Is this a good time to invest

FINANCIAL ARTICLES by Ralph Mero, UUA Church Staff Finances Director

Is this a Good Time to Invest? (2/6/06)

Since 1995 the Unitarian Universalist Association has urged congregations to provide annual salary adjustments for increases in the cost of living index (COL) and for merit.

COL adjustments for 2006 should reflect the 3.4 percent increase in the Consumer Price Index (CPI) for 2005, up from 3.3 percent in 2004. Employees who don’t receive a wage increase of 3.3 percent for 2006 will be falling behind in purchasing power this year. (Looking ahead, the change in the CPI is expected to drop to 2.8 percent over the next twelve months.)

Merit increases come on top of any COL adjustments and should reflect an employee’s growth in skills, productivity, expanded responsibilities, and worth to the organization. Merit adjustments often range from two to five percent and should follow an annual assessment of how an employee is performing in his or her role. Such assessments or evaluations should themselves be linked to up-to-date job descriptions that will have clearly identified the duties and responsibilities of the position for the year just past.

So for effective compensation management, the sequence should be.

1. An annually updated job description with the staff member’s input. This should indicate the amount of time required for various duties.

2. A performance assessment with written evaluations by the worker and the supervisor, plus an honest conversation.

3. An annual cost of living adjustment based on economic factors.
4. A merit increased based on growth in performance and the individual’s contribution to the organization.

It is often difficult for church staff to advocate for their own compensation. That is why the UUA has a cadre of district compensation consultants available to work with local churches at no charge to the congregation. Staff persons can do their job by initiating an updated job description that may list activities of which the employer is unaware.

Fair compensation isn’t about charity. It’s about appropriate pay for valuable staff, and it helps employers avoid the expense of recruiting and training new employees to replace those who have moved on to greener pastures.

For more about how the UUA compensation program is put together, see http://www.uua.org/programs/ministry/finances/salaryrec_explain.pdf, especially the part about “the Minimum is not the goal.”

We’ll address benefits issues in a future column.

Ralph Mero

Unitarian Universalist Association

25 Beacon St., Boston, MA 02108

617/948-6404, 6421.

______________________________________________

Is this a good time to invest?

Only hindsight can answer this question. Stock market wizards get it wrong half the time, and it’s never clear whether this is a lousy time to invest or the best of all possible times, and we just don’t know it yet. Still, many of us are saving like crazy for retirement, and only financial investments such as IRAs and the UUA retirement plan defer income tax on capital gain.

Other good investments are one’s education, a personal home, real estate to be rented out or sold later, and maybe our kid’s college tuition.

A number of financial advisors are looking at the 2006 stock market in a dreary light. The Dow Jones index we hear about on the radio seems to be moving sidewise, and people who don’t pay attention to market details can be excused for quickly moving on.

Still, those of us who are looking to the UUA retirement plan have some decent choices, and it’s worth considering the following:

1. Too many of us have our money in only one or two mutual funds, and we never change the allocation as the years go by. This isn’t wise, and except for those using the Freedom Funds mentioned below, we should be giving this more thought. Consider selecting four funds of different types in order not to have all your money in one basket.

2. Eighty-five percent of the participants in the UUA plan would improve their personal return by using the Fidelity Freedom Fund with the number closest to their expected year of retirement. So if you think you are going to retire in 2016, elect Fidelity Freedom Fund 2020. If 2009 is more likely a retirement date for you, choose Fidelity Freedom Fund 2010. The wonder of these funds is that we don’t have to make any more allocation decisions. As we age, the fund managers shift the investments from more aggressive to more conservative. These funds aren’t ever going to be skyrockets, but they are good performers in their category.

3. 2005 was a terrible year for socially responsible mutual funds because it was a bad year for the stocks of technology firms and other companies these funds tend to invest in. The same is likely for 2006. While we support the principle of SR investing, we have to be realistic and expect these funds not to be immune to larger economic forces.

4. International funds provide an easy and healthy form of diversification. The Fidelity Diversified International Fund and the Calvert World Values International Equity Fund had excellent returns over the past three years, and this trend seems likely to continue. Consider having at least 20 percent of your assets in international funds.

5. Investing in a fund that includes both stocks and bonds is another easy way to diversify one’s assets. The Fidelity Balanced Fund ranks number 2 out of 1,216 US mutual funds in this category and has about 60 percent in stocks and 40 percent in bonds. This could be a useful core fund for many participants.

Feel free to email to me or Joyce Stewart with questions or comments. Joyce is at jstewart@uua.org.

Ralph Mero
Unitarian Universalist Association
25 Beacon St., Boston, MA 02108
617/948-6404, 6421