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There are areas of opportunity in today’s volatile markets, it’s just a matter of looking in the right places, said a featured speaker at a financial planning conference in Orlando this morning.
“With all the negativity we see around us, I think it is important that we do take the time and turn it over to opportunities,” said Bill Hill, vice president of advisor channel sales at RBC, at the 2008 annual Canadian Institute of Financial Planners (CIPFs) conference. “Opportunities with your existing client base, opportunities with prospecting and opportunities that exist within the marketplace today.”
Dividends, resources and packaged products are three key areas of opportunity, according to Hill.
Dividend-paying stocks prove the point that stick-to-it investing is the best option, if not quite as glamorous, he said. To illustrate the point, Hill used recent trend companies with sinking stocks — such as the recently troubled Crocs footwear — by contrasting them with “boring” companies such as Johnson and Johnson Co.
“What companies like Johnson and Johnson do, though, is they make money every year and share the wealth with investors by raising their dividends and buying back shares,” he said.
It’s not just Canada, paying dividends pays investors,” Hill concluded. “A dividend fund should be a core holding, and diversify holdings globally.”
Hill said the increasing demand for oil from emerging-market countries such as China, combined with declining output makes resources a good bet long term — in moderation within the portfolio.
“We like resources, but they should only be considered as part of a balanced portfolio,” he noted. That said, he added, “It’s a theme we think will be with us for awhile.”
Resources make up about 50% of the S&P/TSX 60, he said. Therefore many Canadian equity funds are already “loaded up with resources” and so Hill suggests looking through funds and making sure the weighting is not too heavy in the resource department.
Overall, he says the Canadian resource situation is “a great story, and it’s fun to tell.”
Hill also warned the financial planning crowd not to ignore U.S. large cap companies. “Advisors and investors have underweighted in the U.S. for a variety of reasons,” he said, citing currency, politics and the uncertainty around economic conditions.
“The market quickly changed from a one priced for perfection to one now priced for disaster,” he added. “The world as we know it is about to change.”
Market improvements should be visible before the end of this year and into the first half of 2009, according to Hill. “We just believe stocks are undervalued,” he said, when it comes to U.S. large cap companies.
Finally, Hill pointed to packaged products as a way to boil down the complexity of the market into something easier for clients to digest. “Simple product? Yes. Simplistic? No,” he said of the such offerings.
Overall, he said the planner’s role is to manage greed, fear and procrastination for their clients. “It has been a very interesting year for mutual fund sales. We continue to buy high and sell low and we meet the classic definition of insanity,” said Hill. “We continually do the same thing and expect different results.”
“Despite the short-term impact of major events, markets have historically moved higher over time, “ he concluded. “It’s best to stay invested.”