Money
crafts should depend on two things: is that it’s OK to keep contributing a safe fi nancial haven. Your bro-
an individual’s investment horizon when markets are low because you ker should assure you that what is
and risk tolerance. How much time are buying more shares at a cheaper important right now is being able
an investor has before withdraw- price, and that will pay off when mar- to continue to pay your mortgage.
ing money, whether for college or kets go up again. That’s the only way to guarantee
retirement, will factor greatly in If you make infrequent deposits, an increase in equity, regardless of
how much re-strategizing investors or maybe only at the end of the year, where the market goes.
should do now. your broker should warn you that
you are taking on the risk of the mar-
4
If we had a plan, did it per- ket in its current position. 8
How long before the
market heads back up?
form up to expectations? Another strategy, known as asset- Honestly, no one can predict the
Your adviser should know as much liability management, requires a bro- future. In fact, few people can predict
if not more about your portfolio than ker with a much more hands-on where the market or where any indi-
you. He must have on hand perfor- approach. Many large companies vidual investment will head from one
mance metrics for the portfolio and and banks use the strategy to ensure day to the next. But the way advisers
each stock, bond, or fund in it, as well they have enough cash to pay off respond to fl uctuations should give
as data on how each of those segments liabilities as they come due. Your bro- you some clue about how well they
fared against industry averages. ker can use it to ensure that you have understand the foundational dynam-
If those numbers are not part of adequate reserves for taxes, college ics of the market.
a discussion, then you may want to education, or retirement. As Warren Buffett once said, “In
fi nd another broker. the short term the market is a popu-
larity contest; in the long term it is a
5
Am I being realistic about 7
What are your thoughts on
real estate? weighing machine.”
my tolerance for risk? Real estate was once thought of as You and your broker need to be
Chances are you already have dropped the ultimate investment, because sensible about your money, and take
below your risk tolerance fl oor. But there’s only so much land. But we’ve control over it. “If you don’t have a
given current uncertainty, no one can all seen that theory crumble dur- plan, now is certainly the time,” said
assume that the markets have hit bot- ing the past year amid the housing MarketWatch’s Powell. “If people
GES
tom. As one Wall Street insider put bubble’s burst. with a plan have been hit hard by this
TY IMATY
it, “People have to get reacquainted Real estate still might be a good market, imagine how those who ho
GET
/
GET
with the standard risk measures of place to invest, but it’s no longer don’t have a plan are doing.”
BEER/BEER
portfolio investing. It’s one thing
to say these things average out over
time, and a whole other thing to live
THE ECONOMY IS HURTING. DRINK UP!
through them.” IF YOU HAVE BEEN INVESTING IN BEER, YOU WIN. DURING THE PAST YEAR, THE
Only you can know for sure how
Dow Jones U.S. Brewers Index has risen almost 18 percent. Anheuser Busch is up almost
much risk you can absorb, but it will
40 percent, while the rest of the market is down from its all-time high set in September
2007. Meanwhile, it’s no surprise that mortgage fi nance and insurance, two of the hardest-t-
pay to educate yourself on investing
hit industries, lost almost 100 percent of their value in 2008. — S.P.
basics, terminology, and strategies
so you will be able to ask intelligent
10 Best-Performing Industries 10 Worst-Performing Industriesstries
questions or play devil’s advocate
% change * % change *ange *
when you have that conversation
with your broker.
Brewers 17.91% Mortgage Finance -94.31%
Biotechnology 3.90% Full Line Insurance -94.06%
6
How are we protecting Aerospace & Defense 0.60% Consumer Electronics -78.01%
my money?
Railroads -1.21% Gambling -73.22%
As you age, your fi nancial adviser
Electricity -3.72% Platinum & Precious Metals -72.18%
must make sure your investment
Waste & Disposal Services -10.65% Tires -71.91%
strategy ages with you. The simplest
method, called dollar-cost averaging,
Trucking -10.80% Nonferrous Metals -70.37%
involves investors making regular
Broadline Retailers -11.20% Aluminum -69.72%
monthly deposits into an interest- Insurance Brokers -12.84% Automobiles -69.42%
bearing account such as a stock port-
Nondurable Household Product -13.42% Travel & Tourism -67.57%
folio or savings account. The idea
*As of November 10, 2008
72 NEWSMAX MAXLIFE / JANUARY 2009
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