Christine Benz is Morningstar's director of personal finance, and editor of their Practical Finance newsletter. Her new book, 30-Minute Money Solutions is full of useful and reliable information written in a straightforward and easy-to-follow style. These are excerpts:
"I've become convinced that the best-laid financial plans are often the most simple."
"If you can get the big-picture right--notably, you save enough and your portfolio is anchored in sensible investments appropriate for your time horizon--you'll be well on your way to financial success."
"Tuning out the market's day-to-day gyrations can help, not hinder, your chances of investment success."
"I think that we'll look back on the current environment as one of the most opportune times to invest in a generation."
"Employing tax-sheltered investments like 401(k)s, IRAs, and 529 college savings plans allows you to minimize or even avoid paying taxes on your investments."
"In general, you're better off holding stocks in your taxable accounts and bonds in your tax-sheltered vehicles."
"Nearly all the portfolios (I see) have one thing in common: They're way more complicated than they need to be."
"If you've got high-interest credit card debt, the best use of your money, by far, is to pay it off."
"One of the best things pre-retirees can do is to reduce their fixed costs going into retirement."
"Take care to ensure that your opinion isn't clouded by what behavioral finance experts call 'recency bias,' the tendency to have your decision-making be unduly influenced by recent events."
"Setting some money aside in ultrasafe investments is a must-do before you begin investing in stocks or other long-term securities."
"Many investors overcomplicate long-term investing by buying specific investments for every nook and cranny of the market."
"Creating a sturdy, low-maintenance, long-term portfolio can be extremely simple, particularly if you focus on high-quality, broad-based mutual funds."
"Index mutual funds and target-date mutual funds have grown in popularity in recent years, largely because they can help simplify your investment life."
"You can tap Roth IRA contibutions at any time and for any reason; because of that flexibility, setting one up is a great first step when you get started in investing."
"Timing the market is impossible to pull off with any degree of accuracy."
"Most investors are very poor judges of their own ability to tolerate risk."
"In my experience, less is usually more when it comes to checking up on your holdings and your portfolio's performance."
"I've learned that investments often start to perform best after a period of terrible performance."
"If you're saving and investing for a goal that's close at hand, your own savings rate is going to be a much bigger determinant of whether and when you reach your financial goal than any return you'll earn from your investments."
"If you're running behind your target amount, taking on more risk isn't the answer. Instead, you may have to delay your goal or save more in the interim."
"Be wary of a fund with a yield that's substantially higher than the competition, especially if the fund doesn't have very low fees."
"I'm strongly in favor of building and maintaining the most streamlined portfolio that you can."
"Participants with weak plans who aren't earning any matching contributions from their employers might in fact be better off striking out on their own."
"When selecting active funds, you might be tempted to invest in the ones that have posted the best returns over the past several years, or simply focus on those with 4- or 5-star ratings. Don't make that mistake."
"Amid the (2008) turmoil, the Diehards--who favor the low-cost, no-nonsense index-fund investment strategy of Vanguard founder Jack Bogle--were the very picture of zenlike calm."
"The Diehards have mastered one of the key tenets of successful investing: Know what you can control and what you can safely tune out (the direction of the economy, interest rates, inflation, and the dollar)."
"The IRA is just the 'wrapper' for whatever investments you select, and your investment choices are virtually unlimited."
"Because IRAs offer either tax-free (Roth IRA) or tax-deferred (traditional IRA) compounding, it's usually a mistake to put any sort of investment that itself has tax benefits inside an IRA wrapper."
"I tend not to be a big fan of mutual funds with high turnover rates."
"If you're unemployed or your income is currently appreciably lower than it normally is, it can be advantageous to convert your IRA."
"The typical U.S. worker holds 11 jobs in his or her lifetime."
"T. Rowe Price and Vanguard rank among Morningstar's favorite one-stop firms because both do a solid job across asset classes."
"College graduates, on average, earn twice as much during their lifetimes as those who have completed high school only."
"Because of their generous contribution limits and favorable tax treatment, Section 529 college savings plans have emerged as the college funding vehicle of choice for many households."
"Retirement savings should always trump saving for college. The reason is simple: You can't get a loan to pay for your retirement, but your child will probably be able to borrow money to pay for college."
"As with any investment, costs are a big determinant of how good a 529 plan is."
"When it comes to selecting specific investments for a college portfolio, asset allocation is every bit as crucial as--if not more so than--it is for retirement savings."
"The typical domestic-equity fund in Morningstar's database gained an average of 1.4% per year in the decade through mid-2009, yet taxes gobbled up more than 1 percentage point of that return."
"I prefer a high-quality mutual fund to individual bonds because you get built-in diversification and professional management."
"Index mutual funds that own a broad basket of stocks, such as those that track the S&P 500 or Dow Jones Wilshire 5000 Index, tend to be naturally tax-efficient."
"I'll say flat-out that I'm not a big believer in frequent trading. Patient, buy-and-hold investing usually leads to a better outcome for investors."
"Research compiled by University of California professors showed that households with the most trading activity systematically earned lower returns than the average household did."
"By selling losers in your portfolio, you can use those losses to offset capital gains from other holdings, and you can also use your tax losses to offset as much as $3,000 in ordinary income in a single year."
"Longevity and health--two enormous unknowables--affect how much money you'll need during your retirement years and how long you'll need it."
"Many retirees still cling to the notion of being able to live solely off the yield generated by their portfolio. That's become unrealistic except for the very well off."
"As you craft your retirement portfolio, look for opportunities to streamline."
"Consider anchoring your portfolio with broadly diversified broad-market index funds and ETFs; these investments give you a lot of diversification in a single shot."
"By sequencing your withdrawals properly, you can help make your overall retirement nest egg last longer."
"While taxable assets usually go in the 'sell early' bin, that's not true if you have highly appreciated assets and plan to leave money to your heirs."
"The process of restoring your stock/bond/cash mix back to your targets--called rebalancing--is one of the very best things you can do to improve your portfolio's risk/reward profile."
"Conventional financial planning wisdom holds that the best time to rebalance is at year-end, with an eye toward harvesting any losses to offset capital gains elsewhere in your portfolio."
"In 2008, stocks of all types went down, and style-box diversification didn't get you very far. Only bonds--and high-quality bonds at that--managed a positive return."
"Creating an estate plan is yet another one of those times when you know that you're a grown-up."
"Everyone--regardless of life stage or the size of their portfolio--should think about hiring an attorney to draft the basic estate planning documents: a will, a living will, and powers of attorney."
"It's crucial that you give serious thought to whom you name on your beneficiary designation forms and keep these forms up to date as your life changes."
"All the money in the world doesn't amount to a hill of beans if you didn't help those you love, and learn a few things yourself, along the way."
Thank you Christine
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