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How to Build Your Financial House
Tweet Share on Facebook December 30, 2010 CommentYour home is a special place. It provides you with safety, shelter, comfort, and enjoyment. It's tailored to your specific needs, wants, and desires. It's a reflection of your taste and your personality. Your asset allocation plan—or your "financial house"—is just as special and reflective.
Before you build a home, decide exactly what you want. We have all seen people leaf through magazines and point out fantastic kitchen or home theater equipment. They may even go so far as to tear the page out and save it for future reference. They are deciding what they want. It's just as imperative with asset allocation.
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3 Rules for Positive Returns in 2011
Tweet Share on Facebook December 29, 2010 CommentThe year 2010 proved fruitful for the markets. However, 2011 is uncertain. How investors choose to position their portfolios this coming year could have a significant impact on their future.
Today, the market is looking for direction. With high unemployment, poor credit facilities, a questionable healthcare system, and various other issues, investors must plan for growth and stability in the year to come.
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When Is the Right Time To Invest?
Tweet Share on Facebook December 28, 2010 Comment (1)After enduring two bear markets in the last decade, investors are trying to time the market more than ever before. Trying to catch the recovery by jumping in and out of stocks has become a popular daytime sport.
As tempting as it might be to chase performance, individual investors should avoid this sport. We've found that timing the market is a futile effort. It sounds easy enough: Buy when stocks are rising, and sell when the market is falling. The problem is, market movements are extremely hard to predict. And by the time you decide to pull the trigger to buy or sell, things have already moved.
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4 Ways Money Buys Happiness
Tweet Share on Facebook December 23, 2010 CommentIf you have ever felt confused about the relationship between money and happiness, you're not alone. Even the Beatles were torn over the subject, declaring in one famous song, "You can't buy me love," and then lamenting in another, "Your lovin' don't pay my bills—give me money. That's what I want."
Gallup researchers have helped clear up this conundrum through a series of worldwide polls. The results have once again stirred interest in this ancient debate, answering with the discovery that annual earnings over $75,000 fail to add to an individual's happiness. Thinking less about money and financial security—as opposed to net worth—also played heavily into an individual's happiness.
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15 Year-End Financial To-Do's
Tweet Share on Facebook December 22, 2010 CommentThe year is coming to an end, and with any conclusion comes a last-minute checklist. This is your final financial to-do list of 2010. With only a few days to complete these items, do not waste time getting started.
1. Fund your IRA or Roth IRA. For 2010, investors can add up to $5,000. If you're over age 50, add an additional $1,000.
2. Maximize 401(k) contributions. For 2010, savers can add up to $16,500 to their company's 401(k) plan. If you're over 50, add an additional $5,500.
3. Rebalance investments. Rebalancing is selling part of what has done well and buying what has not done so well, thus selling high and buying low.
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5 Things to Consider for Retirement
Tweet Share on Facebook December 21, 2010 Comment (2)The most important financial goal is saving for retirement. Unfortunately, no one is going to hand over a hefty bag of cash when you stop working. You can't get a loan or scholarship to pay for your living expenses in your golden years. So it's all up to you. Here are a few things to consider as you're saving and investing for retirement:
1. Don't take too much risk. Most people who have achieved financial critical mass—that is, they have enough money for retirement—save small amounts of money over a long period of time. In the accumulative, or working, stage of life, you can afford to take risks in the markets to earn higher returns. If you make a financial mistake, you can fix it by getting another job or a loan, and you have time on your side. When you're retired, though, you can't afford to make mistakes. As you approach retirement, you need to cycle down risk by lowering your exposure to stocks. Bond funds, balanced funds, and other conservative investments can help reduce risk in your portfolio. It may mean missing some gains, but it's the right thing to do.
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Investors: Don't Miss Any More of the Recovery
Tweet Share on Facebook December 17, 2010 CommentIf investors don't understand market recoveries, they'll be disappointed later. Right now, the real problem is that many investors don't actually understand that not only are we in a market recovery, we've actually already had a market recovery. Take a look at the numbers:
March 9th, 2009: The Dow Jones Industrial Average closed at 6,547 and the S&P 500 closed at 676.53. Today, the Dow is up over 11,450 and the S&P 500 is north of 1240 (as of this writing). Most individual investors know this, but do they realize it? Given the amount of money I see flowing into bond investments, I'm not so sure.
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5 Ways to Keep Your Investment Adviser Honest
Tweet Share on Facebook December 16, 2010 CommentNot everyone is a do-it-yourself investor. According to Forrester Research, 30 percent of all investors want to delegate their investment decisions to someone else. Unfortunately, most of these "delegators" will spend more time shopping for a car than they will calculating the true cost of the investment advice they use to protect the nest egg they spend their life working to build. If you are a delegator, here are some tips that will help minimize risk and give you a shot at having a successful relationship with your broker, financial adviser, or investment manager.
1. Show me the fees. Most advisers are biased toward investing your money in mutual funds that kick back yearly marketing commissions, which you pay for. My friend had a $6 million account with one of the largest Wall Street firms, and to make my point, I calculated his mutual fund fees, loads, and extra costs. Last year he paid about $138,000! We switched his portfolio to low-cost index funds and now he pays $18,000 per year. The solution? Ask for a comprehensive list of all the fees you are paying annually, including those for each fund and your adviser's fees. Try to get these aggregate fees below 1.5 percent per year. To help get you started, we built a great mutual fund fee calculator to easily calculate these fees.
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4 Ways to Avoid Being 'Madoffed'
Tweet Share on Facebook December 15, 2010 CommentBernie Madoff swindled more than $20 billion from investors over two decades. The two-year anniversary of his arrest should remind every investor that they need to protect themselves from unscrupulous "financial salesmen."
Madoff surely had the trust of his clients; most recommended him to their friends. He gave every investor exactly what they wanted: great, consistent, and what most considered risk-free returns. But as the world soon found out, those returns were only on paper—literally.
So how do you protect yourself from crooked brokers? There are four ways to stay safe:
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Why You Shouldn't Chase Investing Trends
Tweet Share on Facebook December 14, 2010 CommentOn my weekly radio show, listeners have asked "I heard that the dollar is going to fall in value—so is there a falling dollar fund?" Another caller wondered, "Inflation is forecast to rise—is there a rising inflation fund?" The answer is: You don't need to buy these things. The marketing department at an investment company might create a fund that tries to profit from the trend of the moment, but that doesn't mean investors should take the bait. It might sound cool to buy a falling dollar fund. However, that fund won't be so great when the dollar rises.
Rather than try to be an amateur economist, stick with the best mutual fund managers who have proven that they can pick securities that will benefit the most from whatever will happen in the future. These fund managers should have discipline and a methodology to find stocks that will go up during times when dollar is falling. The managers can also determine which companies will benefit when the dollar is rising.
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