| The best investment strategy for 2010 and | | | | short-term bond funds. Rising interest rates will |
| beyond is not likely to be the normal investment | | | | send bond prices (values) down, and long-term |
| strategy recommended year after year by many | | | | bonds will get hit the hardest. You will sacrifice |
| investment firms. Things ARE different this time. | | | | higher interest income, but will increase safety |
| Here's your basic investment guide of things to | | | | with this investment strategy. |
| consider going forward. | | | | Stocks and stock funds may have moved up too |
| Year after year the basic investment strategy or | | | | far too fast in 2009. Don't chase the stock |
| asset allocation recommended for most people: | | | | market unless you want to speculate. Consider |
| 60% stocks and 40% bonds. Stocks or stock | | | | lightening up your asset allocation to stocks that |
| funds are the growth element and bonds or bond | | | | closely follow the market in general. It's quite likely |
| funds are the safer investment that provides | | | | that much of this move upward was "window |
| higher income in this asset allocation. In theory, | | | | dressing" by large portfolio managers who want |
| losses in one should be offset by gains in the | | | | to look good at year end. Some of it was no |
| other. It's time to review your present asset | | | | doubt caused by individual investors looking for |
| allocation. You might be taking more risk than you | | | | higher returns in a low-interest-rate environment. |
| think you are. | | | | Any bad news in 2010 could prompt these same |
| Sometimes the best investment strategy is | | | | investors to sell and send stock prices down. |
| aggressive in nature; other times a bit of defense | | | | Now that you've cut your asset allocation to bond |
| is called for. Rarely does chasing a hot asset class | | | | and stock investments in general, where do you |
| pay off for long. With the stock market up 60% | | | | put this money? When in doubt CASH is king. |
| in less than a year and high bond prices (super-low | | | | Cash refers to safe, liquid investments like savings |
| interest rates), that's exactly what many | | | | accounts, short-term CDs, and money market |
| investors are doing. At the same time some are | | | | securities. Money market mutual funds are the |
| chasing gold at historically high prices, and | | | | easiest way for the average investor to put |
| emerging stock markets that have been on fire | | | | money into money market securities. With |
| (like China). | | | | short-term interest rates at historical lows many |
| Your asset allocation has probably changed since | | | | investors have taken money out of these safe |
| you last looked due to fast changing markets. | | | | investments. If you want to play defense, |
| Take a good look, and then decide if your | | | | increase your asset allocation to cash. |
| investment strategy is on track at an acceptable | | | | For offense consider moving money periodically |
| level of risk. If you are heavy into either stocks | | | | into a variety of areas often overlooked by |
| or bonds (or both) you might want to lighten up | | | | average investors... to broaden your diversification. |
| and diversify more. In 2010 and beyond the | | | | For example, consider stocks in the following |
| investment landscape could change considerably. | | | | specialty sectors: basic materials, natural |
| What if the financial crisis is not really over, or the | | | | resources, real estate, foreign securities, and |
| U.S. dollar continues to be unstable? What if | | | | precious metals if you don't already have money |
| economic growth fails to materialize or interest | | | | there. Mutual funds are available in all the above |
| rates soar? The USA has not been faced with | | | | specialty sectors as well. Invest in increments to |
| more economic uncertainty in my time, and I've | | | | smooth out the risk of bad timing. |
| followed the economy and the markets since | | | | In times of high uncertainty don't follow the |
| 1972. Here's a basic investment guide to avoiding | | | | crowd. Your best investment strategy is to |
| heavy losses should the going get tough again. | | | | survive financially with your investment assets |
| If you hold bonds or bond funds consider | | | | intact. When the dust settles get more aggressive |
| shortening your maturities and cutting your | | | | with your asset allocation. Meanwhile, cash is king; |
| exposure. For example, if you hold long-term bond | | | | and diversify, diversify, diversify. |
| funds consider moving to intermediate-term and | | | | |