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Make Diversification Work for You
Tweet Share on Facebook August 31, 2011 CommentYou hear it all the time from investment professionals and nonprofessionals alike: Investors need to diversify. But what does that really mean? For some people trying to do the right thing, their method of diversification can actually be a series of bad decisions. It is time to examine what diversification means, why should you do it, and how can you do it the right way for you.
Let's start with a diversification explanation. Simply put, it is a way to get the most out of your investments while reducing your overall risk. With diversification, you are assuming that as one area of the market goes down, another will most likely go up. By dividing your investments into different areas, you are looking to bear the fruit of whatever is in favor at that time and minimize your losses in what has gone out of favor. The market can be extremely fickle, and what was producing results one year may not produce similar results the next. You'll want a variety of investments to try to capitalize on the movement of the markets from one day to the next.
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Hurricane Irene: A Financial Disaster
Tweet Share on Facebook August 31, 2011 Comment (1)Loss of life is always the most devastating part of any significant weather event. Unfortunately, every major storm seems to bring casualties, but the lower the numbers, the better.
There is another loss to consider. One that is quantifiable and far reaching. That is the financial loss.
Hurricane Irene caused a significant financial loss to the country as a whole, but especially the East Coast. And that loss came from many areas.
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What Your Spouse Should Know About Your Investments
Tweet Share on Facebook August 30, 2011 Comment (20)In a household, there's usually a division of labor for things that have to get done. One person may handle the food shopping and cooking, while the other cleans and pays the bills. And one person usually takes care of investments.
In the greatest generation (World War II), it was typically the husband who handled the couple's investments. He created their investment plan and tracked it for the last several decades. Over the years, he probably didn't share all of the important information about their investments with his wife.
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Inflation Is Low…Right?
Tweet Share on Facebook August 26, 2011 CommentMany investors are concerned with the recent volatility we’ve experienced in the markets; there seems to be a constant flow of bad news these days. Economic growth, both domestic and in Europe, has been fragile at best. Our economy struggles. The 9 percent unemployment rate and the debt issues plaguing the U.S. and Europe are adding to the general lack of confidence among most Americans. Well…at least inflation is low…right? Earlier in the month the Federal Reserve made a rare promise that it plans to keep short-term interest rates at virtually zero for at least another two years. With this action the Fed is asserting that inflation should not be an issue during that time.
Baseball legend “Yogi” Berra once defined inflation this way: “A nickel ain’t worth a dime anymore.” And he’s right.
[In Pictures: 6 Numbers Every Investor Should Follow.]
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How to Manage Your Investment Anxiety
Tweet Share on Facebook August 25, 2011 CommentAs uncouth as it may be, worrying about one’s investments seems to be the order of the day. And it’s no wonder. As the markets careen to and fro, publications are replete with stories of advisors and Wall Street pros dumping their stocks in favor or bonds and cash as they scurry to the sidelines.
And, as usual, the average retirement investor feels caught off balance and a few steps behind the curve. What is the ordinary investor to do? It does feel a bit like 2008 again, doesn’t it? Is it too late to take a cue from the pros, pull up stakes on a long-term investment mentality and find a nearby bunker to hunker down in with a bag of bonds now returning less than the rate of inflation?
[In Pictures: 6 Numbers Every Investor Should Follow.]
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Why Americans Should Focus More on Saving, Less on Investing
Tweet Share on Facebook August 25, 2011 Comment (3)Much of the financial services industry focuses on convincing individuals that access to the "right" investment ensures progress toward retirement goals. Unfortunately, this approach often neglects the most important aspect of retirement planning: saving.
Ideally, you should aim to save 15 percent or more of your income—including the company match—for retirement. The industry focuses more attention on investing rather than saving because it is easier to convince someone that a single investment holds the key to their retirement dreams than it is to convince someone to save a substantial portion of their income.
[In Pictures: 6 Numbers Every Investor Should Follow.]
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3 Lessons From the Sell-Off
Tweet Share on Facebook August 25, 2011 Comment (2)Like the previous two weeks, last week was a roller coaster ride. If you had the typical portfolio like most Americans, you lost around 15 percent in less than a month. But let's not dwell on the negative. Let's talk about what we can learn from this difficult time.
First, because companies have become so reliant on global markets for revenue, they respond quickly to an international economic downturn. As a matter of fact, some statistics show that many U.S. companies receive as much as 50 percent of their revenue internationally. This is not something temporary. Therefore, international events can impact your investments.
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4 Tips for 401(k) Participants
Tweet Share on Facebook August 24, 2011 CommentMarket volatility continues to provide investors with a wild, scary ride. In the face of this market turbulence, here are four timeless tips for 401(k) participants:
Continue to save. During the 2008-2009 market decline, many 401(k) participants lowered their deferral rates or stopped salary deferrals altogether. According to a recent study by Fidelity, 401(k) participants who stuck with their allocation plan and continued to save through the downturn have seen their accounts grow between September 30, 2008 and June 30, 2011. This far outstrips the results for participants who totally existed equities and never returned, and those who got out and then got back in at some point. The point is that consistent savings and sticking with a plan plays a key role in accumulating 401(k) assets over time.
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For Investors, Patience Pays
Tweet Share on Facebook August 23, 2011 Comment (10)When the stock market throws a tantrum for several days or weeks, it's natural to get nervous and be tempted to sell or change your investments. The last few weeks have certainly been a test of investors' ability to withstand sharp drops in value and increases in market volatility.
What's the best thing you can do during times of uncertainty and high volatility? Don't panic. That's easier said than done, and with investors reacting to news so quickly now, it's concerning when emotional selling sends the markets downward. But if you're patient and stay focused on your long-term goals, your investments can provide great rewards many years from now.
[In Pictures: 6 Numbers Every Investor Should Follow.]
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Are More Real Estate Foreclosures Coming?
Tweet Share on Facebook August 19, 2011 CommentLower home prices and less expensive credit are providing an incentive for many buyers to step into today's market.
Recently, I spoke with two friends who work in the banking and real estate industries about the future of the housing market. One friend asked the other: "Are we going to see more banks foreclosing on delinquent mortgages?" The reply came back without hesitation: "Yes."
