Financial rejuvenation

• Favor straight-forward investments and avoid complicated strategies. Never make an investment that you don’t understand clearly where the return is coming  from.
• Get good advice, but think for yourself. Trust but verify.
• Stay away from hot tips, market cheerleaders and doomsayers. It seems to be in our nature to favor these extremes, yet the most serious investment mistakes can usually be traced back to extremes of fear or greed.
• Understand and monitor your investment costs. In an uncertain environment it’s something concrete you can control that will have a tremendous impact on your overall returns.
• Make the power of compounding work for you, for compounding makes time your ally. Combine compounding with dollar cost averaging and you have a powerful investment strategy.
• Since we can’t spend pretax dollars, invest for after-tax returns. Still, don’t let tax strategies drive your investment plan, but keep them in proper perspective.
• In a frustrating low interest rate environment, there can be great risk in reaching for higher, ostensibly safe yields. Conservative investors lose a lot this way.
• Don’t underestimate the benefits of diversification. Most investors suffered last year, but for some, over-reliance on a few big names in their portfolio turned a market loss (which can be recovered) into a capital loss, which cannot.
• Use asset allocation to control risk. Your mix of stocks, bonds and cash and the way you rebalance are the key determinants of both risk and return over the long term.
• Think more about your investment behavior than market predictions. Did you have the means and discipline to buy stocks or funds in 2009 when stock prices were low? Will you next time around?
• Overconfidence is a snare that drags down investors time after time. Women seem less prone to this, and are better investors for it.
• Finally, give yourself credit if you stuck out the market declines and have been there for the partial recovery. Volume was massive on the worst days of the market declines, and many investors sold out at the bottom.

Steven Webber is a registered investment advisor and director of investments for the Bedminster Group, providing investment, estate and financial planning services, with offices on Hilton Head Island and in Bluffton.

TIPS TO START 2010 RIGHT

• Go through your financial files and toss what you don’t need. In general, you should keep your tax returns forever, but you can get rid of supporting documents after three years (six years if you have self-employment income). You can get rid of monthly investment statements after everything matches with your yearend summaries. You can also toss ATM receipts as soon as the transactions appear on your monthly bank statement.
• Invest in a shredder to protect your identity from being stolen.
• Be aware of the amount you owe and payment due date on credit cards. Check statements for unauthorized charges, which could indicate ID theft, rate changes, credit limit changes and any additional fees that may have been added on.
• Review your insurance with your insurance agent. Most people have homeowners or renter’s insurance as well as auto. But life, long-term care and disability insurance are important, too.
• Protect your loved ones and write or update your will.
• Balance your budget against your needs. Start each budget category at zero. Then, evaluate what you actually need and find the cheapest way to fill that need.
• Signing up to have your bills paid automatically from your bank account protects you from costly missed deadlines.

Sources: www.wisebread.com; CCCS of the Savannah Area; monster.com