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Tip # 13 George Divel on Fixed Income Investing

These are tough times for fixed income. Interest rates are low, which is good if you have the credit to borrow money. But its not so good if you are investing for income.

CD’s and money market rates are at historic lows. So where’s the best place to put your fixed-income holdings?

It depends, of course, on your time horizon, tax situation and stomach for risk. Generally, though, under today’s conditions it doesn’t pay very well to tie your money up for the long term.

Top-rated five-year municipal bonds, for example, pay the equivalent of nearly 4.7 percent for investors in the 28-percent tax bracket. At the same time, a five-year Treasury note yields just 3.4 percent.

To stimulate a growing economy, the Federal Reserve has cut short-term interest rates — the Fed funds rate — to 4.25 percent, down from 5.25 percent just a few months ago. While there is lots of speculation about whether the Fed will hold rates steady or cut further, not many analysts expect it to raise rates, which it does to head off inflation.

Botton line: be careful. If you invest in a long term bond to get a higher dividend, you could suffer large losses in the price of the bond when interest rates go up.

All the more reason to talk to your financial advisor on a regular basis.


June 23, 2008 Posted by | Uncategorized | Leave a comment

George Divel Investment Tip # 12 Advice for new Grads

George Divel recently spoke to Mainstreet. com and had a lot of great advice for new grads starting their first job.

Read about it at:

June 4, 2008 Posted by | Uncategorized | Leave a comment

George Divel Investment Tip # 11

Shop for Stock Bargains — But shop carefully

Now that the stock market has been pounded down, bargain hunters tend to look around for stocks whose prices seem much less than their true value. One type of bargain hunter pursues stocks that pay a dividend, on the theory that the income from the dividend assures the quality of the investment.

This certainly can work. But like most investment strategies, it is easily misapplied.

If you are thinking of picking up some shares of dividend-paying stocks that are taking a beating you need to see whether the dividend payouts are showing signs of strength and rebound — making a stock a bargain — or whether they are warning investors that the shares are due for a collapse.
Remember, dividends are not fixed, they can change according to the fortunes and policies of the company. If a dividend yield gets to be “too good to be true” it is a good bet that the company will soon cut that dividend and when they do the shares are likely to decline in value.
The best way to play the bargain hunting game is to do your homework and consult with an experienced investment advisor.

May 6, 2008 Posted by | Uncategorized | Leave a comment

George Divel Investment Tip #10

Don’t Panic

With real estate values plummeting and prices of commodities from gasoline to food steadily increasing, there is the danger that investors will panic. This is never a good idea. Nobody can predict the future, but unless you really believe that the world is coming to an end, the best strategy for investors is to make the most of the current investment environment. Here are some ideas:

1. Learn from the mistakes of others. Greed and excess categorize the recent housing debacle. Remember that whenever a situation occurs where 1+1 =3, learn to be skeptical. If the investment banks and mortgage bankers had done this, the devasation would have been avoided.

2. Control your debt. Don’t take on more debt than you can comfortably handle. Debt is great when markets are booming, but can be deadly when values fall. If you borrow a million dollars to buy a house and the value of the house drops to half — you still owe what you borrowed. The same idea works in other markets, no matter how great the potential of a stock, it may not make up for the dangers of buying that stock with margin (borrowed money.)

3. This is the most important rule of all. If you have suffered setbacks in the real estate, stock or bond markets, don’t try to make up your losses all at once. Just as most gamblers who keep doubling their bets to get even rarely succeed, so it is with other markets as well.

The best thing you can do is to choose quality investments with the knowledge that excesses in markets usually even out long term.

With the stock markets currently depressed, many great companies are selling for much less than they were a few years ago. If you don’t panic and keep focused on true value, this could be a good time to add profitable long term investments to your portfolio. Talk to your investment advisor for advice.

April 23, 2008 Posted by | Uncategorized | Leave a comment

George Divel Investment tip #9

Reasons to Re-Balance Your Portfolio

Many advisors recommed rebalancing one’s portfolio on a regular basis. But what about the argument that rebalancing really means taking winnings out of your investments that have done the best and putting them into those that have done the worst. Does this really make sense?

Actually it does, for two good reasons.

First, rebalancing really mean “buy low, sell high.” When an asset class rises in value, you trim it back (selling some high) to beef up your holdings in other asset classes. It’s a mechanical discipline, like dollar-cost averaging, that over a lifetime tilts the odds in your favor.

Second, rebalancing works best when referring to asset classes not individual stocks. With stocks, a good rule of thumb – or at least a rule of thumb to consider, especially in a taxable account – is to “cut your losses and let your winners ride.” With asset classes . . . like “U.S. Equities” or “International Equities” or “Cash” or “Long-Term Bonds” or “Real Estate Investment Trusts” or “Commodity Funds” . . . it’s unlikely that the relative advantage of one asset class will just keep gapping ever wider for decades relative to the others.

So just as dollar cost avering (investing a fixed amount on a fixed schedule, regardless of the market price) is a good overall investment strategy…. so is periodically balancing your portfolio to adhere to your overall financial plan for asset class diversification.

Of course, your investment goals change with your personal situation and time line. Make sure that your portfolio is keeping pace with your goals by consulting with your financial advisor regularly.

