The Money Mom: What to do with your money in 2010

It looks like 2010 will be a great year to refinance or buy a home, a volatile year for investors, and a rough year when it comes to your taxes and credit cards. From CBS money watch, here’s how to make the smartest money moves as we begin the next decade.

So, where to invest in 2010? Your  mattress? Real estate? Banking? Many experts are predicting an economic landscape they call the “New Normal,” with slow growth and less-than-spectacular investment returns. But that doesn’t mean that the space in your mattress is your best investment. In fact, with interest rates at or close to all-time lows, your best moves in 2010 may be to refinance your mortgage and find ways to shield your income from taxes. And there will be plenty of investing opportunities.  Money watch says look for them in stocks that pay dividends, short-term U.S. government bonds, and foreign stocks and bonds. To protect yourself from inflation, a dose of commodities and Treasury Inflation Protected Securities (TIPS) might be a good idea as well.

One reality of 2010 and beyond: The U.S. government is looking for money, and affluent taxpayers are likely to be the easy target. Credit card companies will also be looking for new ways to get your money. In future blogs, there will be strategies to protect yourself against both, including an explanation of the new Roth IRA rules and the home buyer tax credit. And keep an eye on the federal estate tax — opponents call it the “death tax.” It’s supposed to vanish in 2010, but it’s possible Congress will keep it alive.

This is the first part of a three-part series on what to do with your money in 2010

Stock market

After a large up swing from the March low, the stock market is up more than 60 percent, which leaves investors with a question: What are the best investments for 2010? Should you buy the stocks and mutual funds that did the best in 2009, in the hope that they will keep on growing in value? Or should you sell to be ready for the adjustment to price? I say no. Many financial experts do expect a stock market slowdown or correction in 2010, but it’s to short of time to be able to take advantage of the market pricing. Instead, build a balanced portfolio, and make sure you have some investment in high-quality growth stocks that have stable earnings, high dividends and low debt.  Read more at http://moneywatch.bnet.com/investing/article/best-stocks-to-buy-now/367074/

There is always two sides to the story.  “Some of what I hear about the ‘new normal’ seems like utter nonsense,” says James Swanson, chief investment strategist of MFS Investment Management, a mutual fund firm. He believes companies are in a “Never-Never Land sweet spot” with rising profits and low inflation, and that pent-up consumer demand will boost revenues. “The average age of cars on the road is 9 years. Pretty soon those cars will need to be replaced,” he says.

We will talk about mortgages and credit cards next.

The Money Mom

GoRapids.com Money Mom: Investing is Emotional

A business professor and a student were walking across campus one afternoon, discussing whether or not the stock market is rational and efficient. The professor argued yes and that any dip in the market is quickly eliminated by on the spot day traders. The student, who quickly interrupted him, pointed to the ground and said, “Look! There’s a $20 bill.” The student started to reach for it. “Don’t bother,” the professor said. “If it was really there, someone would have grabbed it by now.”

Maybe the stock market is rational, but we, the people who invest in it, aren’t always. Most of the time our emotions get in the way of successful investing.  We chase the latest hot investments and ignore the old stables that have been recently priced down. We listen to on-line tips instead of our inner gut. And when we get in trouble, we blame the professionals or the economy, rather than really look at our own emotions. Another investor told me that because I had years before retirement, all I need to do is look away!

Is that our nature? It’s easier and less painful to fault others for errors in judgment than to learn from them.

“The best investors don’t play the blame game,” says Jonathan Burton, asst. finance editor of Market Watch. “They don’t react to news; they act on it. They’re not reflexive; they’re reflective. They know that, in truth, investing without emotion doesn’t require nerves of steel. It requires patience, commitment, a bit of a contrarian streak and, not least, a leap of faith.”

So go ahead and bend down and grab that $20 bill.  It’s real.  But if it moves when you reach for it and you hear giggling from the bushes, just walk away!

The Money Mom