Adviser targets ‘gotta haves,’ ‘done deals’ for investing success

Investing in areas that are in demand regardless of economic conditions and in technology trends that have proven themselves over time is a good way to ensure returns while inflation surges, an investment adviser said Monday.

J. Andre Weisbrod, director of wealth management at Quantum Financial Advisors, calls industries such as food, housing and transportation the “gotta haves,” or the sectors that will thrive under most circumstances. He deems breakthroughs that have established themselves, such as cloud computing and cybersecurity, the “done deal trends.”

“I’ve got to be invested in the right way, and they should be at the core of any investment strategy,” Weisbrod said at the InvestmentNews Retirement Income Summit in Chicago.

He recommended that advisers minimize risk and enhance income through asset allocation according to conditions — such as increasing cash and floating-rate and short-term bonds when the market is overvalued — security selection and a conservative options strategy to reduce risk and add income.

Depending on a client’s risk profile, Weisbrod recommended allocating 15% to 50% to cash and bonds; 25% to 30% to smaller stocks; 20% to 25% to larger stocks; 5% to 20% to real estate; and 5% to 10% in commodities. He suggested dollar-cost averaging through a bottom for the small and large stocks.

In real estate, he recommended “low-leverage, well-managed” real estate investment trusts and in commodities, he suggested investing in producers rather than holding the products themselves.

During the session’s Q&A, Weisbrod said he’s optimistic about small-cap stocks because those businesses tend to be nimble and have upside potential.

“They can be creative [and] entrepreneurial in a lot of ways some of the larger companies aren’t going to be able to do,” he said. “That’s one of the reasons they should be in just about every portfolio.”

The current spike in inflation is similar to what the country experienced during the 1970s because price hikes in both periods were caused in part by soaring energy costs. The political environment at both times was divisive and international tensions were high.

The big difference today, Weisbrod said, is the massive debt the federal government is carrying.

Retirement math is affected by inflation, he said. Adding the withdrawal rate from retirement savings — say 3% — and the long-term inflation rate — say 3% — produces the target number for investment returns, which would be about 6% in this example.

Weisbrod said he defines retirement as “independence.” Helping clients get to that state requires building strong relationships and can be rewarding for advisers.

“You’ll get to know about the kids they like, the kids they don’t like — all of these intimate things they won’t share with their minister, rabbi or priest,” he said. “It’s a privilege to create lasting value and help people with your talents and gifts.”

[More: Bob Doll expresses tempered optimism about the rest of the year]