Advisors: Beware New Tech Stock Boom - Petersen Hastings Investment Management

ZAG Experts Caution That "Tech is Not an Asset Class - It is Part of Other Asset Classes"; Concerns Raised by Leading Fee-Only Financial Advisors from MO, SC and WA State.

WASHINGTON, D.C.//September 17, 2003//Why are investors so eager today to crowd into a new tech stock "boom" when many of them are still recovering from the financial injuries that they suffered in the last 'Net stock craze? Three leading fee-only investment advisors from across the United States who are members of the Zero Alpha Group (ZAG) warned today that investors need to slow down and think twice before jumping back into a tech stock boom that may turn out to be more volatile than the last one.

"Investors have to understand that tech is not an asset class and, as such, it simply doesn't deserve the degree of attention that it is getting lavished on it today," said Plancorp President Jeff Buckner of Chesterfield, Missouri, a suburb of St. Louis. "Technology stocks can and should play a role in a well-designed asset allocation strategy, but they should not become an obsession for investors. It is that kind of gambling-oriented mentality that leads to big and expensive mistakes from which investors sometimes never are able to come back. The way for investors to minimize the danger of getting clobbered in technology stocks is to fold them into appropriate asset classes in their normal capitalization weightings within large caps, small caps, and so on."

The ZAG members noted that the temptations are building for investors to dive into tech stocks. As of mid-September, the tech-heavy Nasdaq Composite Index has gained 38 percent year-to-date. Recent news accounts have fueled speculation about a new tech boom, noting, for example, a resurgence in interest in risky 'Net-related investment public offerings (IPOs).

James E. Wilson, president of James E. Wilson Advisors in Columbia, S.C., said: "Investors have lived through three years of a bear market. They watched tech stocks go from sky high to bankruptcy. As a result, they now have a more realistic view of risk. At the same time, though, tech stocks can often function like financial junk food. We all know that junk food can give one a short term high but can create long term problems. That seems to be the psychology that is tempting investors who were just burned in tech three years ago to return like a moth to the flame."

"Passive investing reduces risk through diversity, lowers expenses and helps in the management of tax liability," said Scott Sarber, vice president of Petersen Hastings Investment Management in Kennewick, Washington. "Active management - especially when you're chasing tech stocks - can add horrific stress to an investment portfolio and, just as importantly, to the day-to-day lives of investors. That isn't necessary. and it certainly isn't a successful strategy. Long-term success in investing isn't about what's 'hot' or 'sexy' today. It's about getting a real plan and sticking to it."

Rebalance your portfolio, no matter what the market conditions may be. What the market is going to do tomorrow or next month is the great unknown, say the ZAG experts. Many investors may think they are properly allocating their portfolio by following a simple formula, such as "70 percent stocks and 30 percent bonds." However, this one-size-fits-all approach does not recognize the complexity of the investment world (including investment styles, U.S. v. global considerations, and so on), which must be reckoned with in order to have a truly comprehensive and broadly diversified approach to asset allocation.

"Many investors are reluctant to rebalance their investment portfolios right now, especially if it's doing well," Buckner said. "What most people don't realize is that you sometimes need to rebalance precisely because you're seeing significant gains at a specific point in time. It may be time to sell some of those 'winners' and bring your portfolio back to its original diversification. After all, it is diversity that is the likely reason the portfolio saw gains in the first place. The whole problem with the 'tech bug' approach is that it is sector oriented and the smart move is to avoid sector concentrations as a strategy. Investors don't get paid for taking risks that can - and should - be diversified away."

J.E. Wilson Advisors LLC, Columbia, S.C. - J.E. Wilson was founded in 1982 as the first fee-only financial advisory firm in South Carolina. The firm provides objective, long-term private wealth management solutions to investors, with a special focus on the wealth planning and management needs of physicians and their families, using the firm's Integrated Economic Solution. R J.E. Wilson Advisors is on the Web at http://www.jewilson.com.

Petersen Hastings Investment Management, Kennewick, WA. - Petersen Hastings, an independent investment advisor founded in 1962, manages assets through a strategy of asset allocation and indexing. The firm serves its clients - including retirement plans, trusts, non-profit organizations, foundations and established individuals - using its proprietary Disciplined Wealth SolutionT and Core Values Investment ProgramT, which is a solution for socially responsible investing. Petersen Hastings is on the Web at
http://www.petersenhastings.com.

Plancorp, Inc., Chesterfield, MO. - Plancorp focuses on the management of wealth for high net worth individuals and has done so since 1983. The firm provides personal and business transition planning, investment management, family office services and business consulting services, using its Personal Transition ProcessT and Intelligent Investor SolutionT. Plancorp is on the Web at
http://www.plancorp.com.

Founded in 1995, the Zero Alpha Group, which is not an investment advisory firm itself, was created to serve as a nationwide network for seven independent fee-only investment advisory firms that manage approximately $2.0 billion in assets. Members of the Group are committed to providing objective, long-term private wealth management solutions to investors, focusing on asset allocation and a structured, quantitative approach to investing. The seven firms in the Zero Alpha Group network share a common philosophy about investing and client service - a commitment to passive, tax-managed investment strategies while providing an independent, fee-only financial planning solution for investors.