investing

12 essential investing tips for 2012

Tip 7Rebalance your portfolio

Investment allocations in financial securities are typically split between stocks, bonds and cash. A diversified portfolio will have some exposure to all these asset classes. The investment allocation that's right for you will depend on your risk tolerance, investing goals and market outlook.

You may decide that an allocation of 50 percent stocks, 30 percent bonds and 20 percent cash is right for you. If this year's stock performance brought your stock allocation up to 60 percent, then rebalancing the portfolio will get you back to your target allocation.

Taxes and considerations, such as estate planning, can influence your ability to rebalance your portfolio. Consult with your financial planning professional and tax adviser before reallocating your investments.

Tip 8Review your banking relationships

Look at your banking relationships from the deposit and the credit side. Do you have free checking? Are you earning interest in your checking account? What's the fee structure for out-of-network ATMs? Do you have to pay to talk to a teller? What kind of interest are you paying on your credit card? Is there an annual fee? If you're earning miles or points on your account activity, is that affinity program still working for you?

Changing your banking relationships isn't something to take lightly. It's a hassle to switch the direct deposit of your paycheck, direct debits on your loans, and to migrate your online banking and bill paying. That said, take a look at what's out there and see if the grass is greener at another financial institution.

Tip 9Simplify

I'm trying to get rid of the clutter in my life, so I can focus on the things that are important to me. I'm downsizing my house, cleaning out my closets and getting rid of the things that don't make a difference to me.

Most of us are juggling multiple responsibilities. Between work, family, friends and school, there just aren't enough hours in a day. With no plans on the horizon to move to a 28-hour day, you'll just have to figure out how to best use the 24 hours you have. A seminar on time management can help. So can turning off the TV.

Simplify. Seek a balance.

Tip 10Freeze your credit file

As an alternative to paying a monthly fee for credit monitoring services, I like the option of freezing your credit file. Freezing your credit file is a great way to protect against identity theft. It's a bit of a nuisance, but keeping others from accessing your credit is worth the inconvenience.

A security freeze stays in place until you remove it. If you want to apply for new credit, you can request a temporary "thaw" in your credit, so the lender can request and review your report. You need to freeze your file with all three consumer reporting agencies -- TransUnion, Experian and Equifax. There may be a cost to freeze (or thaw) your file, but it's minimal, especially when compared to the monthly cost of credit monitoring.

A potential downside to freezing your credit is that you won't be able to sign up for that store credit card at the mall, but I view this as a benefit. It keeps you from adding to your pile of plastic.

Tip 11Check out HARP

The federal government's Home Affordable Refinancing Program, or HARP, has been modified so homeowners who qualify can refinance their mortgages, even if they owe more than their home's appraised value.

It's too early to tell how homeowner-friendly the program is, but it looks like the government has it right this time. It seems like there is finally some relief available for homeowners who are current, but underwater, on their mortgage.

A key variable in qualifying for HARP is the mortgage has to be owned or guaranteed by either Fannie Mae or Freddie Mac.

Tip 10Write/update a will and health care directive

In filling out the paperwork before having outpatient surgery, I was asked if I had a valid will and a health care directive in place. I did, but a relative in a similar position did not and had to scramble to complete them. People tend to be squeamish about their mortality and avoid this planning.

A health care directive lets you call the shots concerning medical treatments at the end of life. This can include a medical power of attorney that lets you appoint a health care agent authorized to make medical decisions for you if you cannot make them for yourself. A will directs the disposition of your estate to your heirs. Dying without a valid will is called dying intestate, and when you die intestate, the state determines the disposition of your assets.

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