MONEY TALK
By Jack Wagner
_________________________________________________________
How Will Oil Prices Affect Your Investment Plans?
Even before Hurricane Katrina caused
its almost incomprehensible damage to the Gulf Coast, most of us shuddered when
we had to fill our car's gas tanks. With prices at $3 a gallon in come
parts of th country, and crude oil hitting $70 per barrel, we were already in
uncharted territory. Then, Katrina temporarily knocked out about 12
percent of the U.S. refining capacity, along with a significant part of the
Gulf's natural gas and oil production. So, as a driver, you probably
shouldn't expect too much relief at the pump any time soon. But how about
as an investor? Do you need to adjust your investment strategy in response
to high oil prices? It's a difficult question. If oil prices and
energy costs continue to remain high, it's probably not good news for some areas
of the financial markets. Although businesses are looking for ways to
offset higher energy costs, they will eventually be forced to pass on these
expenses to consumers or accept lower profit margins - and either development
could hurt stock prices. On the other hand, some stocks or industries may
actually benefit from higher oil prices. You might hear that now is a good
time to invest in energy companies. And it may be true that, in the coming
months, some of these stocks will do well. But you need to be cautious
abut basing any investment decisions on short-term trends. So, what can
you do to avoid being buffeted by forces and events that you can't control?
Consider these suggestions:
* DIVERSIFY - The more diversified you are, the less susceptible your
portfolio will be to rising oil prices, higher interest rates, political turmoil
or other factors. Spread your dollars among high-quality stocks,
investment-grade bonds, Treasury bills and other securities.
* KNOW YOUR RISK TOLERANCE - If your investments are keeping you up at
night, then you are taking on too much risk. On the other hand, if
"ultra-conservative" vehicles, such as certificates of deposits, dominate your
holdings, you may want to work with an investment professional to create a
diversified portfolio that accurately reflects your risk tolerance and your
long-term goals.
* LOOK AT THE "FUNDAMENTALS" - You'll find it much easier to avoid being
influenced by short-term events if you become familiar with the fundamentals of
an investment. For example, if you're considering a stock, you can take
into account how it might be affected by rising energy prices, but don't stop
there, is it a stable company? Does it seem to be priced fairly? Do
its products or services have good long-term potential? Does it have a
solid management team? And, perhaps most importantly, does it meet your
specific investment needs? By digging deep into your reasons for investing
in any security, you'll position yourself to make smart decisions.
FOCUS ON THE FUTURE
Today, high energy prices, and their possible impact on
the economy and the financial markets, are making big news. Next year -
who knows? The fact is that there will always be "reasons" to shake up
your investment strategies. But the smartest investors are the ones who
find the course that's right for them.
______________________________________________________________________
Jack Wagner is an investment representative for Edward Jones,
an investment company with a 125-year history. For more information,
contact your local Edward Jones investment representative or visit their Web
site at www.EdwardJones.com