Jeong & Lizardi

Few of us will be celebrating, but September marks the beginning of the financial meltdown that began in the housing sector, unraveled the financial system and precipitated a heart stopping seven months of decline with the Dow showing a final 5,000-point loss by March 2009 - and the S&P 500, a 47 percent decline. Across the nation, stock portfolios, investment savings and retirement plans took major hits. After seven months of pessimism, the market has begun to recover, climbing about halfway to the lofty heights it achieved prior to Lehman Brothers' landmark bankruptcy filing and Bank of America's acquisition of former Wall Street titan Merrill Lynch. Strategists are more optimistic, though inevitably there is a range of opinion on every issue. As the anniversary approaches, pundits are examining the past year with the outlook that those who ignore history's lessons are bound to repeat them. Here's an overview of some of their observations.

Asset Allocation
Things will not go back to the way they were before the crash. Sentiments among investment gurus vary: some worry about inflation while others believe that job losses will keep a lid on prices for awhile. And because of these different issues, some investment experts wonder if the traditional principles of asset allocation - stocks, fixed income and cash - are adequate to protect investors from wide-ranging losses. They believe that investors should consider other options, such as hedge fund-like investment vehicles or commodities. After last year's events, investors believe it is important to expect the unexpected and include a small percentage of things like commodities in the usual mix of stocks and bonds. Others believe in traditional diversification and argue that proper diversification helped shelter investors from losses. Not all bonds suffered: U.S. Treasuries saw gains of 27 percent last year and some global bonds performed well, too. They consider the traditional principles sound but suggest looking at the entire range of options beneath the category umbrella.

Strategic Investment Planning
One size doesn't fit all, and that's especially true for portfolio diversification. Experts suggest that individual investors be more realistic about their tolerance for risk, suggesting they review the makeup of their portfolios to meet the demand of ever-changing circumstances. Recent events suggest that too many people approaching retirement age had an asset mix that was too aggressive, and U.S. stocks carried too much weight in their 401(k) packages. Don't forget, too, that unexpected circumstances might necessitate a revision to your strategic plan - perhaps your job security is not as good as was once or your family has faced a medical emergency. Also consider that some sectors that were traditionally resilient, such as healthcare, might not be the safe harbors they once were. The Obama administrationÂÂ’s healthcare reform proposals will affect certain segments of this sector. The events of the past year suggest that strategic planning must be an ongoing process, requiring more of your attention as well as frequent advice from your professional tax and investment advisors.

Think Globally
Most investment experts predict the recovery will be slow and choppy. Cash-rich companies with an established market share can be expected to rebound first. But don't be afraid to expand your horizons. Although the U.S. financial crisis precipitated a global recession, growth in emerging markets will continue - especially populous powerhouses like China and India.

The commentary above provides some general observations and is not intended to be a substitute for counsel from your tax and legal professionals.