The investment economy today is the epitome of what we call in our business the “savings and investment dilemma.” Investors have been rocked by a roller coaster stock market over the past four years and are afraid and uncertain as to what to do. On one hand they want good returns but are hesitant to take on any risk after being burned. On the other hand playing it “safe” in money markets or CD’s is yielding literally nothing, and with real inflation over 3% annually when you include food and fuel, parking in cash is a losing proposition.
Especially hard hit are non-profit charities. With financial belt tightening required within most households, charitable giving is sometimes one of the first budget items that families cut. To make matters worse for those who benefit from charities, government spending will likely be reigned back mightily at both the federal and state levels in an attempt to shore up deficit spending.
It is for exactly these reasons that our firm would like to see charities thrive. In most cases they are better positioned than the government to help those in need, anyway. And for the United States, as one of the most generous nations in the world, a robust non-profit sector speaks well for our values as a nation.
Our Investment Advisory firm, Southern Capital Services, is celebrating its 30th year in business this year. During that time we have helped individual investors and businesses navigate the wild investment waters of the past decade. We can help non-profits in the same manner so that they can continue to be able to perform their vital missions.
What do we see on the economic horizon for this year? There are several influences working against each other and it is uncertain which will prevail. First, on the positive side, this is a presidential election year and the government has historically tried to stimulate the economy prior to the election. Second, corporate earnings have started to rebound, and third, interest rates continue to remain low to make lending easier.
On the flip side of the coin, the European economic crisis continues to threaten the recovery from 2008. Next, China’s economy is slowing and they are now the world’s second largest. Finally, continuing the theme of a global economy, if tensions between Iran and Israel escalate into hostilities, it will likely drive the price of oil to record highs.
There are more factors that can be cited on either side and nobody has a crystal ball to see into the future or accurately time the market. Therefore our approach is to construct a diversified portfolio that will minimize volatility, or wild swings, within the market. Then we add other investments that protect against possible negative outcomes by holding assets that can appreciate in good times and tend to hold their value in bad. This approach applies to investors in the for-profit and non-profit worlds.
The bottom line is that for the long term, investors need good average compounded rates of return in order to live their dreams in retirement, in the case of an individual, or continue in their philanthropic mission in the case of a charity.
Eric Nager is an Investment Advisor Representative with Southern Capital Services. He received his MBA from the University of South Alabama and a Masters in History from Harvard. Mr. Nager is a Lieutenant Colonel in the US Army Reserve and has been with Southern Capital for the past 12 years. He can be reached at firstname.lastname@example.org or at 251.626.1140