Smart long-term investing can make or break a company's financial future.
In the HFMA session titled "Designing a Successful Investment Program," Jerry Katz, charter financial analyst and senior consultant at Yanni Bilkey Investment Consulting in Pittsburgh, will offer advice on where to start, when to diversify and how to find the best investment managers. The session takes place on Tuesday, June 30, at 2: 30 p.m.
The key to strong investing is to diversify the company's portfolio based on the amount of risk it is willing to take, Katz says.
"Start by figuring out how much risk you want to take," he says. "Some (companies) say they can't risk any; some risk a lot. Some are in competitive environments, some not. All those things get them to the type of risk they want to take. There's not a model that says all hospitals should risk a certain amount."
Diversification of investments allows companies to reduce their risk and can improve long-term return, Katz says.
Small-company stocks can grow faster but may be volatile, whereas large-cap stocks from companies such as IBM Corp. are more stable. Bonds and money markets are even more stable but yield less return.
Katz says most Yanni Bilkey clients, 40% of which are hospitals, have begun to take more risks in recent years. "They have a pot of money and need this money to earn more," he says. Also, "a lot aren't spending money at the rate they were spending 10 or 15 years ago. They think this is money that's going to be around a long time. The market's been so strong; they want more than fixed income."
However, Katz warns that taking more risks just because of a good market is unsound. "Make sure you're not adding risk just because the market's strong, because the market can go the other way," he says. "You must focus on the long-term goals."