SUNDAY, SEPTEMBER 12, 2010 PERSONAL FINANCE
Rebalance your portfolio regularly
by Knight Kiplinger
f there was one sure way for investors to lose a lot of money in the markets over the past 10 years, it was this: Belatedly follow a herd that has poured money into the latest hot asset. The biggest losers were those who loaded up on tech stocks in early 2000, who placed their chips on condos and real estate investment trusts (REITs) in 2006, or who piled into oil and farm commodities in early 2008. They blew the last breaths into asset bubbles that were about to burst. Conversely, if there was one sure way to
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stay out of financial hell and make some decent returns in the past decade, it was this: Sell what the crowd was buying and place your bets on the assets they were shunning. The big winners were those who bought bonds in the late 1990s, when bonds were considered stodgy investments; who bought stocks in the dark days of fall 2002 (near a Dow low of 7286) and early 2009 (near Dow 6547); or who bought REITs in 2009, after a two-year plunge. In short, the path to investing success in the Lost Decade of the Aughts lay in bucking the crowd, being contrarian, buying low and selling high. No, this did not require market-timing
clairvoyance, which no one possesses. It did require using a technique that doesn’t rely on market hunches, but puts your portfolio management on autopilot. It’s called strategic asset allocation with periodic rebalancing. The beauty of it is, you are forced to do what most investors find very difficult — taking their gains and buying out-of-favor assets. Even when all asset classes are falling (or rising), you load up on the ones that fell relatively more (or rose relatively less). Your most important decisions come at
the start of the process, when you decide what kinds of financial assets you wish to own and in what percentages. (First, consult with a financial planner or study asset-allocation strategies.) The asset mix you choose should reflect
your age, wealth and tolerance for risk. If you’re a young investor, you will tilt toward U.S. and foreign growth stocks,
ILLUSTRATION BY TIM GRAJEK FOR THE WASHINGTON POST
which are risky in the short run but offer the best long-term gains. If you’re older or more risk-averse, you will want to allocate higher percentages to bonds and less-volatile, dividend-paying blue-chip stocks. Because asset allocation is more about which broad classes of assets to own rather than which individual stocks and bonds, it works especially well with index mutual funds and exchange-traded funds. A classically simple asset allocation might be 60 percent stocks and 40 percent bonds, but you could cut your pie into many more slices — for example, 40 percent stocks, 20 percent bonds, 10 percent REITs, 10 percent gold, 10 percent other commodities and 10 percent cash. The magic of asset allocation lies in the
fact that, at any given time, some asset classes are having their day in the sun and others are in the doghouse. When you rebalance to maintain the predetermined percentages, you have to sell, say, your soaring REITs and commodities and reallocate the gains to unloved stocks.
Try not to rebalance more often than once a year so that your profits will be taxed as long-term capital gains. Do not confuse this strategic asset allocation, which is formulaic, with tactical allocation, the market-timing technique used by many hedge-fund managers, who often trade rapidly among several asset classes. Asset allocation with disciplined rebalancing would have reduced — but not eliminated — your pain from the burst bubbles of the past decade. And it will surely minimize your grief when the next bubbles — in my opinion, U.S. Treasury bonds and gold — eventually fizzle, too. While other investors run with the pack, pouring more and more money into these overpriced assets, you will be gradually reducing your exposure — and sleeping better at night.
Columnist Knight Kiplinger is editor in chief of this magazine and of The Kiplinger Letter and
Kiplinger.com.
