Tips for Financial Investing

While investing news and views can be had at the click of a mouse or a television remote, many investors continue to struggle in navigating the financial waters of our turbulent times. Here we view some major investment categories and see what some noted experts have to save about each for 2010.

PRECIOUS METALS

John Paulson is bullish on gold, according to The Wall Street Journal. The hedge-fund manager, who predicted the burst of the housing bubble and scored big by investing in credit-default swaps, has formed a new fund devoted to acquiring gold mining shares and other bullion-related investments. Introducing his plans for the new fund at an investors' meeting in November 2009, Paulson anticipates another burst of inflation as the Fed holds interest rates low while the economy continues to struggle. Arguing that gold traditionally does well in inflationary periods, Paulson has committed to investing $200 - $250 million of his own cash in the fund that opens this month.

STOCKS

"If I had to pick one attribute that I most like to see in a stock, it's a safe, sizable dividend," says Jim Cramer of CNBC's Mad Money in his book, Getting Back to Even.

Always looked to as reliable income sources, dividend-paying stocks are usually also sensitive to economic factors. As a result, as the economy recovers, so should the stock prices of these investments. The investor doubles his benefit - a high-dividend yield and increased stock value.

Cramer's favorites include pharmaceutical giant Eli Lilly, ConEd, and AT & T. (www.cramers-mad-money.com)

An easy way to cull your high-dividend portfolio - check the Dogs of the Dow. The 10 highest dividend yielding stocks as of December 31 are listed in an easy to read table. (www.dogsofthedow.com)

ETFS

Forbes.com claims ETFs are "rapidly replacing mutual funds as the smartest packaged investment products available to investors."

Cramer likes PowerShares Financial Preferred Portfolio, a high-dividend paying ETF guarding against risk through the preferred shares of 30 financial companies.

If you're considering following John Paulson's lead and investing in gold, a Gold ETF may be your answer. Like other ETFs, Gold ETFs are purchased in real time. Unlike holding physical gold, Gold ETFs attract no wealth tax. ETFs also trigger long-term capital gains after holding one year, unlike physical gold which requires a three-year holding period.

BONDS

Bonds continue to provide greater stability than other forms of investments. To determine if bond investment is the right strategy for you, first determine how far you are away from your targeted retirement age. The old rule-of-thumb was to subtract your age from 100. If you are 40, you should invest 60% of your portfolio in high-yield, longer term investments, and 40% in safer vehicles. With Americans living longer and putting off retirement until later, some analysts suggest using 110 or 120 to calculate position.

One of the greatest risks with bonds is that their low fixed-rate of return will be less than the rise in inflation. To hedge against that risk, consider Treasury Inflation Protected Securities (TIPS). While the fixed coupon rate is lower than regular bonds, the principal value of TIPS is adjusted to keep up with the consumer price index.

While your anticipated return on investment will most likely be lower than other investment strategies, if you are close to or in retirement, the security and steady income stream provided by government-backed bonds may provide you with a more valuable asset - peace of mind.

YOU

Investors often overlook their most important asset - themselves. Regardless of the investment vehicle, there are some tried-and-true rules to guide your investment decisions:

Take a gut check. Nothing is a sure thing. If it sounds too good to be true, it warrants a bit of skepticism.

Take a look around. Consider the nation's all-around condition when making investment decisions - not just the stock market. Debt markets predicted the burst of the housing bubble.

Up your I.Q. Educate yourself before trying to chart unknown waters. Even John Paulson got schooled before delving into CDSs and has hired gold analysts to educate him on that market.

Play the field. Diversify, diversify, diversify. Spreading out your investments continues to be the best hedge against loss.

Take care of the necessities first. Build a liquid nest egg. Clearing plastic debt and shoring up an easily accessible emergency fund will cushion the fall if things start to go sour in your portfolio.