My money makeover: what you can learn from expert makeovers of real-life investment portfolios.

Author:Korn, Donald Jay
Position:PERSONAL FINANCE
 
FREE EXCERPT

IF YOU BLINK, YOU MAY MISS THE NEXT MAJOR STOCK market move. For anyone who follows the financial markets, 2010 has been topsy-turvy. In the first three months of the year, stocks maintained the pace of 2009's rebound and moved up nicely. But spring turned out to be a disaster as Greece's debt woes threatened Europe's financial stability, and slow job growth in the U.S. raised concerns about economic recovery. At the halfway point of 2010, U.S. and foreign stocks were down sharply. Those ups and downs are likely to continue in the months ahead.

In times like these, it's important for all of us to return to the fundamentals of investing. That is, properly spreading risk by diversifying your portfolio of holdings among various sectors of the global economy and efficiently allocating assets among stocks, bonds, cash, and commodities.

The financial headlines are littered with reasons to apply these tried-and-true principles. Many categories of mutual funds were losers in the first seven months of 2010. Foreign stock funds lost ground, especially those with European holdings. Other poor performers included funds with heavy exposure to commodities, especially oil, and healthcare funds. The bottom line? We seem to be in a market without clear trends.

To protect yourself from future market turbulence, it's wise to hold a mix of various funds that own different types of stocks. And don't forget bond funds, which can deliver lower risk to your portfolio. So, how do you gauge whether your portfolio is equally balanced in terms of the investments it contains--and the amount of your nest egg divided among various types of assets? In this article, you'll read about investors who, while serious about securing their financial future, are in need of some help when it comes to balancing and properly allocating their holdings in a way that fits with their goals. BLACK ENTERPRISE asked financial advisers to evaluate each of these investors' strategies and suggest ways to navigate today's uncertain markets.

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THE REHAB SPECIALIST

Kandria Daniels, 35, Chicago

Value of invested assets: $40,000

Current savings strategy: As a certified rehabilitation counselor, working for a company that processes disability claims, Daniels specializes in helping people get back to work. Now she warns to find out if she should rehab her investment strategy.

Daniels' strategy has been to balance the types of mutual funds in her 40l(k). She has a stock fund, a bond fund, and a stable value fund. (Stable value funds generally invest in short-term, high-quality bonds that have low risks and low returns.) Within those funds, she has invested 77% in bonds, 15% in domestic stocks, 3% in foreign stocks, and roughly 5% in cash equivalents. She's now contributing 5% of her income to her 401(k), even though her company matches up to...

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