What the experts say
Power for your portfolio; Term insurance: Cheap for now; Investing in Farmer John
Power for your portfolioElectric utilities may not be sexy, but the companies are “stable,” the dividends are “fat,” and right now the stocks are “cheap,” said Andrew Bary in Barron’s. Because utilities are typically viewed as defensive investments, their stocks have recently lagged the broader market. That’s not such a bad thing. Regulated utilities still trade at about 12 times 2009 earnings estimates, versus the Standard & Poor’s 500 price-to-earnings ratio of 17. Meanwhile, utility dividends yield more than 5 percent on average—double that of the S&P 500. While you probably won’t “make a killing” in the long term on utility stocks, you could see 10 percent gains in the coming year, not including dividends. “And given their defensive characteristics, utilities are apt to hold up better than the S&P if the stock market corrects.”
Term insurance: Cheap for nowDespite a “modest uptick” this year, term life insurance policies are “supercheap” relative to what they cost a decade or two ago, said Miriam Gottfried in SmartMoney. Unlike universal or whole-life policies, term life policies don’t have any cash value and are good only for a certain number of years. They give the most coverage for your buck if your main concern is paying off your mortgage, getting your kids through college, or giving your spouse some financial cushion. To take advantage of today’s low rates, you want to opt for a policy with “guaranteed level premiums.” The longer the term, the higher the premium. So don’t “skimp on coverage” to save a few bucks now. “Premiums are expected to continue creeping up, so buying a term policy now will likely save you money in the long run.”
Investing in Farmer JohnThe same rationale that drives some people to eat locally produced food and shop at mom-and-pop stores prompts others to invest in sustainable farming, said Stephanie Simon in The Wall Street Journal. At a time when most investors send billions of dollars who-knows-where, contrarians might consider investing in small local farms. Former venture capitalist Woody Tasch is one who’s doing so. “Taking a page from the Slow Food movement, which calls on consumers to take the time to savor home-cooked meals, Tasch dubbed his philosophy Slow Money.” The idea is to put capital into businesses that investors “can see, smell, and even taste.” The financial returns may be modest, says Tasch, but the greater goal is to “bring money back down to earth” by supporting local communities and economies.