| The best investment portfolio for 2010 and | | | | Income funds or bond funds probably treated you |
| beyond will hold stocks, bonds, and money | | | | OK over the years, but this will change in a hurry |
| market securities. Finding the best investment in | | | | when interest rates go up. Interest rates were at |
| each area is not possible or necessary. Coming up | | | | highs in the early 1980's. They were at historical |
| with YOUR best investment mix is. Let's review | | | | lows in 2009. When rates go up money market |
| your investment options. | | | | funds should be good investments and pay more |
| I'll keep it simple. If you invest at all you have an | | | | interest in the form of dividends. Bond funds or |
| investment portfolio, which is simply a list of the | | | | income funds will lose money. That's not a theory. |
| investments you own. For example, if you have a | | | | That's the way bonds work. If bonds or bond |
| 401k plan you probably picked a few different | | | | funds are a large part of your investment mix, or |
| investment options from a list. Most of your | | | | you are considering long-term bond funds, think |
| choices were likely mutual funds. Even if you | | | | twice. The risk is significant. Your best investment |
| knew not what you were doing, you put together | | | | here is short-term and intermediate-term quality |
| your own investment mix, your own portfolio. | | | | bond funds. |
| The question is whether or not this is the best | | | | Now let's look at the third category of |
| investment mix for you. | | | | investments you probably own or should own... |
| If you are like 90% of the investors I've known | | | | stocks, commonly in the form of equity funds. |
| and worked with as a financial planner, you don't | | | | These are the investment options that have likely |
| really understand this stuff. That's why you should | | | | caused you heartburn and acid indigestion over |
| be invested in stock funds, bond funds and | | | | the past several years. There's more risk here, |
| money market funds vs. individual securities like | | | | but greater profit potential as well. The best |
| stocks and bonds. When you own funds | | | | investment mix for most investors: about 50% in |
| professional money managers pick the stocks and | | | | stocks, preferably spread across a VARIETY of |
| bonds etc. for you and a pool of other investors. | | | | equity funds. Conservative folks might want to |
| But you need to pick the appropriate mix of | | | | cut this to 25% or even less, but all investors |
| funds. | | | | should be familiar with the variety of equity funds |
| So, let's take a look at the securities or funds you | | | | that are available to them. |
| might own or be considering, and see if changes | | | | First, you need a GENERAL DIVERSIFIED |
| might be in order. I say "might own" because | | | | domestic (U.S.) equity fund that basically tracks |
| most people are not sure what they really hold in | | | | the U.S. stock market's performance. Then, add a |
| their investment portfolio. Sound familiar? Let's | | | | diversified international fund that invests in a broad |
| start with your safe investments like bank CDs | | | | range of foreign equities. You now have a leg up |
| and money market securities. If you have cash | | | | on most investors who miss opportunity by not |
| invested in a money market fund, you have | | | | investing abroad. You may want to add a |
| money market securities in your portfolio. The | | | | small-cap or mid-cap fund that invests in smaller |
| bad news is that you are earning very little in | | | | companies, because these funds can outperform |
| your safe investments. The good news is that | | | | in some market environments. Finally, consider |
| you have a high degree of safety. Don't keep all | | | | non-diversified equity funds that specialize in stock |
| of your money here, but don't bail out just | | | | sectors like real estate, natural resources, basic |
| because interest rates are low, either. | | | | materials and precious metals for a smaller portion |
| If you are risk adverse don't be afraid to have | | | | of your allocation to stocks. |
| 50% (or more if you are retired and older) of | | | | The best investment portfolio going forward will |
| your investment mix safely invested. Sooner or | | | | contain stocks, bonds, and money market |
| later interest rates will go up... which brings us to | | | | securities; but you will need to give your |
| the next area of investment options you might | | | | investment mix the attention it deserves. Hold |
| own. Bonds and bond funds (also called income | | | | some safe investments, avoid long-term bonds, |
| funds) pay more interest, and billions of dollars | | | | and diversify your stock holdings. Uncertainty and |
| flowed into bond funds in 2009 from every-day | | | | risk in the investment markets is likely to remain |
| investors chasing higher interest rates. Check and | | | | high. When in doubt diversify across the three |
| see if any of your mutual funds fall into this | | | | investment areas and within each of them. |
| category. | | | | |