CBS 6 Answers Team: Portfolio and Investments

November 19, 2008 7:59 PM

PORTFOLIO AND INVESTMENT

Abigail Doolittle
Director of Marketing and Sales, Johnson Illington Advisors
518-641-6857

Below are some of the questions that were sent to CBS 6 Answers Team member Abigail Doolittle during Wednesday's live chat. Check back for more from the Answers Team in the coming weeks!

CBS 6 VIEWER: When loans are hard to come by savings rates usually go up. But not now. How come?
ABIGAIL DOOLITTLE: Good evening. Your question is a difficult one - very complex and a sign of the times. Banks at this time are trying to bring up ratios that measure their performance while also trying to bolster their capital reserves. Many of those ratios are measured on loans and the "quality" of loans relative to the potential for default or said in a more positive way - performing loans. This is an environment in which many banks are tightening credit standards so that those ratios stay strong and the result is a more difficult lending environment. In addition, when you tie this into wanting to bolster capital reserves for strength and/or "a rainy day", it makes the lending environment even more difficult. Savings rates have been low so far being tied into the Fed Funds rate which is at historic lows and may go lower. However, there is some thinking that as banks try to attract more capital, the banks may pony up themselves and raise savings rates.
A-TEAM AD: However, on the flip side, I was speaking to a friend of mine recently at a bank and he said the bank's deposits are at a record high and because of this fact and because loan activity is down, it doesn't make business sense for the bank to offer higher rates considering the bank is in the business of making money. Again a very complicated topic, but I hope this helped.

CBS 6 VIEWER: My husband will be retiring in Sept 2009. His retirement is in a portfolio held by T Rowe Price. He gets a "cash balance" -- it will be around $560,000. What type of investment would be best? Where can we turn for advice?
A-TEAM AD: Hello. You are in a very fortunate position to have a cash balance coming to you when your husband retires. While I can't speak for what the environment will look like in September, if you were to invest those funds today, you would probably want to invest it in short-term fixed income instruments.
CBS 6 VIEWER: Can you give me an example?
A-TEAM AD: These would include CDs - FDIC insured up to 250K - and possibly some short-term - as in 2-3 year - non-finance corporate bonds. The latter, however, require a certain degree of "know how" in terms of buying and I would advise you to work with an investment advisor in putting together such a portfolio.
CBS 6 VIEWER: Where is the best place to look for an investment advisor?
A-TEAM AD: The goal would be to keep your money fairly flexible - say a ladder of CDs between 6 - 12 months for a yield range of 3-3.5% today. The corporate bonds would offer a little more yield - say 4-5% - but your money is "locked" up for 2-3 years.
A-TEAM AD: The best place to look for an investment advisor is either of word of mouth - friends and family - or by reading local papers to see which advisors speak about investing in a way that appeals to you.
A-TEAM AD: If you would like to have a more detailed conversation with me or the members of my team, I would be very happy to meet with you. My name is Abigail Doolittle and I work with Hugh Johnson at Johnson Illington Advisors in Albany.
A-TEAM AD: As we found out more information about you and your husband, our answer could be significantly different, but the investment strategy I outlined to you is very conservative in nature and focuses first and foremost on capital preservation.
CBS 6 VIEWER: Can you tell me what BCD means? It says in the portfolio that it will be a lump sum BCD and then NRD?
A-TEAM AD: Hmmm, without seeing your statements, I don't know what that stands for exactly. All statements are different.