by Stacy Francis, CFP®, CDFA

Even in a market like today’s, many people are making nice returns from their investments. Though the masses are mainly nervous, the latest issue of one of the newsletters I subscribe to featured interviews with six self-made investment millionaires. While their choices varied widely in terms of securities and industries, they had three important techniques in common – three techniques you, too, can use to strengthen your investment portfolio.

1. Think international. With the US markets anything but rosy, it is tempting to give up and simply dump your money in a bank account. But if you widen your horizons, you will find that not all countries are headed into a recession. At least not right now.

2. Think creative. Don’t dump all your capital into the financial version of Top 40 music. Instead, keep your ears and eyes open and for new ideas – or new twists to old ideas – that you believe in.

3. Invest in what you know. Do you have a Ph. D. in molecular biology? That gives you an edge over most people if you choose to invest in for instance biotech. Perhaps you have strong reasons to believe that a certain product under development is going to work. Whatever your field is, knowledge is money and when you know more than the masses, you have better chances than they do to make money. Of course, you always have the option to hire an expert who can help you gain this advantage. What is it they say? In love and money, everything’s fair?

by Stacy Francis, CFP®, CDFA

Another question I get all the time is, how many investments should I go for? 2, 5 or 1,000? With a virtually unlimited number of securities available, and a limited budget (for most of us, anyway), how do you get the most out of your money? When it comes to investment positions, what’s the magic number?

Of this, the wise ones dispute. Of course, to a certain extent it should depend on the number of promising investments out there. At times, thirty different stocks, funds, or bonds can look promising, while at other times it can be as little as three or four. You may have a very specific idea of what kinds of industries and companies you’d like to trust with your cash, or you may want to diversify lots and lots to dilute risk and feel safe.

Another factor you need to consider is of course budget. If your total investment capital is, say, $5,000, a diversified mutual fund or ETF (Exchange Traded Fund) might be the better option. With only $5,000 it will be difficult to get exposure to the broad market. If, on the other hand, you have several million bucks to invest, you can create your own mutual fund by purchasing many different stocks and bonds. Fifty positions of $20K each may be the answer, or twenty positions of $50K. Or fifteen positions of various sizes depending on what securities you like the most.

It is true that if you own every fund out there, you will own all the winners. The problem is, you will own all the losers too. The key is to look at the fundamentals, identify your reasons and — together with your advisor — find the one, or two, or ten, or twenty, investments that work the best for you.

by Stacy Francis, CFP®, CDFA

A client just called me up to ask what my take was on the real estate market. She half-wanted to get into what mass media refers to as “flipping houses,” but was concerned that this may be the end of the real estate boom.

The truth is, of course, that the real estate boom ended quite a while back, in most places. What we are seeing now is a bit of a correction, along with the effects of a slowing economy. When two families in a neighborhood are trying to sell their homes, and a third one forecloses, the next buyer expects to pay less, throwing the area into a downward spiral of more worries and more foreclosures.

The good news is that if you are in good to excellent financial shape, and you are in no hurry to sell the houses you buy, this is not a bad time at all to get in. Historically, and with a few geographical exceptions, real estate prices have never kept dropping for very long. If you have the patience to keep placing bids well below market prices and hope someone gets desperate and accepts, you can score yourself some fantastic deals. And if you can wait long enough, chances are you will be able to sell the houses for significantly more. With these lower prices, I would actually say it is less risky to get into real estate now than, say, a year ago.

Keep in mind that while the above applies to most areas in the US, local exceptions apply, so make sure to take the pulse on your neighborhood before you hop to it.

by Stacy Francis, CFP®, CDFA

Flipping channels last night, I came across one of those corporate ads that are so vague and nondescript it had even me scratching my forehead, wondering what the company in question really did. Because the thing is, while some businesses are easy to understand (manufacturing comes to mind), in today’s world of service and high tech and diversity, many are so complex it is almost impossible to evaluate them. GM, for instance, has traditionally been a car manufacturer. But these days, they make more money off the financing side of their business than the car side. And how do you deal with software companies or biotech?

My point is not to try to explain every business out there, but rather to remind you that if you don’t understand the business you are investing in, you will have an extremely difficult time making rational choices, and even harder trying to sleep well at night. If you are a biotech guru and know all about Elan’s latest product, you may know whether it’s worth your money or not. Alternatively, if you are Bill Gates’s brother, you may know what works and doesn’t work in software. But if you want to venture into industries you do not grasp fully, you can lower your risk substantially by hiring someone to analyze it for you.

We all know it’s a bad idea for blind people to drive cars. Throwing your hard-earned money around you randomly can be just as perilous.

by Stacy Francis, CFP®, CDFA

Walking from my office to my favorite lunch spot today, I heard four different languages spoken. The cameras, backpacks and maps made it difficult to take the people for immigrants – rather, I gather they were a few out of the countless individuals making pilgrimages to the US to take advantage of the frail dollar.

For many of us, this weakness is a major nuisance. Foreign travel is getting more expensive by the day, not to talk about imported groceries, cars, and electronics. So I wanted to make you aware of a few ways that you can use currency fluctuations to your advantage.

The first one is when you go on vacation. When the dollar is strong (think six or seven years ago), you can live like a queen pretty much wherever you go. Today, you need to get more creative. Looking at charts, I learned that only the Zimbabwean dollar has significantly underperformed the US dollar this year – hardly your dream vacation destination. Fortunately, plenty of countries are still fairly reasonable. Instead of France or Spain, next time consider Dominican Republic, or Sri Lanka, or Thailand. You will get much better value for your money.

Another way you can make money off currency fluctuations is by investing in foreign countries. If you are convinced that the Yen has nowhere to go but up, buy a fund focused in Japan. Even if the stocks remain flat, when the dollar falls, you make money. Plenty of people have expanded their capital over the past couple of years by putting their money to work no further away than Canada. When the exchange rate went from US $0.69 per Canadian dollar to a scenario where the Canadian dollar is actually worth more than its American counterpart, they were some happy campers.

by Stacy Francis, CFP®, CDFA

A friend of mine called the other day to tell me about this “miracle fund” she’d been watching. Despite the markets, it had climbed almost 40% over the past five months. I have to have this fund, she said. Could I get her some?

Well, I told her, the thing is, few funds beat the market averages in the long run. If this fund has climbed 40% in a matter of months, chances are, it is more than a little overpriced.

Most investors know that in theory, investing is all about buying low and selling high. Yet very few can put this into practice. Few people are brave enough to buy a stock or a fund that’s been falling off lately, even when their financial advisors assure them that the fundamentals look good and the outlook prosperous. When, on the other hand, stocks or funds have been raging lately and are halfway to the moon, everyone wants to buy.

It is not hard to see why. You have worked hard for your money, and you depend on it. Your life would be over if you lost it. The problem is, by buying securities that are up and selling them when they are down, you are doing just that. You are practicing the opposite of clever money management.

Sure, both stocks and funds can fall because the companies are plain bad. There may be a real reason people do not wish to own them. On the other hand, weaknesses in the markets can present extraordinary opportunities to buy. The key is to work with an expert who can tell the difference.