Hiring and raises are back, but only in small amounts
by Anne Kates Smith
non-cash rewards that companies have been doling out to prized employees (or at least the ones still standing), the little something extra next year might actually be money. “Salary increases are back,” says Mercer compensation consultant Loree Griffith. Hiring is starting to perk up. A recent survey by Mercer found that 27 percent of companies are expanding their overall workforce, and only 3 percent are in the midst of broad-based staff reductions. A year earlier, just 12 percent of firms surveyed were expanding and 15 percent were cutting back. Caution prevails, however, as 45 percent of companies are hiring just enough newcomers to replace workers who have left, and 25 percent are hiring only in critical areas. Most workers will receive raises
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in 2011: 98 percent of organizations surveyed by Mercer are planning increases. But few employees will consider their pay bump generous. Surveys show that employers are projecting median salary increases of about 3 percent or a little less for 2011, up from about 2.5 percent this year. Employees with the highest performance ratings will do better. Mercer projects that average pay increases for the highest-rated employees will be 4.5 percent in 2011, compared with 2.7 percent for workers receiving an average rating and just 1.5 percent for those deemed to be less competent. In 2010 bosses have been most
generous in the oil-and-gas and pharmaceutical industries, where raises have averaged 3.2 percent
n a welcome change for recession-weary workers, employers are hiring again. What’s more, instead of the
and 2.7 percent, respectively. At the bottom of the scale, health-care and education employees are seeing 2.1 percent pay increases. Companies are once again focusing on money as the best way to retain workers and keep them happy. Over the past 18 months, limited budgets for raises have meant more perks, such as flexible work schedules, more time off, training and career development, and opportunities to participate in special projects. Career training is still big, but so is cold, hard cash. How can you get your fair share?
Don’t be afraid to ask, ask at the right time and frame your request in the right way. Most raises are awarded in the spring, after an annual review. But you should plant the idea with your supervisor when you see the health of the company starting to rebound. A good time to make the request is just after you’ve won accolades for a significant accomplishment. Remember that performance is measured in terms of quantity, quality, cost and timeliness, says executive coach Robert Lorber, of Lorber Kamai Consulting Group, in El Macero, Calif. Have you pitched in to cover for laid-off colleagues or helped to increase your company’s market share? Reduced errors or improved production? Gotten customers to pay more quickly or shaved your division’s budget through cost savings? Have you continued to meet or beat deadlines despite staff reductions? Document each success. Now more than ever, companies emphasize variable pay models based on contributions to the bottom line. Show that you’re moving the needle in the right direction, and your boss just might show you the money. — Kiplinger’s Personal Finance
More from Kiplinger Go to
www.kiplinger.com for more analysis.
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Instant search provides a new option in the familiar order of Google domination
earching the Web hasn’t changed all that much over the past 15 years: You type words describing what you’re looking for, hit the Enter key, and look through the results that a search engine presents to you. Sites have changed their presentation and style and made themselves accessible on mobile devices, but the central ritual of Web search hasn’t changed much since the days when Yahoo was a research project hosted on a Stanford University server. Last week, Google introduced
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ROB PEGORARO Fast Forward
a feature to its Web search that breaks with that tradition — an option called Google Instant that shows you search results before you even finish typing a query. Google Instant (
google.com/
instant) is a somewhat logical extension of the “auto-complete” feature that it and other search sites offer, which suggests search queries matching what you’ve typed so far. It also makes a vaguely frightening statement about our collective attention
span online — and how much Google claims to know about our interests. Instant works like this: If you run a modern browser (Mozilla Firefox 3.0 or newer, Microsoft’s Internet Explorer 8, Apple’s Safari 5 and version 5 or newer of Google’s Chrome) and start typing a query on Google’s home page, the site will display links matching your query after you’ve typed the first letter. For example, typing just “w” yielded links showing the current weather for the District. Revising and extending that query to “wa” caused Google to spotlight links for Wal-Mart; “was” yielded links to The
iTunes update is less than a perfect 10
Q: What’s up with the close buttons in iTunes 10 for Mac OS X, and how do I make it look like a normal Mac program again?
