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Rcap 2007 - Position 2008 for Wealth and Future Retirement

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Building and Maintaining Wealth in 2008

Last year (2007) was a tumultuous year for the stock market. Now that the LED ball in Times Square has dropped and the confetti has been cleaned up, it's time to briefly recap 2007 and, more importantly, look at how your portfolio should be positioned for 2008.

2007 could easily be referred to as the Year of the Tums. Our volatile markets experienced three major drops during the year. The first, at the end of February, caused the S&P 500 to fall 4.7% and the emerging markets over 10%. The after celebrating a great first half of the year, the sub-prime fiasco hit in early July and resulted in the S&P 500 losing 7.7% and the emerging markets 17.7%. The year-end rally came early followed by another decline of 7.75% for the S&P 500 and 15.3% for the emerging markets.

In the end, the S&P 500 was up 3.5% and the emerging markets (EEM) were up 33%. Investors, even seasoned investors, have been tempted to throw in the towel and get out of the market. Many have (even institutions have increased their cash holdings). That's why interest rates have fallen so dramatically, with the 10-year Treasury now yielding around 4%.

Let's put this in perspective before you get too depressed! The last time the S&P 500 had a losing year was in 2003. The average annual return on it over the last 5 years has been over 12%. That's well above its long-term average. If your holdings consist of the fixed indexed annuity your gains from the past 5 years are locked in.

The emerging markets (EEM) have done even better. EEM wasn't available for all of 2003, but has been up over 25% each of the last 4 years. To put that in dollar terms, a $100,000 investment in EEM when it came out in 2003 would now be worth around $600,000.

While there is risk associated with investing in the markets, we need to be compensated for taking that risk. Over the last 5 years I would have to say we have. The amount we've earned has far out-weighed the amount we spent on Tums!

Enough about the past. How should you invest in 2008? I can't speak to your situation specifically, but I will tell you about the general themes that I see playing out in 2008 and how you can profit from them. I expect it will be another volatile year so you will have to determine if the potential reward is worth the risk. I believe it is, if you invest correctly.

Boomers Advisory Group is aligned with Gradient Investment Services for fee based managed accounts. Gradients investment strategy is comprised of mainly fundamental analysis and designed to deliver higher risk adjusted returns than the broad market. We see the fixed index annuity as a safe haven for most of our clients who want the lions share of the market gains but none of the losses. One new innovator we like is (A) rated Forethought Financial Group. Their new product named Destination gives a big bonus (10%) upfront day one and has a 5% guaranteed lifetime income account value that can be activated after just 1 year.

The U.S. economy is slowing and the housing market/sub-prime crises may continue into 2009. I doubt that we will see returns higher than 8% in the S&P 500. It's more likely that the return could be half of that, but it depends on the Federal Reserve. I expect the Fed to continue to cut interest rates because it must keep our economy from going into a recession, even a mild one. Real estate as an asset class should be in most portfolio's and I expect that by the middle of this year great opportunities for buying income producing properties will prevail. In fact several clients and I created a real estate investment company "Boomers Real Estate Investment Company LLC" (BRIC) to purchase properties near the bottom of the market.

A relatively new asset class called Life Settlement is growing exponentially since its creation in the late 1990's. Many factors have supported this growth and many emerging trends and developments should propel life settlement transactions to ever-increasing levels in 2008 and beyond. Since life settlements have pr-oven to be pro-consumer, they are getting increasing attention from advisors, agents, CPA's, lawyers, and trust officers who find them useful in the right situations. Several emerging trends bode well for life settlements and promise to increase their interest and use as a new and effective financial tool. A similar area poised for growth is the premium finance life insurance for individuals over age 67 with no out of pocket cost protection.

If you are serious about growing your wealth, you need to invest a portion of your money outside the U.S. markets. The growth in Russia, China, India, and other Asian nations will once again far surpass the growth of our nation, while our inflation is likely to increase. If you don't earn enough, you will actually see your purchasing power decline.

Asian economic growth, combined with even higher mandates for ethanol production in the U.S., will continue to put pressure on commodities like corn, wheat and soybeans. Demand for energy will continue to increase far faster than supply. Oil and coal prices should continue to increase.

I expect high-dividend paying stocks (such as regional telephone companies) to recover their recent loses. Declining interest rates should drive income-oriented investors back.

Investing in foreign companies, energy and raw materials can increase the volatility of a portfolio. You will have to be the judge whether you have the stomach for it. But think about it this way, what are you are trying to accomplish over the next 5 years? The best way to protect your wealth is for it to grow.

I couldn't be more excited about the opportunities in 2008 for my clients. I've begun the long and tedious step to acquiring my CFP credentials and plan to sit for the exam June of this year. Thank you for considering me as your financial planner and I look forward to making 2008 your best year yet.

John Berlet- CEO
Boomer's Advisory Group LLC
Registered Investment Advisor Representative
Licensed Insurance Agent TX,CA,CO.OH.
512-345-6400