For investors who are eager to start 2012 on the right financial track,
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Make periodic adjustments
While the New Year may be a time for many to evaluate their financial plans, investors should keep in mind they don't have to reallocate their whole investment portfolio at once. In fact, investors may want to consider reallocating one-third of their money in January, another third in February and the final third in March. Then continue this pattern of reviewing and/or reallocating one-third of their portfolio each month.
"This strategy helps long-term investors develop good investing habits
and avoids the ‘set it and forget it' mentality by keeping them
constantly engaged in their portfolio," said JJ Kinahan, chief
Embrace market volatility … with a little help
Options might seem foreign to most long-term investors, but many investors are finding them useful in volatile, flat, up or even down markets. While subject to unique risks and not suitable for everyone, qualified investors who need some additional guidance with options might consider taking advantage of free online financial education courses such as TD Ameritrade's "Introduction to Options." Or for those investors interested in speaking to an independent registered investment advisor (RIA), TD Ameritrade's AdvisorDirect™ service can refer investors to knowledgeable, independent RIAs who can help them pursue their investment goals.*
Be informed on diversification
The market meltdown of 2008 was a reminder that worldwide markets are highly connected. Diversification is important because if one country's economy fails, it is likely to impact other economies as well. Investors may want to think about diversifying across sectors rather than economies.
Investors can use online tools to better understand their portfolios' exposure to different investment styles, geographic regions and sectors. Third-party research can help investors make educated decisions and implement the trading or investing strategy that they decide best fits their needs.
If an interest rate seems too good to be true, it just might be
When a 10-year corporate or foreign bond is paying 10 percent or higher at the same time the 10-year U.S. government rates are at 2 percent, investors should understand the reason. Anything that is more than 2 to 3 percent higher than government rates will likely have greater risk associated with it. For investors, financial education is key to making informed decisions and recognizing potential risks.
Just because it's a guaranteed government bond, doesn't mean it can't lose value
The word "guaranteed" associated with U.S. government bonds refers to the timely payment of principal and interest. The government does not guarantee that the bond itself will not lose value. So investors should be aware that their principal can fluctuate. Investors should do their research and be sure they understand the full risk, as with any investment.
*Options are not suitable for all investors as the special risks
inherent to options trading may expose investors to potentially rapid
and substantial losses. Options trading privileges subject to
Potential AdvisorDirect clients should typically have at least
Investments in bonds and other fixed-income products are subject to liquidity (or market) risk, interest rate risk (bonds ordinarily decline in price when interest rates rise and rise in price when interest rates fall), financial (or credit) risk, inflation (or purchasing power) risk and special tax liabilities.
About the Survey
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