Beware of new breed of auction rate securities

Aside from equating money funds to broccoli, I enjoyed Evan Cooper's opINion column on auction rate securities that ran on investmentnews.com Aug. 6.

Aside from equating money funds to broccoli, I enjoyed Evan Cooper’s opINion column on auction rate securities that ran on investmentnews.com Aug. 6. Well stated.

Recently, my wife sautéed broccoli with pignoli nuts, garlic and lemon juice, and even my grandchildren liked it.

Beware of the new variable-rate demand preferred shares — I bet they will come with fake cheese and sodium.

Bruce R. Bent
Founder and chairman
The Reserve
New York

Hedging the market is the ticket

After reading Jim Pavia’s Just Thinking column, “A real pain in the portfolio,” in the Aug 11 issue, I know how he feels.

In my case, I have two kids in college at Boston University and Fairfield (Conn.) University, and those checks aren’t easy to write.

However, several years ago, I moved to alternative investments for the equity portion of my portfolio.

It was the best move I ever made in my 18 years in the financial services industry.

Most people fear hedging the market, but often, it isn’t based on the facts. You can be conservative, avoid the Pepcid and skip the Meow Mix down the road.

Next month, when Mr. Pavia reviews his statement, remember: Don’t sweat it — just hedge it.

Philip Rutigliano
Director of sales and marketing
Westgate Capital Management LLC
Pearl River, N.Y.

Move to cash as college approaches

I am writing in reference to Jim Pavia’s Just Thinking column, “A real pain in the portfolio,” in the Aug 11 issue.

I get your point. Yet I question the nonchalance of your financial adviser’s stay-the-course mentality.

In fact, I think you and Harry are dead wrong. That “smart investors” diatribe is just an excuse for a lack of communication and common sense.

Practicing academic asset allocation is a lot different than helping clients manage their money to meet up with pre-stated financial goals.

Consider a few questions: Why did you have to call Harry? Did he call you first? Did he call to wish you well as you send your son off to college? Did he proactively call to assuage your fears, knowing your propensity for worrying when the market hits a bad patch?

Sure, your overall asset allocation may match your conservatism, but there is no reason for your Section 529 college savings plan to have been invested in anything but cold, hard cash.

You say that last year, you “maximized” your portfolio for a “weakened economy.” What does that mean? What does that have to do with the reality of paying for college so soon?

To me, it sounds like a bunch of financial mumbo jumbo.

If you and Harry truly invested your 529 account to pay your son’s tuition, why would you leave any of it exposed to market volatility so close to freshman year? As college gets closer, even the most conservative of asset allocations should be ditched.

Cash is the only alternative for funds dedicated to a financial objective so close at hand.

And this isn’t just investment theory. I have been a financial adviser for close to 25 years, and I coach financial advisers on the importance of client care.

Plus, I have triplet daughters who will be entering college at the same time that your son will be gracing the halls of SUNY Albany.

My 529 plan was systematically diverted to a money market as my daughters’ high-school graduation year approached. I didn’t need the double shock of a lousy market and three private college tuitions.

The “train wreck” of 2008 has had no impact on my college-specific funds or my investment psyche.

Please don’t take exception to this rather harsh advice. In fact, I apologize for any assumptions I may have incorrectly made in this reaction to your column.

I simply tire of the pseudoprofessionalism of financial types who substitute formulas and theory for common sense.

Please do yourself a favor: Pop another Pepcid and call Harry to give him the ax. He is taking you and your 20-year relationship for granted with his “remember what I always tell you” malevolence.

Financial advice isn’t about quaint truisms and clever quips. Real pros make outgoing calls to clients — they don’t simply take calls from clients and offer pandering advice.

Rob Brown
Founder and head coach
EncoreAdvisor.com
Williamsburg, Va.

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