Note from Editors:
Today is the best time to invest. However, you must consider some factors first before investing.
The U.S. stock market is having a solid year. It is a far cry from 2013, when the Standard & Poor’s 500 index surged more than 30 percent, but it is up 12 percent year to date.
Most experts agree that the rest of 2015 won’t break any new records, but it will continue to roll forward at a calmer pace than investors have seen over this past six-year bull market.
It is an excellent time to invest, but there are various factors affecting the markets, so you need to be selective when allocating your money. Listed below are a few factors that you should consider when investing this year.
Federal Reserve Rate Hike
As the economy improves, so are the chances that the Federal Reserve will end the era of low #interest rates. Rate increases by the Fed can be good because they can signal that the economy is doing well. They can be bad, however, for investors with riskier assets like cheap stocks or investments that are sensitive to interest rate hikes, like U.S. #realestate investment trusts and high-dividend-paying equities.
Bond investors are also at risk during a Fed rate hike because bonds are extremely sensitive to interest rates. For example, a one percent increase in interest rates could potentially cost you upwards of five percent in a bond fund. During rate hikes, bonds aren’t considered a safe haven.
Strong U.S. Dollar
U.S. companies with the bulk of their business in the U.S. will benefit from a strong dollar, whereas companies that export might suffer because goods become more expensive for foreign buyers.
Larry D. Zimpleman, CEO of Principal #financial Group, suggested in a Wall Street Journal post that investors consider mid-cap and smaller-cap companies because such businesses are likely to be domestically focused compared with larger-cap stocks that will likely have a greater portion of business overseas.
Greek Debt Crisis
If you hold Greek banks or bonds or if you have #mutual funds that hold either, they will likely weigh down your portfolio. There is some light at the end of the tunnel, however, because much of Europe is being brushed off by investors due to its eurozone connection with Greece.
The eurozone’s gross domestic product rose 0.4 percent in the first quarter of 2015, compared to just 0.1 percent growth in the U.S. For example, Italian firms increased profits by 27 percent over the past 12 months, according to Bloomberg. Such an increase can suggest there is opportunity for investors to hold investments in strong European companies.
Investments to Consider Holding for the Remainder of 2015
Mark Holder, chief investment officer of Stone Fox Capital Advisors in Broken Arrow, Okla., pointed to IBM (IBM) as a good long-term investment for conservative investors looking for a solid yield at an attractive valuation.
Right now is a good time to jump in because some investors are avoiding IBM due to concerns about revenue growth, which has declined for 13 consecutive quarters. Holder expects the stock to fluctuate but anticipates that the stock will turn around.
Investors can buy the stock; a mutual fund that holds IBM, such as Aberdeen Equity Long-Short I/S Fund (AELSX), which is shorting it; or a tech exchange-traded fund that has exposure to IBM, such as the Nasdaq Technology Dividend Index Fund (TDIV).
Daniel Beckerman, president of Beckerman Institutional in Oakhurst, N.J., favored Google (GOOG) for long-term investors. Google was up 20 percent year to date (as of July 30), and the stock soared in the middle of July after Google announced that earnings were substantially higher than expected.
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