High-tech, health care drive stock market

By JESON INGRAHAM
Special to Essex County Newspapers

"Professionals who are doing it full time have a hard enough time," says Stephen DiCarlo, vice president of Merrill Lynch in Peabody.

Against the rising popularity of e-commerce, the market value of companies like his has flinched in the last few months as more people are braving the stock market on their own.

Internet trading makes it easier to invest without the help of a manager, but DiCarlo isn't getting nervous yet. He's confident market uncertainties will ensure the role of the traditional financial managers.

Investment companies all over the North Shore are promising 10-12 percent returns, but not everyone's impressed. Although such percentages would double $50,000 in about seven years, many investors are searching for the stock that will make them rich quick.

"You might as well go buy a lottery ticket," says financial adviser Robin Bullard Carter of MoneySense in Newbury. "It's not investing. It's gambling."

She started MoneySense 10 years ago and has 2,000 clients. Carter says people who invest based on tips they've gotten from a friend need professional help, literally.

"We don't look for fads, but we look for long-term trends," says Tom Burger, principal at The Hamilton Group in Hamilton.

Although many financial managers are skeptical that the market can sustain the dramatic success it's had in the last few years, technological breakthroughs and demographic changes leave little doubt that at least two sectors will bring in high, if not consistent, returns for years to come:

ù The technology sector, encompassing telecommunications, networking and data storage, has been a driving force behind the productivity of the economy, and 10 years after infancy, biotechnology firms are beginning to make money.

ù The health-care sector. As the age of the baby boomers increase, so do the value of health-care stocks. Not only will medical and pharmaceutical companies benefit from changes in technology; they'll find themselves with an increasing number of customers.

In addition, financial services are confident that a "graying" America will keep the market performing at high levels. People are working longer before retiring these days, and financial services are a must for aspiring retirees who want financial stability.

When talking about what's hot, Burger says it's important to remember not to "structure portfolios around industries or sectors." A lopsided portfolio will have difficulty sustaining the bumps and bruises of a jagged earnings curve.

"There's no perfect investment _ you have to diversify," says John W. Thompson, senior financial adviser for American Express Financial Advisors in Rockport. He says a portfolio should be like cylinders of an automobile, with each part separate but working together. "You've got something performing and something that's not performing."

First and foremost, investors should put together a portfolio with which they're comfortable. All portfolios should be diversified and include stocks from companies in all shapes and sizes, mutual funds and even bonds.

Everyone should carry stock from well-established companies. Depending on the risk tolerance of the investor, mutual funds of small aggressive companies should make up zero-20 percent of a portfolio. Nervous investors should include more bonds. With the recovery of foreign markets, managers also suggest buying stock from international and global companies.

As a "value investor," Thompson recommends buying cheap stocks from big companies that have "fallen out of favor." Sometimes these companies have lost money for good reasons, but often, he says, their trouble is the result of difficulties overseas.

However and wherever you choose to invest, financial advisers stress that a good portfolio is one that brings in high dividends at risk levels that won't keep you awake at night.