Wall Street – Don’t Count on Federal Reform

“Gain the upper hand by making smart decisions” says Neil Weinberg in the August 8, 2010 issue of Forbes.
Weinberg suggests the following:

Ignore the Chatter

To make money over the long haul stop trying to outguess the market and focus on setting up a mix of stocks, bonds and other assets that it makes sense for you to own. Then stick to it!

Invest in Indexes

Wall Street has built a large industry of managed funds, futures, and options and leveraged products that in aggregate can’t do any better than market returns. Don’t get sucked-in. Buy the whole market, via a cheap and tax efficient index fund or exchange-traded fund.

Find a Fiduciary

Make sure that the person that is giving you advice is putting your interest ahead of their own. They may tout themselves as advisors but most are salesman whose vague legal duty is merely to sell you products that are “suitable”.
A fiduciary by contrast must put your interests first. Registered retirement advisors are fiduciaries. You can also access one by switching from a commission based account to a fee account at a traditional securities firm. Get the relationship spelled out in writing – and negotiate the fees.

Admit Mistakes

Many of us have a hard time doing this. Instead capitalize on your dogs by selling them and using your losses to offset up to $3,000 of ordinary income and an unlimited amount of capital gains.

Less Tax Liability

Taxes are probably second only to asset allocation in determining in what you end up with.
Put tax-inefficient investments like bond funds and real estate investment trusts, into retirement accounts. Their income doesn’t get taxed until it is taken out.

Stocks and equity funds are best for taxable accounts where, as noted above, loses can be used to minimize, if not eliminate gains on your winners. You can also use appreciated stock as gifts to low tax- bracket relatives and bequests.