Your New Year
Investing Checklist:
The 10 Most Important Elements!

Every investor's situation is unique, and you have to make all the right moves that are right for your own situation.

You can use the following list to stimulate your own thinking and make your own checklist and moves!

1. Get the Most from Your Cash:

If you have cash in a money-market fund, you know you're not making much money. You can probably do better than you think if you're willing to do a bit of shopping.

2. Shop for Interest Rates:

If you have money in a bank, find the highest interest rate you can to protect you against inflation.

For example, a regular interest-bearing checking account pays a miserly 0.1 percent. That is essentially a joke!

3. Review Your Emergency Fund:

This should be money you don't think you will need any time soon. Try to make this money work harder for you.

A short-term bond fund will pay more than a money-market fund without much additional risk. If you think you probably won't need this money for four or five years, consider using a fund that owns both stocks and bonds.

4. Check Your Asset Allocation:

The way you allocate your assets is the most important investment decision you will make. Your investment plan should specify your percentage allocations between fixed-income and equity investments.

Within the equity part of the portfolio, you should have target allocations for funds as well as for big-company stock funds and small-company stock funds. Your plan should also specify how much is to be in value stocks and how much in growth stocks.

If you have a financial advisor, set up a meeting to evaluate your current allocation. The advisor can suggest any necessary changes.

5. Rebalance your Investments:

After a year like i.e. 2006, when equities seemed to go through the roof, your investments may have taken you some distance from the proper allocation you determined for yourself.

If you began the new year with a portfolio equally split between stock funds and bond funds, you might be able to change it with about 60 percent of your total in equities and only 40 percent in fixed-income funds.

What's wrong with that? Too much risk. A portfolio with 60 percent in equities is riskier than a 50-50 portfolio.

Rebalancing gets you back on track. And thereʼs another benefit:

By rebalancing you will be taking some of last year's profits "off the table" and spreading them around.

This is called buying low and selling high. Rebalancing makes it automatic.

6. Diversify:

Maybe you think you're already properly diversified. But the vast majority of portfolios are not that well put together.

Most portfolios are heavily over weighted in large-cap growth stocks. That may seem fine in a year like the one we just experienced.

But diversification pays off in good times and bad. It's a rare investor whose equity portfolio couldn't be improved by adding one or more of three kinds of funds:

Value, small-cap and international.

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