Be Next Year’s Smart Investor
by Nancy Hecht, CFP

During the early 1980s, I worked at a bank in suburban Detroit, and one of the perks was that I could buy silver coins for face value. I accumulated quite a stash of pure silver half-dollars, quarters and dimes that were 50-60 percent silver. I was also attending college at the same time, so I wasn’t paying much attention to business news—which means I was unaware of the Hunt brothers, the famed investors who bought up silver like crazy because the price was rising.

When I moved to Central Florida in 1983, I didn’t want to cart a pile of coins with me, so I cashed them in for 150 percent more than I paid. That was a lucky investment, buying into a trend I didn’t even know was going on. And I was lucky again to cash out at the right time. Silver never again surged in price; in fact, it’s now about where it was in 1983.

Since then, we’ve seen investors jump on the dot-com, gold and, most recently, real-estate bandwagons. While none of these are bad investment sectors, the investors ignored the first rule of investing: diversify. In the early 1990s, investors put huge portions if not all of their invested assets into one sector. I believe they did this because they didn’t want to be left behind, and as the value of their investments kept going up, they got greedy. And many got burned.

If you want to try to hit an investment “home run,” go ahead—but to avoid getting burned as they did, invest just a small portion of your portfolio in that sector, not your whole account. That’s how you build a diversified portfolio. It might include a combination of stocks in various sectors, bonds, real estate—not all your assets in one thing. Diversification may not be exciting, but it works.

Here’s another important rule of investing: Know when to sell. You have to know when to take profits, and when to discard a loser. How will you know? You can do the research on your own, or you can work with a professional. In fact, how long has it been since you’ve had an independent financial check-up? If you aren’t already working with a Certified Financial Planner, it’s smart to make an appointment now for some year-end planning.

No one knows what the hot investing trend of 2008 will be—but I do know that you can avoid getting burned. By investing “smart” and being diversified, you can weather the worst of the ups and downs, and you’ll likely be many dollars ahead of the pack. S

Certified Financial Group, 1111 Douglas Ave, Altamonte Springs; 407.869.9800; financialgroup.com.

Nancy Hecht is a Certified Financial Planner and an Investment Advisory Representative with Certified Financial Group in Altamonte Springs.