Another stock market optimist in New Jersey!

BY WARREN BOROSON

NEWJERSEYNEWSROOM.COM

BOROSON ON MONEY

Nick LaVerghetta is somewhat optimistic about the stock market. Why? "There's so much negativity around." So his portfolios are a little overweighted in stocks.

He makes a good point. The stock market does tend to climb a wall of worry — granted that the wall seems rather lofty these days.

About a year ago, LaVerghetta, a Certified Financial Planner, opened up his own shop, in Mahwah, named NCM Capital Management after his kids — Nick (not junior), Cristina, and Marissa. As a financial planner, he's somewhat unusual.

First, he's fee-only. No commissions. Other things being equal, fee-only is the way to go.

Second, he accepts clients with a relatively small amount of money to invest — $300,000. (I did say "relatively.") Many other money managers have minimums of $1 million and up. "I didn't want to turn down people who had less than a million," he says.

Next: He will work by the hour — for people with circumscribed problems. (He's studied with Sheryl Garrett, who has popularized hourly planning.) His usual charge: $200 an hour.

How, I asked him, does he differ from other money managers? (Personally, I hate the PR-invented term "wealth managers.")

His reply: "I'm 100% independent — meaning that I am free to choose any type of investment, whether it's an ETF, a mutual fund, or an individual security. I am always looking for the best investment for my clients.

"In these volatile and complicated markets, investors are looking for an adviser they can rely on and have a relationship with. I think I have a closer relationship with my clients — they know I am always there for them." He chats with them at least once a quarter; all his portfolios are customized for individual clients. "I do a lot of hand-holding."

As for his investment strategy, he believes that for most people it's a loser's game to try to beat an index fund. So, much of his investment money gets ploughed into exchange-traded funds (most of which are index funds). Some does go into mutual funds — those that zero in on alternative investments, like long-short funds. Among his favorites: Hussman Strategic Growth (a fund I should write about).

As for bond funds, he uses clear winners, like PIMCo Unconstrained and Fidelity municipal bond funds. For wealthier investors, he may put together a laddered portfolio of individual bonds.

For wealthy investors, he may also purchase individual stocks — but only large-cap U.S. companies, to reduce risk. Typically dividend-payers, typically in all-weather industries like consumer staples. Stocks like Procter & Gamble, McDonald's, and H.J. Heinz. "I'm not looking for the next Microsoft."

He goes on: "Historically speaking, dividends have composed about 40% of the stock market's total return, and I think this percentage will go higher in the future. I see great opportunities in this area, especially in light of the low yields in the bond market."

What about commodities? Forget it. "They've gotten too much hype. And commodity funds are quite expensive and complicated. Besides, the whole idea of their being uncorrelated with stocks just isn't working anymore. I think they are basically an emerging-market play, and I'd rather buy a simple, much less expensive emerging-market ETF, which is much easier to understand."

He divides his portfolios roughly into aggressive, moderate, and conservative. The target allocation for a moderate portfolio: 50% stocks, 35% bonds, 15% alternative.

When does he rebalance — bring a portfolio back to its target? "We don't follow the calendar. We may do it two or three times a year, during a volatile market."

As a CFP, he will give his clients advice about taxes, insurance, and other matters.

What does he think of annuities? "They cost too much. And they're complicated."

Whole life insurance vs. term? "It depends on the situation. For young people, term is usually better. For older people doing estate planning, whole life may be better."

He's a Bergen County guy, having graduated from Ramsey High School. He then went to Gettysburg College in Pennsylvania, majoring in accounting and finance. He entered the financial field 20 years ago — he's 40 — and has toiled in the vineyards of Lehman Bros. and Fidelity, and most recently spent several years with Brinton Eaton, that splendid financial-planning firm in Madison.

Why did he leave? To do things his own way — like accepting clients with less than $1.5 million to invest.

A first, get-acquainted visit is free.

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