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Five great investment moves for 2011


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There is no better time than the new year to groom your portfolio. We have already had a few good years in the stock market and some great years in the metal and bond markets. Now may be the time to consider some of these steps.

1. RE-BALANCE YOUR GAINS

I hope 2010 left you with some good gains on your investments. A key to locking in those profits is re-balancing. For example, if you have $10,000 in a mutual fund and it is now $12,000 then sell the two-thousand dollar increase.

This way you still have the bigger part of the position, you have limited your exposure to an appreciated (and possibly overpriced) asset class and you have "locked in" your gain. If the fund drops you have your $2,000 profit out.

2. SLOWLY INCREASE EXPOSURE TO "RISK" ASSETS

I believe the stock market will finally respond with some respectable and lasting growth. The previous two years have been up and this year could continue positively. We will definitely see volatility throughout this time. But...we could see increased risk-taking rewarded.

The main "risk" assets are stocks in all of their flavors. Some examples are small-company, mid-sized, sector, real estate and international equities. Improving markets usually benefit these riskier classes.

I would avoid the areas that have gone up too much. For example, gold and other precious metals, certain international markets or high-priced (low-earning) individual stocks.

3. ALLOCATE LESS TO GOVERNMENT BONDS

Federal interest rates are at their lowest in history. Up is really the only way for them to move...eventually.

What bond sector usually gets hit the hardest when rates change? Often U.S. Treasury bonds get whipsawed during interest rate moves. So keep a smaller amount in this area.

4. LOWER BOND & CD MATURITIES

For the same reason you want less government bonds you want to lower the overall maturity of other fixed income investments. Fixed income values can be unstable during rate moves.

Also, the last thing you would want to do now is lock in a long-term CD. It might be tempting compared to other low-yielding investments. But when rates jump up that 10- or 20-year CD will pale in comparison. Keep these maturities short.

5. LEARN MORE

Always inform yourself. There are vast free resources on the internet that will help you make decisions or help you start a conversation with your advisor.

Some of the better sites are Morningstar.com and Investopedia.com. The first site has good articles, in-depth tools for understanding your portfolio and helpful investment-specific details. Investopedia is my favorite. It has articles covering basic to advanced topics, tutorials, a stock simulation game and acts as an encyclopedia of investing.

Any of these steps can help you improve your portfolio. Do not stop with these ideas. As you know, the investing landscape is always moving. Pay special attention to idea number five and continually update your investment IQ.
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Ron Phillips

Ron Phillips is an Independent Financial Advisor and a Pueblo, Colorado native. He and his wife are currently raising their two sons in Pueblo. Order a free copy of his book "Investing To Win" by visiting www.RetireIQ.info or leaving a message on his prerecorded voicemail at 924-5070. Simply mention Promo Code #1001 when ordering.

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