Today, the financial problems faced by HIV patients are akin to those confronting people with progressive or degenerative diseases such as multiple sclerosis or rheumatoid arthritis, or some types of cancer or heart disease. Having such a condition can bring on conflicting emotions in a more urgent and uncertain variation of the spend-or-save decisions everyone must make.
On the one hand, patients are tempted to spend what they have or even go into debt when they feel good and can enjoy what money will buy. The opportunity to travel and pursue hobbies and entertainment becomes more precious.
On the other hand, for those who are not already poor, a fear of being sick as well as destitute brings a powerful inducement to save, and to be certain those savings will be secure.
Furthermore, if they can afford sufficient help, even extremely ill people can enjoy a significant degree of mobility. It may be, then, that the extra expense of special aides and equipment would be worth far more to people when they're ill than the entertainment and travel would be worth to them when they felt good.
And, of course, some patients want to leave an inheritance or at least a life insurance policy to help loved ones who may be sacrificing their own financial futures to help the patient.
As for Bergstein and the here and now, if he decides he wants to make immediate changes to the way his assets are allocated, Gleason said, he could liquidate his Chemical Financial stock and two of his mutual funds, although this course would subject him to a capital gains tax liability and a back-end load on one of the funds. A more conservative strategy would be to have him retain his current holdings as his future savings are applied to new choices. (Bergstein intends to keep the Chemical Financial stock for family reasons.)
Bergstein recently switched health plans, saving himself about $200 a month. Gleason would like to see him use that money to start creating a true emergency savings fund, with contributions being parked in Vanguard Fixed-Income Securities Short-Term Corporate Portfolio (five-year average annual return: 5.8%) and the newer Vanguard Fixed-Income Securities Intermediate-Term Corporate Portfolio.
Bergstein, on the advice of a broker at one of the large houses, rolled over about $18,000 in a 401(k) from a previous employer into an individual retirement account invested in Putnam New Opportunities Fund (five-year average annual return: 27.3%), a mid-cap growth fund. In addition, he put $4,000 into the newer Putnam Capital Appreciation, also a growth fund.
About 75% of Bergstein's current 401(k) contributions, which total about $200 a month, are going into the large-cap Alliance Growth Portfolio (five-year average annual return: 22.1%), and the rest into Lazard International Equity Fund (five-year average annual return: 16.9%).
Gleason approved of Bergstein's 401(k) choices, but he pointed out that, with the exception of the Lazard fund, all of his savings are in U.S. large- and mid-cap equities, meaning a big chunk of his investments are dependent on continued strength in those parts of the economy. Gleason also thought Bergstein might do better to stop contributing to the Putnam funds, which, although they are above-average performers, charge loads.
The planner recommended investing instead in the large-cap Oakmark Fund (five-year average annual return: 23.8%) and in the newer mid-cap, concentrated Yacktman Focused Fund. To add a small-cap component, Gleason suggested the newer Third Avenue Small Cap Value Fund. Gleason said he admires Donald Yacktman's savvy and believes the other funds offer prospects of good returns at reasonable risk and lower expenses.
As for Bergstein's international holdings, Gleason recommended that he start raising those to a maximum of 20% of the portfolio once he has his emergency fund in place. New savings would be divided about equally among BT Investment International Equity Fund (five-year average annual return: 21.7%), Morgan Stanley Emerging Markets (five-year average annual return: 10%) and the newer Scudder Emerging Markets Income Fund.
One caveat: The Morgan Stanley and Scudder funds are known for large capital gains distributions because of unusually active trading of their portfolios. Gleason pointed out, though, that if Bergstein holds these in an IRA, he will not have to pay capital gains taxes.
As a further diversification move, the planner recommended that some of Bergstein's large-cap money go into Gateway Index Plus Fund (five-year average annual return: 9.6%) to help protect him in a market downturn. The core of this fund's portfolio is the Standard & Poor's 100, but, unlike with a true index fund, the manager has the leeway to purchase options and puts to dampen risk. Practically speaking, this means the fund generally won't rise as high as the S&P 100 itself, but neither will it fall as far in a downturn.