Your Money Matters The Miami Herald - December 10, 2000 BY HARRIET JOHNSON BRACKEY ------------------------------------------------------------------------ THEIR GOAL: To be financially secure in three years. SEE ALSO Need a money makeover? FINANCIAL SNAPSHOT Monthly income: $8,300 on average Monthly expenses (including taxes): $6,825 ASSETS ------------------------------------------------------------------------ Stocks: $991,000 in Cree, Esynmch, Interlink Electronics, Mindarrow Systems, New World Coffee & Manhattan Bagel, Paradigm Medical Industries, Sepracor, Thermo Cardiosystems, Eurpsville USA, Westbury Metals Group. Mutual funds: $112,000, including ACM Government Income Fund, Alliance World Dollar, Gabelli Convertible Securities, Capital World Growth & Income, Euro Pacific Growth Fund, Smallcap World Fund, Fundamental Investors, Washington Mutual Investors, Brandywine Fund. Retirement funds: $23,150 in Roth IRA, invested in Capital World Growth & Income Fund, Fundamental Investors fund, Vanguard 500 Index fund; $14,000 in a retirement annuity from TIAA-Cref; $10,000 in a 401(k). Equity in home: $150,000 DEBTS ------------------------------------------------------------------------ Home mortgage: $90,000 No credit card debt TOP PRIORITY: Get money out of volatile high tech stocks, move into a diversified portfolio largely of mutual funds. MEET THE PLANNER ------------------------------------------------------------------------ MARC SINGER is a partner in SingerXenos Investment Management of Coral Gables, which manages about $300 million. He has been a certified financial planner since 1983. He also holds an MBA from Florida International University. His company is also a founder and owner of the National Advisors Trust Co., a federally chartered trust company that is expected to begin operations early next year. Singer`s specialties are investment management and asset protection strategies, and his practice includes a large number of physicians. Singer also is the founder of the Advisors Forum, a nationwide network of leading financial planning firms. Featured Advisor: Marc Singer, MBA, CFP Thankfully, Sean Greene`s path in life has gone straight up, not anything like his favorite stock. That would be Cree, a semiconductor maker. Even a bunch of six-year-olds in a bounce house don`t move as quickly as this one. In the last year, Greene`s stake in Cree has been worth from $122,100 at the low point to $444,400 at the high. It`s bobbing along close to the bottom right now. Yet Greene sees it as some sort of future IBM, a very reliable growth company that makes an essential product. ``I love this stock. I believe in it,`` he says. Thankfully, Sean Greene`s path in life has gone straight up, not anything like his favorite stock. That would be Cree, a semiconductor maker. Even a bunch of six-year-olds in a bounce house don`t move as quickly as this one. In the last year, Greene`s stake in Cree has been worth from $122,100 at the low point to $444,400 at the high. It`s bobbing along close to the bottom right now. Yet Greene sees it as some sort of future IBM, a very reliable growth company that makes an essential product. ``I love this stock. I believe in it,`` he says. Greene`s entire net worth has dramatic ups and downs because he`s primarily invested in very small tech stocks. For example, he`s sitting on $75,000 in paper gains on a biotech stock called Vaxgen, which he bought for $3.50 a share and which is now $23. At the same time, he`s lost $700,000 in paper value from his overall portfolio since tech stocks peaked in March. Now he has about $1 million. He doesn`t see that as a crisis, though. ``I think the market`s a roller coaster. My portfolio 20 months ago was worth $255,000. Then $1.7 million. You`ve got to be realistic,`` he says. ``It`s like a book. Chapter One was try to make some money and do something with it. Chapter Two is take what little savings you have and how do you protect it. That`s where I am now.`` The portfolio amount is just one clue that this isn`t your ordinary thirty-something investor. Greene, 32, was once drafted to play with the Toronto Blue Jays, but he turned away from ball and instead went to law school. As the son of a single mother of modest means, he had to borrow to pay for all that education. In the last year, with earnings from his investments, Greene was able to both pay off $100,000 in student loans and to help his wife launch her own business. Greene practices with the personal injury law firm of Krupnick Campbell in Fort Lauderdale. Wife Jodi, 29, used to be a first-grade teacher. In May, she opened an upscale store for dogs just south of the Aventura mall called Biscuits & Bones Dog Bakery & Boutique. ``We`re holding our own,`` she says of the business. They`re doing far better than that in their personal finances. With an annual income of about $100,000, they manage to save $30,000. Their great savings habits allow them to enjoy such things as a recent vacation in France and still build their investments for the future. They share a two-bedroom townhouse with a 130-pound bull mastiff named Napoleon. Like any young couple, they want a bigger house in a few years. Their other goals are much larger. Sean wants to become financially secure by age 35. That means amassing a net worth of almost $2 million. ``I started working when I was 6 years old,`` he said. ``I want to make sure my children do not have to go through what I did.`` The couple is expecting their first child in January. ``Sean is an extremely aggressive investor and that style has worked up until now,`` said certified financial planner Marc Singer of the Coral Gables firm SingerXenos. ``But now he has a wife and a baby on the way. With that kind of volatility, it`s time to take some cash off the table.`` Singer prophetically told Greene last month that his stocks could just as easily go out of favor as stay up. Now, with the Nasdaq about half of what it was at its peak, Singer notes that to get back to 5,000, the Nasdaq has to rise 100 percent. From this point forward, Singer wants Sean, who is the stock-picker of the family, to safeguard what he still has. Singer proposed a two-year plan in which the Greenes would reduce their exposure to the volatile small stocks from nearly 80 percent to only 25 percent. That would start, Singer advised, with selling $200,000 as soon as Greene is comfortable with the idea of parting with some of his favorite investments. Since he has big losses in some of them this year, he could use those to offset gains he realizes by selling other shares. Investors can deduct capital losses against any capital gains, plus up to $3,000 a year against ordinary income. Singer would have Greene put that money into mutual funds. At the same time, Singer wants Greene to shift $230,000 that he already has in an assortment of funds into some different fund choices. At the end of all this reallocation, Greene would have 75 percent of his assets in mutual funds and the rest in his small growth stocks. The largest concentration in his remade portfolio would be in international stock funds (26 percent). Next would be those aggressive stocks that he doesn`t want to part with plus other mid-cap stocks (25 percent). The rest would be spread out over value stock funds (17 percent), bond funds (15 percent), small-cap stock funds (12 percent) and growth funds (5 percent). The funds Singer chose are: For international, Artisan International, Janus Overseas and Thornburg Global Value; for bonds, Pimco Real Return and Pimco Foreign Bond; for small caps, a value fund called ICM/Isabelle CS; for mid-caps, Thornburg Value and Excelsior Value. Here`s how it would all work out. The Greenes, three years from now, would have a net worth that Singer figured would be almost $2 million. (Of course, the market`s tumble has been so steep that could well be optimistic.) From that, their investments would grow to more than $6 million in the next 40 years, even with a less aggressive portfolio. At the same time, the Greenes would be able to buy a $500,000 home, with $250,000 down from their savings. Singer allowed the couple $68,000 for living expenses, far above what they spend now but including inflation and future children. He also factored in $180,000 in education expenses for two children. Greene says he intends to implement Singer`s plan. But not now, in the market tumble that began Nov. 7. ``Once the presidential election is all decided and everything settles out, I think it`ll rebound. Then I`ll make the moves to be more conservative,`` he said.