One crucial step to insuring a diverse portfolio is to create a financial plan, Burns says. People need a financial plan to get a clear idea of their goals and objectives, because that s what drives how to invest - in stocks, bonds and cash. Without a sound financial plan, everything is chance. When developing a financial plan, sit down and go over your assets, liabilities, goals and objectives - retirement or funding a college education or a full financial plan, he says. Burns says any brokerage house will help a client set up a financial plan.
Investors can also buy software that can do the same thing.
Just make sure you understand what you re putting in and what it all means, he says of the software programs like Quicken. Return to bonds Investors shouldn t ignore bonds this year, either, the advisors suggest. For the past several years bonds were too boring for people to invest in because of the speculative bubble that had been created, Reby says. Now most people wish they owned more of them. Reby says he prefers corporate bonds and tax-free municipal bonds over U.S. bonds because the risk is similar but the returns are higher on the corporate and municipal bonds.