WALNUT CREEK, Calif. - Say goodbye to long-term bonds in 2010. Say hello to investing in dividend-paying growth stocks and companies with a technological, pharmaceutical and global reach.

That's the main message from financial experts at a time when the economy is emerging from the worst economic time since the Great Depression.

"In 2010, at least in the first half, we expect continued improvement of economic fundamentals," said Karl Mills, president and chief investment officer of Jurika Mills & Keifer, an Oakland, Calif.,-based independent investment firm. "The economy most likely is destined for slow overall growth because the deficits it has to manage are like a giant ball and chain."

The market crash of 2008 spooked many individual investors into the safe harbor of Treasuries, bond funds, certificates of deposits and other fixed-income investments.

In 2010, interest rates for long-term Treasury notes (those that are 10 years or longer) will likely rise to help finance the growing federal debt that is paying for the economic stimulus, said Mills. When interest rates rise on existing bonds, their prices fall.

"A rising long-term (interest) rate environment is not a good environment for bonds, for Treasuries and longer-dated bond portfolios," Mills said. "Last year, you had a lot of money that went into bond funds chasing performance and they did pretty well and there is a perception of safety. The reality is that you can get some pretty good yields in stocks now and have growth as well."

For instance, investors should consider a stock such as Verizon that pay a decent dividend to replace income payments derived from bonds, Mills said. Also, dividends from stocks are taxed at a lower rate than income payments from taxable bonds, he said.

Technology companies such as Cisco and Qaulcomm that are active in the wireless mobility sector on a global basis are also good moves.

"These technology companies we think are selling at pretty reasonable valuations and have the ability to grow," he said.

Pharmaceutical and bio-technology stocks are another good sector.

"We think they are very, very cheap and perhaps have been overly penalized by the worries about health-care reform," Mills said.

No doubt, the message is to invest in stocks this year. But don't overlooking having some money in shorter-term bonds and CDs despite their low returns. The recent average rate on www.bankrate.com for a one-year CD was 1.62 percent. It's all about maintaining a balanced portfolio. And if interest rates do indeed rise, CDs would be more attractive.

"We think it's good to keep some money in relatively short-term highly liquid instruments," said Mills said in order to hedge for a possible market downturn. "We know things can come out of left field."

The move away from long-term bonds and into stocks is also shared by Henry Gold, a retired Belmont resident and president of the San Francisco Bay Area chapter of www.betterinvesting.org, a national nonprofit that provides investment education through a network of local investment clubs and an online community.

"This is not a great time to get into fixed income and bonds. If someone's money is going to be in fixed income, it certainly should be in a short-time range," he said.

Before buying a stock, Gold said people need to ask this question: "Are their earnings still growing because revenues are still growing or are their earnings growing because they managed to reduce costs to keep earnings up but they are losing revenues?"

If a stock's earnings are going up without revenue growth, "that's not a good sign. ... You should be looking for companies that have managed to keep the top line and bottom line growing," Gold said.

This year will continue to see a strong bull market that began with a market recovery that started in March 2009, said Eric Flett, chief executive officer of Concentric Wealth Management, a Lafayette firm that manages investment portfolios for high net worth clients.

"We still think the upside is substantial and this bull market has legs. There are opportunities across the board for long-term investors," said Flett. "If you've got a choice between having money sitting in a CD (and) investing in a good company paying a 3 percent dividend and growing, I think this is an opportunity to use your cash to buy stocks."

He likes companies with a global reach in the sectors of energy, technology, health and industrials.

"Under industrials, one of the companies is 3M and half of their business comes from foreign trade. Globalization, investment and innovation are the three big themes of 2010 and beyond," he said.

Investing in discount retailers such as Wal-Mart and Dollar Tree would be a good move to make this year, said Yee Ong, founder and portfolio manager of YSO Capital Management LLC, a Burlingame-based investment firm.

"People will make purchases at places like that despite a weak economy," Ong said. "I think the economy is fundamentally pretty weak despite the run-up in the stock market last year."

He also likes pharmaceutical companies and for-profit schools such as DeVry.

"There is always a need for drugs and many of the (pharmaceutical) companies have not risen as much as the market has risen last year. And at a time of high unemployment, people need to get a job and to do that they have to enhance their skills," said Ong, who is the author of "The Strategist's Mind: The Art of High Return, Low Risk Investing."

As far as global investments go, look to companies that do business in Asian countries.

"Right now, Asia still has a lot of growth potential and an economy that still has a lot of room to grow," he said. "There are different companies and different sectors that thrive in different times and there are always opportunities in the market. This is not 2008. We are still facing a weak economy but are not having a crisis any more."

(c) 2010, Contra Costa Times (Walnut Creek, Calif.).

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