"It is creating an emergency fund of six to 12 months."
Once you have an investment strategy, you don't want to disrupt it by constantly pulling funds to cover out-of-the-ordinary expenses. An emergency fund, usually with cash in money markets and other conservative, easily accessed accounts, helps investors navigate the unexpected.
Keady said he also talks to clients about existing debt before investing. It's often better to kill a credit card balance accruing 20 percent interest, for instance, before diverting extra funds into stocks or mutual funds with annual returns in single digits or low teens.
Make your bets. Investing is an individual exercise. Everybody has different goals, time horizons and tolerance for risk. About the only thing that is constant is the need for diversification, putting money into several kinds of investments to hedge against losses in any one.
All that said, it is helpful to see what the professionals are doing. Many see opportunities with stocks these days.
In a balanced portfolio, Mike Ryan, head of UBS Wealth Management Research in New York, has about 55 percent of assets allocated to stocks, about 44 percent in fixed income investments such as bonds and the remainder in cash.
That's more weighted to stocks than usual. In particular, he sees opportunity with stocks of companies in energy, technology and other industries that attract consumers' discretionary income. He's less bullish on companies in the health-care sector and remains cautious on financial stocks.
He was quick to point out that there's still risk in the markets. They're going through a repair process amid the recession.
"It's not like the world has returned to normal," he said. "It will be a while."
Same goes for real estate. That's another option for investors looking to diversify, but treading into that market requires caution as it works through supply, demand and credit issues that got it out of whack in the first place.
jonathan.cox@newsobserver.com or 919-836-4948
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