Feature

What the experts say

Portfolio power play; Trade currency with caution; Savings with a jackpot

Portfolio power playInvestors seeking decent returns with only modest risk should consider utility stocks, said John Waggoner in USA Today. Water, telephone, and electric-power companies are “pretty sedate operations,” and “because they won’t entice investors with their red-hot earnings, they often pay above-average dividends”: Standard & Poor’s utility index has a 4.31 percent yield—more than twice that of the S&P 500. Dividend strategies are popular right now, given the scarcity of ways to generate investment income. But utilities are still cheap compared with Treasury notes, says Maura Shaughnessy, manager of MFS Utilities fund. For many investors, the best way to put money in utilities may be to buy into a niche fund overseeing a diversified utilities portfolio.

Trade currency with cautionThrowing money into “risky currency markets” has become “easier than ever,” said Jane J. Kim in The Wall Street Journal. TD Ameritrade and other brokerage firms are now allowing all customers access to foreign-exchange trading systems that were “previously available only to active traders.” Foreign-exchange sites such as Oanda.com let armchair traders buy and sell currencies “for as little as $1” a trade. But while some exposure to foreign coin can do a portfolio good, note that “there are huge risks involved.” Not only can currency values “bounce around sharply”; because foreign-exchange dealers allow customers to heavily leverage their bets, losses can be dramatic.

Savings with a jackpot Americans’ love affair with lotteries just might be the cure for their dismal savings rate, said Ryan Sager in SmartMoney. That’s the “provocative” idea promoted in a new National Bureau of Economic Research working paper. The researchers wondered if savings rates might jump if savings programs were created that protect participants’ principal but regularly pay out jackpots. Fifty-eight percent of Wal-Mart customers, it turns out, say they’d be interested in such a product. The idea itself isn’t new: The British introduced the first “prize-linked savings program” in 1694, and a number of countries have them in place today. But the idea might not fly here: States have a monopoly on the lottery business, and they’re not likely to give it up.

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