can, do what you can yourself. Take control of your retirement yourself.  RETURN TO TOP |
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