If there was one message the professional investors at Morningstar's 27th annual investment conference sought to convey this week, it was this: Remain invested.
As concerns mount that a six-year-old bull market may be tiring and that the Federal Reserve may be preparing to raise interest rates, speakers addressing the Chicago conference reiterated the importance of investing basics--moving money into the market gradually, rebalancing regularly and sticking with a diversified investment portfolio even when the market seems scary.
The U.S. economy is not booming, but it is definitely bouncing back, David Kelly, chief global strategist for J.P. Morgan Funds, told the financial advisers attending the conference Thursday. Neither a bear market nor an interest-rate increase should worry investors, he said.
Of a possible bear market, he said, "Think about the number of times you have heard that over the past six years." And he said, "if rates rise from a very low level because of an improvement in the economy, that's not bad for the stock market."
Still, Mr. Kelly expects the U.S. economy to grow just 1.5% over the long term. Investors should now focus on "alpha"--excess return over a benchmark--by seeking out experienced money managers who can generate "that extra few percent" in returns, he said.
Sectors that will be least harmed by rising interest rates, such as finance, offer opportunity, he said. He also sees opportunity in emerging markets.
Rob Lovelace, president of Capital Research & Management, which manages American Funds, also sees opportunity abroad and emphasized the importance of finding a manager who can target that exposure accurately. Focusing on where a company derives its revenue is better than focusing on its country of domicile, he said. About a year ago, American Funds began reporting in annual reports where the companies it invests in derive most of their revenue, and more asset managers are now doing that as well, he said.
Investors who want to take advantage of the rising living standards in some countries may turn to an emerging-markets fund, but end up with exposure to telephones and banks, Mr. Lovelace said. Choosing an emerging-markets fund that invests in some companies domiciled outside of actual emerging markets, but which derive revenue from emerging markets, might leave them better positioned, he said. Consumer products and health care are underrepresented in emerging-markets indexes, he said.
Mr. Lovelace recommends investors diversify away from U.S. domestic stocks as their valuations are stretched. European stock valuations are also stretched, but the region is at the beginning of the economic cycle, he said.
"This is not like 2006 to 2007 where all the markets are feeling frothy, " he said.
(END) Dow Jones Newswires
June 26, 2015 15:21 ET (19:21 GMT)
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