Know Your Finances: Keep it simple

What a ride it has been this year. With only a month more to
go, it looks like 2010 will have no trouble ending on a positive note for the
stock market. Both the S&P 500 and the Dow are up 8 percent through Dec. 1.
Yet you can’t count chickens, as
they say, since these chickens are one erratic bunch of fowl.

The year has been
intensely volatile with frequent 1 percent and 2 percent daily moves up or down as investors
react to their favorite economist of the day declaring either double-dip
recessionary nightmares or all clear signals ahead.

It’s true that the tea leaves can be read with both
favorable and dire outcomes. The sky is falling as Europe implodes and takes
the global financial system down with it. Then again, Europe will be saved and
companies all around the globe have stronger balance sheets and growing
earnings. It’s just a matter of time before credit markets improve and
investors believe in riskier assets again.

So, what’s an innocent investor to do when the forecast is
so cloudy? Here are three golden rules to help you maintain a measure of sanity
about your investment portfolio:

1. Stay informed about business news but remain
emotionally remote
. What I mean is don’t let the media run your emotional
life. When the market rallies big, don’t go all in. When the market plummets
big, don’t sell out. Maintain your established long-term asset allocation
between stocks and bonds.

 2. Keep at least 20 percent of your total
financial assets invested in highest quality bonds (individual, bond
mutual funds, or exchange traded funds)
. The exact percentage will
depend on your asset base, age, ability to take on risk, and cash flow
needs. If the market continues to rally don’t abandon your bonds no matter
how low the interest rates on them may be. They reduce the fluctuations in
your portfolio over the long haul. Make sure your bonds have an average
maturity of 10 years or fewer. Don’t panic if market interest rates start
to rise. If you own high quality individual bonds, you will only see the
loss on paper. If you own bond funds start to trim the longer maturity
funds in favor of shorter ones.

3. Maintain highest quality stock
. Don’t get caught up in the fad of the day or the flavor
of the month. For example, alternative energy stocks may sound wonderful
from a scientific standpoint but be lousy stocks when it comes to earnings
and cash-flow expectations. Beware of young stocks that have low market
liquidity, because when they fall in price, they can quickly fall off a
cliff. Stick with companies that have a track record for growth, have a
recognizable brand, and pay a good dividend.

Happy holidays everyone! And all the best for investment
success in the days ahead!

• Ellen Le is the
founder and president of Ascend Investment Management (
She has been a financial planner and investment adviser for more than 20 years.

I look forward to receiving your
questions about anything related to investments, retirement planning, or the
economy. Send them to: and write “Chadds Ford Live” in
the subject line.

About Ellen Le

Ellen is the Founder and President of Ascend Investment Management. She was born in Philadelphia and has lived in the Delaware Valley for most of her life. When she is not researching investments and managing portfolios, she pursues her interests in tennis, bridge, hiking and art. Beginning her investment career in 1981 as a stockbroker at E.F. Hutton and Co., Ellen now has over 20 years of investment management experience. Prior to founding Ascend in 2006, she managed high net worth assets for many years at Bank of America, Mellon Bank, and most recently at Davidson Capital Management. At Davidson Capital Management, Ellen served as a Senior Vice President and Senior Portfolio Manager of the firm. She managed assets for more than 50 family relationships and was a core member of the firm’s Investment Committee.Ellen earned a BA in History from Brown University and a MBA in Finance & Investments from The George Washington University. She is a member in good standing of the Chartered Financial Analyst (CFA) Institute, which is a global organization dedicated to setting a high ethical standard for the investment profession. Her professional memberships include the Delaware County Estate Planning Council, Women Enhancing Business (WEB), and the Chadds Ford Business Association. She is a docent with the Delaware Art Museum and an active volunteer with the Brown University Alumni Association.



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