Investing Today

Several years ago, probably in 2002 or 2003, my brother and I were talking about summer and second homes and what to do with a chunk of money that my wife and I had squirreled away. My brother is a real estate guy, corporate investment in apartment buildings across the country. He was one of the people in my circle that was an early and vocal proponent of 'buy real estate, the value will always increase'. Thank God i didn't listen to that piece of advice. I decided to buy into a business partnership that I was able to flip in a year, make some money and then lose it all in a big professional mistake.

Now, that was me and that was a few years ago. The big question is - what do you (or I) do today with investable assets?

This is a time where I tell all of the non-financial types in my life to get back to the basics. These basics are really simple and should always be followed. Chasing stock market riches when you're not 'in the market', so to speak, is foolish. If you do not buy-and-sell stocks or bonds or ETFs for a living, don't think that you're going to be able to compete and beat the hedge funds and the mutual funds that have killed off 7+ years of gains in a little over 6 months.

Here's the basics -- and I'm just reinforcing things that everyone really knows and forgets about.

First - make sure that you have 6 months worth of expenses in a very liquid savings vehicle. The standard rule of thumb is for you to have 3 to 6 months of expenses, but the national unemployment rate has been growing for over a year and now is the time to be conservative if you (like i) work for a living. These 6 months of asssets should be held in a combination of money markets and CDs with a very short (3 month) maturity. I found a really good emergency savings calculator over on BankingMyWay.com if you need to figure out how much you need to have.

Next - if you have less than $10,000 in assets to invest AFTER you consider your emergency fund, you need to have a diversified portfolio, so i would look into the so called Asset Allocation funds. These funds create a diversified portfolio based on target dates. These funds determine an average risk tolerance and create a balanced and diversified portfolio based on a basic risk profile of an individual targeted the maturity term. This basically means that if you need your assets in the next 15 years or so, you should be looking into a fund with a maturity target of 2020 -- these portfolios are constantly rebalanced with adjusted risk based on the projected need.

Finally - as you accumulate assets, we actually recommend that you do a couple of things. If you are hesitant about direct investing (as most of us are), let someone else do it. Either continue with the asset allocation strategy outlined above, or hire someone that you trust and knows what they are doing to help you. This is not the time to go it alone and most importantly, don't go it in the dark. Historically, there's been no 10 year period in US history that has had an overall drop should you invest in stocks. If you keep your assets working for you (not in a buy and hold forever strategy) there's no reason why you can't rebuild your nest egg and get back on track.

We've all been hurt by the drop in the value of the stock market. But honestly, now isn't the time to pull everything out and put it under your matress -- that time would have been back in March of 2008. Now that we're in December we all need to rebalance, refocus and continue marching down the track to success.