Now that the worldâ€™s economic outlook appears less gloomy than in months past, Black Enterprise wants to make sure you participate in the recovery. To do so, we talked to some of the smartest people we know, asking these â€śall-starâ€ť experts: â€śWhatâ€™s the best advice youâ€™re offering friends, family, and clients now?â€ť The result is a collection of timely tips to guide you in making financial decisions.
Rebalance your portfolio while sticking with your long-term investing plan.
Rebalancing means that sometimes you will be doing things that are counterintuitive but that will work to your advantage in the long run. Rebalancing forces you to sell things when theyâ€™re high and buy when theyâ€™re low. That sounds easy to do, but emotionally itâ€™s hard. Most investors operate on a very short-term emotional basis, which is a recipe for disaster. Thatâ€™s why a lot of 401(k) plans offer the option of automatic rebalancing. Thatâ€™s something Iâ€™d take advantage of.
Itâ€™s important to have a mix thatâ€™s appropriate for your age, your risk tolerance, or how much youâ€™re willing to lose. For example, a thirty-something may want to be 80% in stocks. But somebody near retirement may want to be 40% in stocks. Bonds tend not to go up and down in value as much. Theyâ€™ve done much better than stocks during this downturn. Also, invest consistently. The worst thing you can do is not contribute to your 401(k) because the market has gone down. If you canâ€™t sleep at night, instead of reducing your contributions, put them in a money market fund for a period of time.
REAL ESTATE TIP
Donâ€™t rush to buy or sell because of housing market price projections. Do it when the time is right for you.
What I see a lot of these days are people worked up and anxious about market timing. Buyers are frantically trying to get in while prices are lowâ€”and in time to get the [up to] $8,000 first-time home buyerâ€™s tax credit [which expires Dec. 1, 2009]. Would-be sellers are trying to figure out whether they can afford to sell and when they should list to get top dollar.