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The author is a certified financial planner and first vice president with Cassaday & Co. in McLean, Va. Yes, the stock market is down for the third year in a row, and never before have so many ordinary Americans held so many corporate icons in such low esteem or expressed such profound mistrust of Wall Street. Every day brings bad news for legions of employees and investors. But many sound companies are “on sale” right now. While much has been reported about wiped-out savings and altered retirement scenarios for older investors, today’s market may actually turn out to be excellent for most investors. To make the most of this opportunity, all you have to do is apply a few sensible rules you’ve heard since childhood. Do Be a Diversifier Well, this isn’t exactly something we have to go through college to learn, is it? The funny thing is, many of the investors who were severely burned by the tech bubble implosion didn’t live by this simple rule. Otherwise intelligent people decided that that one stock or that one sector was their ticket to the good life. They bought as much as they could, dreamed big dreams about the payoff, and then held onto their stock in quiet desperation as it sank like a rock in a muddy pond. In the investment business, we strongly encourage diversification: spreading one’s eggs among several investment baskets. Ideally, the portfolio should be diversified by capitalization (company size), market sector and risk level. As investors approach retirement age, diversification might also mean adding investment instruments that create income and are less subject to fluctuations in principal. There is no portfolio that is perfect for everyone. Portfolios should be age-appropriate, risk-appropriate and suitable to the special needs of each investor. Buy Low, Sell High Again, this is so basic that it seems embarrassingly obvious. Yet few people manage to do it because it goes against human instincts. This tenet is at the heart of the doctrine known as periodic rebalancing, which causes most investors real heartburn. For example, imagine that your portfolio holds stocks and bonds. Your original allocation was 25 percent in bonds and 75 percent in stocks. Over a period of time, the bond portion has increased in value and the stock portion has gone down in value. Assuming your original reasons for allocating your investment dollars in this manner remain valid, it is time to sell a portion of your bond holdings to buy more stocks. I know, it’s painful. This difficult action restores your asset allocation and rebalances your portfolio. Over the long run, periodic rebalancing should help to reduce the type of risk associated with market volatility. Different sectors of the economy perform well at different times, and trying to guess when the market is about to go up or down, or timing the market, is a game no one should ever count on winning. Pay Yourself First There are so many wonderful ways to spend money these days; great restaurants beckon, and there are so many gorgeous homes to let us live and entertain in the style to which we would very much like to become accustomed. But the paycheck that seemed so generous at first just vanishes when it meets the urge to splurge. Make a plan on day one. Ask your payroll office to take a little off the top every payday and send it to a savings or investment account. By starting this now, you can avoid the pain of paring back later. It’s very difficult to make up for lost time when it comes to investing. If your firm or company offers a retirement program with matching contributions, enroll in the plan as soon as you are eligible. Although you may be many years away from retirement, choosing not to participate now is a bad financial decision. A qualified plan with employer matching helps you reduce taxes on current income, prepare for a more secure financial future, and provides free money from your employer. What’s not to like? Borrowers Beware Debt is probably the single most destructive force in financial nature. Using borrowed funds to finance today’s lifestyle needs has derailed countless wealth-bound engines. Just as the magic of compound interest can turn a modest savings plan into a successful investment strategy, the insidious nature of borrowing can eventually turn a modest credit card balance into an overwhelming financial obligation. If you have student loans or other left-over debt from college or graduate school, commit yourself now to making them go away as quickly as possible. When prioritizing debt payments, first pay off the loans with the highest interest rates. Look into loan-consolidation programs to determine whether or not it is in your best interest to turn several student loans with different interest rates and payment terms into a single loan. If debt is part of your financial reality, resist the urge to take on more of it right now, even if your local banker is willing to help you get in a bit deeper. That new sports car and the golf club membership will still be there in a few years, when circumstances should make paying for them somewhat easier. Be Prepared In financial terms, this means setting up a savings account with the ready cash equivalent of three months’ salary, purchasing insurance to manage the risks associated with loss of income or property, and establishing the basics of your estate plan. And lawyers must remember: Don’t be like the marriage counselor with three divorces behind him. Be mindful of your own personal planning issues and create an orderly financial house by keeping good records, having risk-management vehicles, and writing wills. No Free Lunch Although we are all on guard in our personal lives against things that sound too good to be true, there is a tendency to forget this old adage when investment opportunities come our way. The tip you get when you join a new foursome on the golf course, the IPO you hear about from a friend or business associate, and the chance of a lifetime offered by your brother-in-law are potential grenades. Whenever you invest money, be sure to do it for the right reasons and think it through carefully. Of fear and greed — the two emotions that most often impede financial success — greed can be the more destructive, causing us to set aside our usual caution and give in to a desire for immediate gratification. The more thoughtful analysts in the investment arena today remind us that in the heady days of the tech boom, many so-called experts announced that the old rules of investing no longer applied, that it was a whole new paradigm. They were wrong. Earnings, cash on hand, and good old-fashioned corporate integrity still matter — and they continue to be indicators of a good investment potential. Keep on Learning Spend some of your valuable time learning to help yourself. When my older clients ask me to sit down for a financial chat with their 20-something offspring, I follow up by sending a copy of a good book that was written quite a few years ago. The Richest Man In Babylon, by George Clason, is a collection of essays that provide simple but powerful wisdom on the subject of money. The Millionaire Next Door, by Thomas Stanley and William Danko, gives readers a few good rules to live by financially, the most important of which is to “live below your means.” What it comes down to, as these authors emphasize, is good planning, discipline and some old-fashioned common sense. Notwithstanding the gloomy headlines, these are very good times to invest in your future — if you make the time and the effort to understand how to take advantage of present opportunities.

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