Friday, May 16, 2008, 11:39PM ET - U.S. Markets Closed.
I've got one word for you: "diversification."
Wait! Don't hit the "back" button on your browser just yet. We need to talk about your portfolio, specifically those investments in your IRA, 401(k), or other retirement accounts that keep you up at night.
In order to get some quality Zs, you need a solid asset-allocation plan -- meaning a portfolio with a bunch of investments that don't always move in the same direction.
To accomplish that, it all comes down to -- you guessed it -- diversification. Please have a seat.
Spread the Wealth
Think of portfolio diversification as having a bunch of prom dates lined up: If one turns you down, you're not completely crushed, because you've arranged for a backup date -- one you're pretty sure will be giddy at the sight of your powder-blue tux and seasoned moonwalk.
In investing terms, diversification works like this: Instead of investing all your money in one place -- say, putting 100% in small companies’ stocks, or keeping it all in cash -- the idea is to hold a mix of asset classes. A portfolio spread out among, for example, small U.S. stocks, large international stocks, bonds, and emerging markets offers a much smoother ride -- a bad run for one asset class can be offset by another that's having a bang-up year (or at least one that's not so bad).
Does that describe your portfolio? If not, it's time for an annual investment makeover -- or, in Wall Street-speak, it's time to rebalance your portfolio.
Bring Re-Balance to Your Portfolio
Rebalancing simply means buying and selling investments to minimize your exposure to risk. The concept is simple, but the execution can get complicated, particularly if you have multiple investment accounts (IRAs -- Roth and traditional, old 401(k)s, current 403(b)s, etc.).
At The Motley Fool, we're believers in four main rebalancing strategies:
Dayana Yochim sincerely apologizes for not getting the economy back on track since last month's disaster-preparedness drill. Although they're not handing out economic stimulus checks over at The Motley Fool, where Dayana's the consumer-finance guru, they are offering plenty of sound long-term money management strategies. And hugs. Lots of hugs.
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| Loan Type | Today | Last Week |
|---|---|---|
| 30 Year Fixed | 5.76% | 5.69% |
| 15 Year Fixed | 5.36% | 5.28% |
| 1 Year ARM | 5.90% | 5.85% |
| 30 Year Fixed Jumbo | 7.04% | 6.97% |
| 5/1 ARM | 5.23% | 5.09% |
| 3/1 ARM | 5.20% | 5.02% |
| Loan Type | Today | Last Week |
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| $75K Home Equity Loan | 7.56% | 7.50% |
| $30K HELOC | 5.01% | 5.02% |
| $50K HELOC | 4.49% | 4.17% |
| $75K HELOC | 4.48% | 4.16% |
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| 72 Month New Car Loan | 7.19% | 7.10% |
| 36 Month Used Car Loan | 7.16% | 7.17% |
| 48 Month Used Car Loan | 7.05% | 6.89% |
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| Cash Back | 11.47% | 11.46% |
| Business | 11.10% | 10.91% |
| Airline | 12.75% | 12.69% |