Fox’s Gerri Willis: Don’t Get Too Conservative

Yesterday the New York Times ran a front page piece about how risk-averse investors have become. Long-time personal business correspondent Gerri Willis warns against becoming too conservative.

Willis was CNN’s face of personal finance for many years. Now she hosts her own shows The Willis Report at 5PM EST on Fox Business Network. She calls it “personal finance plus” and covers saving and investing as well as keeping a close on “the money you’re giving to the Federal government  as tax dollars.”  She spoke to Nanette Byrnes from Fox Studios in New York City and here is an edited transcript of their conversation.

Portfolioist: Interest rates are extremely low right now. You’ve talked about ways people can take advantage of that to lower their monthly mortgage payments.  For those who have good credit ratings and can do that, where would they be wise to put the savings?

Willis: I think the priority right now is retirement. So many people have seen their savings decimated by the market. It’s time to really think about retirement. You can’t borrow for your retirement. Your son or daughter can for college.  It’s up to you to make up for the difference, what’s been lost.  It’s tough, though. People on the cusp of retirement, a lot have had their hours paired back, and it’s a challenge.

Portfolioist: If someone is trying to boost their retirement savings, for example, is there advice you’d have for them on how to do that in the current environment?

Willis: First, don’t get too conservative. Look at the mutual fund inflows. A ton is going into bonds. I know people are scared, but you can’t ignore stocks. That’s the go go vehicle.  For people with 10 years, 20 years to retirement, we are going to see stocks rally somewhere  along there.

Second, trick  yourself into saving. If I can just put money away and do it automatically,  I never think about that money. Automate all your savings.  Do yourself the favor of looking at it occasionally. The  payoff can make you want to save more.

Portfolioist: Bond yields are so low it’s hard to see the payoff.

Willis: Even muni bonds. And  you may find some that are paying, but in this economy is  that what you want to invest in? Recently there was an EBRI report that 3 in 5 boomers wont’ have the money they need.  It’s because yields are so low on everything from CDs to bonds. You have to go out the risk curve to get any return. This is a big problem.

Portfolioist: What about other asset classes, like real estate?

Willis: If you can get a loan, if you have money to invest, the payoff is going to be in housing. In some markets, some good retirement markets, values are down 50 and 60 percent. Southern California has just had its biggest sales drop in two years, and consider the time period.

I would not be looking for the bottom. I’d be buying now if I could. This is like going to a shoe sale. You want to buy when prices are cheap not when prices are high. You have to select carefully, pick the right property, and be sure you can afford it.

Portfolioist: Do you think this recession has been enough to really change behavior? We’ve been a country of very low to no savings for so long. Can we get that into better balance?

Willis: The most recent numbers I’ve seen show people are saving.  I have to say ‘ha ha ha’ to all those  economists who told me all those years that the American consumer would keep spending.

People were taken down the garden path with easy credit. But credit card debt is down. I think we’re making some headway on paying that down. People are getting serious about their money for the first time. They’re getting serious about retirement.

Portfolioist: You’re outspoken about taxes. That’s a big topic on your show, taxes and government spending.

Willis: I fear for people who are trying to save and invest money. Not only are taxes going to rise (when current tax breaks expire later this year). There’s also taxes coming with health care reform. Individual taxes, investment taxes are going to go higher. This is really going to sting people who are trying to do the right thing. You have to get in touch with your accountant.

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