Y2K not OK for this investor
Forget, for a moment, his mutual-fund holdings.
Stephen Fairfax gets a lilt in his voice when he talks about the gold coins he has tucked away.
Mr. Fairfax is no Cassandra. Yet he sees a possible market downturn, given current high valuation levels of stocks. And Fairfax believes the stock market and US economy may face serious disruptions with the Y2K problem - the possibility that computers will fail after being unable to identify the year 2000.
Fairfax owns M Technology, a consulting-engineering firm near Boston.
He prefers mutual funds over individual stocks. His portfolio is about 20 percent international funds, 60 percent aggressive-growth funds, and 20 percent conservative bond and stock funds, mainly located in tax-sheltered retirement plans belonging to him and his wife, Katherine. She is a librarian at the Massachusetts Institute of Technology in Cambridge, Mass.
Among his funds, Fairfax has two emerging-market funds, an Asia fund, and a Europe fund. He likes aggressive-growth funds to maximize returns. "I'm a buy and hold investor," he says, and tends to stay with a fund as long as possible, at least so long as it continues to muster profits.
"What is turning me off about the market right now," he admits "is that so many people are rushing into stocks with money that they probably can't afford to lose."
Such euphoria, Fairfax says usually occurs at the top of a market cycle, before a downturn.
Fairfax believes that investors should, if possible, have a small part of their portfolios in gold, traditionally an inflation hedge as well as safety net in case of global crisis. He prefers coins.
James Fraser, a financial adviser with Fraser Management Associates, in Burlington, Vt., considers Fairfax an enterprising investor, although he doesn't see a serious Y2K threat.
Mr. Fraser says Fairfax's long-term strategy - might benefit by shifting the conservative bond and stock investments from the tax-sheltered plans to the taxable accounts. The aggressive stock funds, likely to incur large capital-gains taxes, belong in the sheltered plan.
That assumes, of course, that the 401(k) plans offer such funds. He agrees that precious-metal holdings make sense, but Fraser prefers individual stocks or a precious-metals mutual fund, over coins, which are inconvenient, and perhaps expensive, to store and insure.