April 23, 2008 Posted by | Uncategorized | Leave a comment

George Divel Investment Tips #8

Stocks for the Long Term

Recent stock market volatility has forced investors to consider the wisdom of investing in stocks. If you look at short term results, it does seem that investing in stocks can be a terrible strategy.  Remember back to  Oct. 19, 1987? Stocks experienced the worst one-day drop in stock market history  down 22.6 percent. More recently, the shocks have been prolonged and painful. For example,  if you had invested in a NASDAQ index fund at the time of the market’s peak in March 2000 you would have lost three-fourths of your money over the next three years!

Pretty scary.

But on the other hand, in the long term, there has been no better investment than stocks.   From 1926 to 2006, the S&P 500 returned an average annual gain of 10.4%. The next best performing asset class is bonds. Long term U.S. Treasury notes returned, on average, 5.9 percent over the same period.

It is difficult to keep these results in mind when the stock market is plunging hundreds of points, but most of the time, this is a good idea. The impulse at those times is to sell all stocks and run for the hills.  But it is important not to let your emotions manage your investments.

If you pick good companies, or good stock mutual funds or index funds, over time you will do better than most other types of investments.  Of course, you also have to consider your investment time horizon but if you are a long term investor, stocks need to be part of your strategy.

Of course, you should consult with your investment advisor to make sure that your portfolio is diversified and suitable to your particular financial needs.

April 3, 2008 Posted by | Uncategorized | Leave a comment

George Divel Investment Tips #7

With the fixed income and equity markets showing so much volatility, many investors are taking a fresh look at an old favorite: the Certificate of Deposit (CD). Investors searching for relatively low-risk investments that can easily be converted into cash often turn to certificates of deposit (CDs). A CD is a special type of deposit account with a bank or thrift institution that typically offers a higher rate of interest than a regular savings account. Unlike other investments, CDs feature federal deposit insurance up to $100,000.

Here’s how CDs work: When you purchase a CD, you invest a fixed sum of money for fixed period of time – six months, one year, five years, or more – and, in exchange, the issuing bank pays you interest, typically at regular intervals. When you cash in or redeem your CD, you receive the money you originally invested plus any accrued interest. But if you redeem your CD before it matures, you may have to pay an “early withdrawal” penalty or forfeit a portion of the interest you earned.

Although most investors have traditionally purchased CDs through local banks, many brokerage firms and independent salespeople now offer CDs. These individuals and entities – known as “deposit brokers” – can sometimes negotiate a higher rate of interest for a CD by promising to bring a certain amount of deposits to the institution. The deposit broker can then offer these “brokered CDs” to their customers. Ask your investment advisor for more information about CDs. 

March 18, 2008 Posted by | Uncategorized | Leave a comment

George Divel Investment Tips #6

A Tip About TIPS

If the threat of inflation is making you nervous and your investment timeline is one the short side – for example, if you are retired or nearing retirement. Here’s a tip:

Consider TIPS. (Treasury Inflation Protected Securities) Tips are treasury securities that are indexed for inflation. The mere prospect of facing inflation justifies a place for TIPS in the portfolio of retirees who are concerned about maintaining the purchasing power of their nest eggs.

TIPS perform well even in periods of rising inflation coupled with stagnant economic growth (known as stagflation), a condition that we may be experiencing right now.

If you buy a conventional Treasury, you receive the same interest payment semiannually for the life of the bond. With TIPS, the Treasury adjusts the principal value of a bond each month (with a two-month lag time) to keep pace with inflation. A higher principal value also lifts interest payments.

Of course you pay a little more but it could be worth it.

When experts compare Treasuries and TIPS, they study the break-even inflation rate. In mid-January, 10-year Treasuries yielded 3.8 percent, and 10-year TIPS yielded 1.6 percent. That implies a break-even inflation rate of 2.2 percentage points. If inflation over the next 10 years tops 2.2 percent annually, you’ll do better with TIPS than with the equivalent Treasuries.

So if Inflation is on your mind, ask your investment advisor to explain TIPS to you.

March 11, 2008 Posted by | Uncategorized | Leave a comment

George Divel Investment Tips

# 5  Don’t try to time the market

Everyone wants to buy low and sell high.  What could be nicer than to buy a stock at $3 and sell it at $30, or $60 or $200? But for most of us this is just a fantasy. It is very difficult to pick the best time to buy a stock or to time the market in general.
Actually  it is time in the market and not timing the market that counts.  The best way to be a successful investor is to get help finding good investments and then  stick with it for the long term. Most people make the emotional error of buying into an investment when it is at the peak of its performance and then selling out when its value has dropped.  To invest wisely, keep emotion out of your investment decisions as much as possible and try to get as much help as you can selecting investments that will serve you over the long term.

February 20, 2008 Posted by | Uncategorized | Leave a comment

George Divel Investment Tips

#4 Diversify

The notion  not to “put all your eggs in one basket” is probably the oldest piece of investment advice. It is also great advice.

Nobody, even the smartest investors can foretell the future but if you keep your investments diversified, you are protected because the odds of any one bad investment hurting hurt are greatly diminished.

If you ask an investor who has lost a great deal of money their greatest regret, it will likely be “I should have been more diversified. I should not have put so much into one investment.

Whether you are a small investor or have millions of dollars in assets, you won’t go wrong by starting your investment program with diversification as your goal

Talk to your investment advisor about what diversification means to you.  Some investors think it means buying different stocks. But there is much more to diversification than that.  A balanced portfolio should not only have diverse stocks or mutual funds, there should also be diversification between stocks and bonds. That’s why it is important to tell your financial advisor about all your assets, including real estate so that you can get advice to truly diversify your holdings.

February 5, 2008 Posted by | Uncategorized | 1 Comment