Published in the Sept. 3-16, 2014 issue of Morgan Hill Life

By Marisa Otto

Morgan Hill financial advisor Marisa Otto provides answers to questions about investing in today’s market.

Do men and women invest differently?

Men and women may have different investment styles — which may show up in the investment results. For example, men tend to invest more aggressively, which could lead to excessive risk-taking, although it’s also true that the greater the risk, the greater the potential reward. By investing more conservatively, women may limit their losses, but they could also be limiting their gains.

Here’s another difference between the genders: Women, when investing, are more likely to look at the ‘big picture.’ Instead of focusing strictly on performance statistics, they tend to delve deeper into their investments background, competitive environment and other factors. This quest for additional knowledge may help explain why all-female investment clubs have achieved greater returns than all-male clubs, according to a study by the National Association of Investors Corp.

Neither men nor women have a monopoly on positive investment behaviors. Each gender can probably learn something from the other.

If rates rise, what should I do with bonds?

Short-term interest rates are at historic lows — and the Federal Reserve plans to keep them that way for awhile. But long-term rates may rise in the not-too-distant future. If you invest in fixed-income vehicles, such as bonds, what might higher rates mean for you?
If long-term rates rise, the value of your existing bonds will decline because other investors won’t pay full price for your bonds when they can get new ones issued at higher rates.

Examine your fixed-income portfolio to determine if it’s heavily weighted toward long-term bonds. If so, you may want to consider repositioning some of these assets and possibly using them to help build a ‘bond ladder’ containing bonds of varying maturities. Then, when market rates are low, you’ll still have your longer-term bonds earning higher interest rates. And when market rates rise, you can reinvest your maturing short-term bonds at the higher rates.

Consider building such a ladder — it may help you in all interest-rate environments.  But you must evaluate whether the bonds held within the bond ladder are consistent with your investment objectives, risk tolerance and financial circumstances.

Can I afford to live to be age 100?

Over the past three decades, the centenarian population in the United States has grown about 66 percent, according to the U.S. Census Bureau. This doesn’t necessarily mean that you have a pretty good chance of living to 100 — but it won’t hurt for you to plan for a long retirement. And that means investing for both income and growth.

Many retirees depend on fixed-rate vehicles for a good portion of their retirement income — which is a real challenge when interest rates are low. Consequently, when you retire, you’ll need to be aware of the income you can expect from these types of investments in various interest-rate environments.

While it’s important to invest for income, keep in mind that many fixed-income vehicles provide returns that may not keep up with inflation. To help protect yourself from losing purchasing power, you should also consider some investments that offer growth potential.

You may not live to be 100, but it would be nice to know that you could afford to do so. And investing for income and growth can help.

Marisa Otto, CFP® is a Financial Advisor with Edward Jones U.S.A. She can be reached at (408) 778-4400, at [email protected] or visit www.edwardjones.com.