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April 3, 2012
Effective Diversification

CHICAGO — If there is one investment philosophy that approaches universal agreement among financial advisers, it’s the need for careful diversification in every portfolio in order to minimize risk

CHICAGO — If there is one investment philosophy that approaches universal agreement among financial advisers, it’s the need for careful diversification in every portfolio in order to minimize risk, but exactly what does diversification mean, and how can you tell if your investments are truly diversified?

One popular TV show on finances features a segment called “Am I Diversified?” in which viewers call in, give the host their top five holdings and the host lets them know if they are properly diversified. According to Jason Whitby, MBA, CFA®, CFP®, AIFA®, senior financial adviser with Miami-based Investor Solutions, it’s not that simple. “The idea of five-stock diversification is mostly refuted by the financial community,” he says, “which tends to agree that the number of individual stocks needed for diversification is actually closer to 30.”

January 5, 2012
Where to Find a Safe Haven

CHICAGO — If the crazy ups and downs in the stock market these days have you feeling a little dazed, you have lots of company. For many savers and investors, trying to find a safe haven for whatever cash is left in their portfolios has become a top priority. Unfortunately, investing cash these days is no less daunting than investing in the stock market.

If you have a brokerage account, there’s a good chance that your broker has recommended that any cash in your account be swept automatically into a money market fund. These so-called “sweep” accounts currently hold billions of dollars — money that is probably doing a lot more good for the brokerage firms than for their customers. Money market funds, on average are paying about 0.03% interest (that’s three one-hundredths of 1% — a paltry $30 interest per year for every $100,000).

Most banks offer money market deposit accounts, which are similar to money market funds but differ in several important ways.

August 16, 2011
Your Money: Leaning Toward Alternative Investments

CHICAGO — Judging from my e-mail, it’s not difficult to find savers and investors who are questioning the conventional wisdom when it comes to investing their money. With the stock market on an erratic, volatile course that seemingly leads nowhere, and yields on cash investments such as money markets and CDs almost nonexistent, more and more income-seeking investors are breaking the old rules by dipping a toe in waters they would have considered too risky a few years ago.

Instead of sticking to the philosophy that calls for portfolios laced solely with a careful mix of quality stocks, well-rated bonds and cash, these hardy souls are venturing into eyebrow-raising investments such as junk bonds, commercial real estate, options like puts and calls, and equities in emerging markets in an effort to improve the anemic and unpredictable returns they’ve been enduring of late. According to one adviser, taking on even a little more risk requires overcoming fear of foreign markets.

July 6, 2011
Market History Shows Profit Potential

CHICAGO — This is a difficult time for anyone trying to build a portfolio of savings and investments capable of providing a financially secure retirement. According to the Center for Retirement Research, more than half of the Baby Boomer generation will not be financially prepared for retirement even if they work until age 65.

With corporate pension plans now largely just a memory, it’s up to individuals to design their own financial plans for retirement, and that calls for making some tough decisions.

I can’t remember a time when the economy has seemed more uncertain and fluid. Are interest rates for savings set to rise after a long period of stagnation, or will they continue to remain mired abysmally low? Is it time to start investing in the stock market again, or is it better to wait? How about real estate? Is this a good time to buy or sell a house? These and other questions about our economic future are never easy to answer, but they seem especially problematic in mid-2011.