Five Financial Trends To Watch in 2010
Each New Year’s brings predictions about the stock market’s performance and with it the opportunity to look like a fool or genius. Instead of walking that prediction tightrope, I have decided to highlight five financial trends for 2010.
Clicks & Mortar Beat Bricks & Mortar
The proliferation of Internet Banks will continue to cause problems for traditional banks as investors seek income instead of excuses. Internet based banks don’t have branches on every corner with salaried tellers waiting for people to come in, so their savings in overhead translate into higher rates of return and more flexible terms. Rates offered by online saving account alone can often exceed those available from local institutions’ three, six, and nine month CDs.
Cash Continues It’s Decline
2010 will continue to see cash vanish as banks incentivize customers to use debit cards instead of cash. And with technological advances like mobile banking via cell phone, the days of George, Abe, and those lovely Benjamins are slowly suffering the same fate as pay phones, beepers, and home phones.
Good Defense Beats Good Offense
Investors who select low-cost mutual funds like ETFs and individual stock portfolios can save in the range of 1% – 2% on average. In 2010, GDP growth is likely to be below 3%, unemployment will remain at double digits, and the housing market will be dominated by foreclosures. The impact of these factors on consumer spending (which accounts for approximately two-thirds of GDP) will make it more important to make up for lackluster market returns by minimizing investment costs.
Non-Savvy Conservative Investors Get Burned
With short-term yields at an all time low, more and more conservative investors will seek income through high-yield bond funds and dividend paying stocks. Unfortunately, not all bond funds and dividend stocks are structured in the same way. Many investors will be lulled by high yields alone and, to their regret, will learn that good cash flow, profitability, and quality credit cannot be ignored when it comes to the selection of dividend stocks and bond funds.
Fiduciary v. Broker Fight Takes Center Stage
The Fiduciary versus the Broker fight that has been taking place within the financial services community will take center stage as investors become more aware that not all financial professionals operate under the same rules and guidelines. Fiduciaries provide actual investment advice and are legally obliged to do what’s in the best interest of their client. Commissioned agents at firms such as Merrill Lynch, Edward Jones, Ameriprise, and at a host of insurance companies, refuse to accept such legal obligations. Educated investors armed with the right questions and information will see firsthand the potentially abusive and expensive tactics inherent among non-fiduciaries.
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