Don't get stuck in financial gridlock. By learning the basics, you can steer your finances onto the road to prosperity. .

financial pages daily. One option: using be as a resource by reading the monthly Moneywise section, visiting the Investing page of or getting a copy of the be Wealth-Building Kit (which includes a glossary of commonly used investment terms).

  • Identify a specific investment strategy. Such factors as goals, age, time and risk will determine where you park your money. For instance, the closer you get to retirement, the more likely you are to be conservative and income-focused. If you lose money, you’ll have less |principal for living expenses and less time to recover. The longer you have until retirement, the more aggressive you want to be because you have time to wait out market cycles. So what should you do? Structure your portfolio-your mix of assets-based on your goals and time horizon. For example, high-priority objectives should be placed in less risky investments such as Treasury notes, Treasury bills or blue-chip stock and bond mutual funds. Remember that lower risk translates into lower returns and, therefore, it will take more time to reach your objective. With less immediate goals, you can assume more risk-that is, if you’ve given yourself enough time to realize your objectives and recover from dips in the market.
  • Consult experts when necessary. With the advent of online brokerages, many experts advocate “do-it-yourself investing.” However, make sure you have the time to make the right moves. And, by all means, don’t start off day-trading. That would be like getting behind the wheel of a Formula One race car with a learner’s permit.
  • Investment advisors and brokers can be helpful at times. When dealing with a broker, however, write down your financial goals and have your broker sign a copy of that docume
    nt. Keep an eye on your monthly brokerage statement and inquire about all fees.
  • Determine how you want to allocate your assets. A 1991 study by researchers Gary Brinson, Brian Singer and Gilbert Beebower found that the determining factor in investing came down to asset allocation. In fact, the investment mix accounted for 91.5% of the difference in the returns of the investors they surveyed.
    As you plot your mix of investments, figure out how much of your portfolio should be allocated to stocks by subtracting your age from 100%. For example, if you’re 35, you should place 65% of your assets in stocks or stock-based mutual funds. A great primer on how to develop an asset allocation model can be found in the book Getting Started in Stocks by Alvin D. Hall (John Wiley & Sons, $18.95). The four steps outlined in the book are: (1) determining the class of assets-stocks, bonds and cash equivalents; (2) determining the amount of money needed to invest in each class; (3) investing in specific securities based on your goals; and (4) the amount of money to be invested in each security (see chart). Mutual funds represent one of the best ways to achieve portfolio diversity as well as professional management. Because of this, mutual fund assets have grown to $5 trillion

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