Two reasons you'll never see me write stuff like, "Investments You Absolutely Must Have in 2010."

First, the notion we need new investments just because the calendar turns is ludicrous. Second, I don't know which investments will perform best in 2010. I won't know until 2011, just like everybody else.

Rather than waste your time with useless lists, I'll emphasize timeless investment principles for 2010 and beyond. But I can hear you now. You also want specifics, not just concepts.

I'll give you specifics, too. But they are just examples, not recommendations, and it's up to you to decide whether any investment idea I discuss is suitable for you.

First, the principles: Define your goals, develop a sensible long-term plan to reach those goals and have the discipline to follow it. As to specific investments, there are many worth considering. Among them:

--A broadly diversified portfolio of low-cost funds, including index mutual funds and/or exchange-traded funds (ETFs).

You can find model portfolios at the free Web site www.fundadvice.com, including portfolios of ETFs you can buy at discount brokerage firms and of mutual funds from no-load firms Vanguard, Fidelity and T. Rowe Price. The site also includes an archive of excellent investment articles, including, "The ultimate buy-and-hold strategy" and "Fine-tuning your asset allocation."

--A diversified portfolio of dividend-paying stocks, reinvesting dividends to buy more shares and adding new money regularly.

"By making regular investments you end up buying shares at lots of different price points," buying more when prices are down and fewer when prices are up, said Vita Nelson, publisher of The Moneypaper and Direct Investing. These two newsletters, available by subscription, focus on stock dividend reinvestment plans (for information and a free sample issue, go to www.directinvesting.com -- the site is also available in Spanish).

--So-called "moderate allocation" or "balanced" mutual funds that include stocks and bonds and sometimes commodities, real estate and precious metals.

These funds are less volatile than all-stock funds and investors are more likely to stick with them, studies have found. Some funds in this category with solid long-term records that I own or have owned include FPA Crescent, funds from the Manning & Napier Pro-Blend series, Oakmark Equity and Income, T. Rowe Price Capital Appreciation and Vanguard Wellington.

Places I use to research funds include the Web sites of Morningstar (www.morningstar.com) and of the not-for-profit American Association of Individual Investors (www.aaii.com). Both offer a significant amount of content for free. Other content is by subscription, including from the AAII its annual "Guide to the Top Mutual Funds."

--An immediate lifetime income annuity from a highly rated insurance company.

A lifetime income annuity pays you a monthly sum for life in exchange for a lump-sum premium. Rather than an investment, consider it as insurance against running out of money in old age. A paper by the Center for Retirement Research in Boston College suggests retirees consider such an annuity to cover basic expenses.

Among insurance companies offering income annuities, New York Life boasts the highest safety rating, competitive payouts and a wide variety of income options, including emergency access to money and payments that go up to offset inflation (I own an income annuity from New York Life). The ELM Income Annuity (www.elmannuity.com) from Principal Life Insurance Company also offers inflation protection options and good payouts. Do-it-yourselfers can also purchase income annuities from different companies through Fidelity (www.fidelity.com). I have bought two, issued by Principal and Genworth Financial.

 

 

Make Your Financial Resolutions
Andrew Leckey

Negatives will linger into 2010, making it a year to tread lightly but carry a big emergency account. Market volatility is certain to continue. The most significant potential boost to stocks could come from an improved jobs picture that makes all investors breathe a sigh of relief.

 

Timeless Investment Principles More Valuable Than Stock Picks

(c) 2009 Humberto Cruz