You’ve got assets, but how do you allocate them wisely in the most volatile environment of our lifetime? Should you focus on products or securities? What about bonds and preferred issue shares? These questions can seem overwhelming. To gain insight into asset allocation, 1AND1 Life Co-Founder and CEO Corey Lewis went Off the Cuff with financial advisor and wealth manager Bob Fuest.
Interview Key Points
In this interview, Bob addresses the following key issues:
- Whether the investment focus should be on products or securities.
- The difference between high yield and growth stocks.
- What are preferred issues shares and should you invest in them?
- Are bonds a good investment right now?
- The importance of looking ‘beyond the hump’ when investing in companies.
More Financial Advice from Bob Fuest
This is Part 3 of our initial interview with Bob. In the first part, he provided insight on the signs of the types of businesses that will not make it out of the current crisis? He also discussed the types of investment opportunities that will arise as we emerge from lockdown and get closer to a vaccine for COVID-19. Then, in Part 2, Bob got even more specific as he provided guidance on precious metals and whether or not they’re a good investment from his perspective, for the foreseeable future.
About Bob Fuest
With a background in psychology, economics, and business, Bob is uniquely qualified to provide the personal, empathetic guidance that we all need right now to make sense of the financial world around us. Bob’s passion is to help everyday people to develop the skills they need to achieve their financial goals.
Bob is the founder and CEO of Fuest & Klein Wealth Advisors. Since 2009, the company has been focusing on individual and small businesses, providing financial planning services and alternative investment management. According to Bob, the thing that sets the company apart is the high level of trust, transparency, and tenacity that they have.
“No matter which hat I’m wearing — advisor, business owner, life partner — I am an unwavering idealist at heart. I have always felt that anything is possible and that most things can be fixed. I believe that, if you put your mind to something, you can accomplish any goal over time, and I truly love helping people achieve those goals.”Bob Fuest
Find Bob Fuest online
- So in regards to assets and asset allocations,
what would you say are the best asset allocations
for right now like in terms of where people
should be looking to allocate their assets?
- We do things a little different here at Fuest and Klein.
So we do not invest in products,
products like annuities, or mutual funds, or ETFs.
We do have a couple ETFs right now
because we’re hedging the portfolios at large,
based on volatility in the markets.
The market goes up 500, down 500.
So we have some ETFs that actually perform
when that is occurring, but very rarely,
’cause we would rather do direct investments in securities.
And what is a security?
A security is anything
that trades in the public markets, right?
So anything that you could buy either electronically.
And so we invest in stocks.
We had an allocation in REITs, real estate investment trust,
but we got rid of that entire section
of that asset allocation
because it’s not going to recover,
but there are some rates that we are looking into
to get back into that asset class
that are gonna benefit from this like I said before.
Storage for cloud computing capacity, things of that nature.
And then we’re looking at large-cap, so high-yield,
So we classify as an asset class, high-yield stocks,
so anything that’s delivering a dividend,
so anything that’s delivering a dividend,
or a distribution of 2-1/2% or more,
we classify those stocks as high-yield.
And then anything below that
we classify that as growth, okay?
So it could be a dividend that’s 1.25% and it’s growing,
or it has no dividend,
and we just are classifying it as a growth stock.
And then the next asset class we do leverage,
and we do like from an income perspective
preferred issue shares.
So preferred issued shares
are typically issued by banks and insurers.
And they’re almost like a quasi-bond.
So they’re issued at $25 per share,
and they typically yield between five and 6%,
and they don’t tend to have a lot of volatility.
And it’s typically the bigger banks that are issuing them.
So they tend to be pretty safe.
And then we also have
depending on how old the individual client is,
we are buying bonds,
and we are starting to look at high-yield junk,
but in very, very, very, very specific areas.
I wouldn’t suggest any individual retail investor
to do this on their own.
It takes a lot of research,
and we have a lot of research at our disposal.
Not only do we have in-house research,
we have third parties that we rely very heavily on,
and they’re independent.
So everything that we do, we look for independent providers
so that they don’t have anything
that’s clouding your judgment.
And so we look for bonds and small pieces.
We’re taking small nibbles in the high-yield sector.
And then for the other
it’s medium duration investment grade bonds
that are quality names that we know,
that we can understand their balance sheets.
And so we’re looking for yield
right at this particular point.
We do think we’ll get out of this,
but we do think for the foreseeable future,
we’re gonna bounce up and down for a little bit.
So we want the income to help offset that.
And we do dividend re-investments, we focus on that as well.
- I would say, if you’re gonna buy,
start being conservative.
Look for things that are gonna come out the other side
in better shape than what they were when they went in.
- Right, yeah, to your point, the little limit example,
look at the landscape right now,
and then kind of look at how companies are doing.
And then also think about how they’re gonna be doing
when we kind of get over that hump,
and get on the other side of this.
So I think that’s definitely a good way to look at it
in regards to asset allocation.
So I think that’s all amazing insight