A: Apple’s just-updated media
program has its issues. But on a Mac, none stand out like its bizarre placement of the red, yellow and green buttons that close, minimize or zoom iTunes — Apple stacked them vertically instead of in the normal horizontal lineup. That is an inexplicable move for a company so focused on correct interface design and making developers follow those rules. (The Windows version of iTunes is no paragon of proper Windows coding, but its maximize, minimize and close buttons are in the right spot.) Apple declined to comment. Fortunately, Mac users quickly found a fix for Apple’s mistake. Quit iTunes, then open the Terminal application from the Utilities sub-folder of your Applications folder. At Terminal’s command line, type “defaults write com.apple.iTunes full-window -1” and hit Enter. Restart iTunes, and it should
now feature a row of close, minimize and zoom buttons.
My portable Sony radio’s analog-TV band is useless. Does anybody make one with a digital-TV tuner?
Although we’re near the debut of a mobile digital-TV standard for on-the-go viewing—and two of the 23 mobile channels available in the District are audio-only NPR signals — manufacturers haven’t built that technology into portable radios. Dave Arland, spokesman for an industry group called the Open Mobile Video Coalition, said the roughly $30 cost of a mobile-DTV tuner made its use unlikely in such low-end hardware. Instead, look for it in pricier gadgets with small screens, such as DVD players.
Rob Pegoraro attempts to untangle computing conundrums and errant electronics each week. Send questions to The Washington Post, 1150 15th St. NW, Washington, D.C. 20071 or
robp@washpost.com. Visit
voices.washingtonpost.com/ fasterforward for his Faster Forward blog.
Washington Post’s Web properties. It didn’t take long for Google users to start comparing how many keystrokes it takes to be pointed to one site vs. another — turning the practice of Googling yourself into even more of a competitive sport. But Instant’s results, like
Google’s ordinary results, may be tailored to users’ location. A friend in Portland, Ore., found that “k” yielded info about one of the city’s TV stations; here, it directed me to pages about Kings Dominion. Instant also shies away from providing previews to objectionable content. Attempting to type more than the first half of a four-letter word beginning with “f” caused Google to stop suggesting links. The Mountain View, Calif., company seems quite proud of the time Google Instant can save, bragging that this option “saves the average searcher two to five seconds per search.” Is that really Instant’s primary
selling point? Have we become some race of info-hamsters, running ever faster on our exercise wheels. The thought that we must
save a few seconds in a Web search is enough to make one yearn for the quiet, calm (and often frustrating) routine of thumbing through a library’s printed card catalogue. Instant looks more interesting when seen as a way to turn a search into a conversation: You type a query, see what Google suggests for a match, then revise, check its suggestions again, revise further, and so on. Except, instead of having to click the “Back” button or hit the backspace key, all this happens on one page. It can become a weirdly compelling sort of man-machine synthesis. But the more conversations
you get into with Google, the more the site can learn about your interests, especially if you’re signed into a Gmail account while you search. You can opt out of Instant in
any given search by clicking the “Instant is on” menu to the right of Google’s search and selecting “Off,” or you can disable it for all searches in your Google account’s search preferences. You can also avoid Instant by using the search form at the top of your browser — what I normally employ myself. But Google says it will bring Instant to those search shortcuts, and to Google’s mobile software and services, in the coming months. To judge from the negative tone of many reader comments about Instant, there’s an opening for Google’s competition. And for once, Google’s foremost competitor has the resources to pose a serious challenge. That company, Microsoft, launched its surprisingly good Bing site last year; has since been quietly rolling out such useful tweaks as specialized searches for lyrics, music, videos and games; and recently took over providing search results for Yahoo.
But Bing and Yahoo combined
trail far behind Google. In ComScore’s numbers for July, its most recent, both sites had gained only a fraction of a percent in market share from the month before, adding up to 28.1 percent of the U.S. market. Google, meanwhile, held 65.8 percent. That’s not an easy lead to overcome, especially when you consider how most Web users get accustomed to using the same search site every day. Here’s where I have to note
that I didn’t pluck those ComScore figures from an e-mail waiting in my inbox; I had to look on the Web for them. And despite my professional interest in keeping up to date with all the major competitors in this market, I almost instinctively went to the same search site as ever: Google.
robp@washpost.com
Living with technology, or trying to? Read more at voices.
washingtonpost.com/ fasterforward.
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