Investing in the Gold Rush or are Social IPOs Flush?
by www.SixWise.com
What’s hot and what’s NOT this year in the investments market? Are there any really safe bets this year? Will the market crash? Should you start stashing away your extra cash in the back of your freezer?
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Thinking of regrouping your investment portfolio for 2010? Keep reading to find out new trends to watch this year, plus sound investment strategies to weather any economic climate.
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2010 brings with it more questions than answers when it comes to investing, but there are good bets to be made even in today’s volatile times.
A Trend to Watch: Social IPOs
In 2008 and the first half of 2009 the IPO market was pretty quiet as the economy tanked. In fact, USA Today reports that in the last years companies raised about $22 billion through initial public offerings in common stock. That amount is similar to what was raised in 2008, and both years fell far short of the $59.7 billion collected in 2007.
However, the second half of 2009 saw a flurry of activity as confidence in the economy (and stock markets) returned. Now experts say 2010 could be a busy year for the IPO market, and social networking sites may be front and center.
The site garnering the most attention is Facebook, which many experts believe may soon go public. Twitter, LinkedIn, Yelp and Skype may then follow suit.
"Once Facebook makes that move, it will literally be pandemonium," Scott Sweet, senior managing partner at IPO research firm IPO Boutique, said on USAToday.com. "It will clear the way for everyone else."
If you’re thinking of getting involved in the IPO market, you may want to check out this top 10 2010 IPO candidate list from TechCrunch.
Be aware, too, that buying immediately after release is not always the best option. According to the U.S. Securities and Exchange Commission:
“When an IPO is "hot," the demand for the securities far exceeds the supply of shares. The excess demand can only be satisfied once trading in the IPO shares begins. This imbalance between supply and demand generally causes the price of each share to rise dramatically in the first hours or days of trading. Many times the price falls after this initial flurry of trading subsides.”
Is Gold a Good Bet?
Gold is a hedge against inflation, and typically as the value of the dollar goes down, the value of gold goes up. Gold offers a sense of security, an insurance policy, if you will, that you will have something to fall back on if the economy crashes again. If the economy is doing OK, precious metals can still be a fairly wise investment strategy, but that's not to say they’re without risk. Precious metals are known for being volatile and quite unpredictable.
Because of this, experts say you shouldn't tie up more than 5 percent (and certainly not more than 10 percent) of your investment money in precious metals.
Before you buy, it’s also worth looking into the Dow/Gold ratio. As written on SafeHaven.com:
“The Dow Jones Industrial Average (Dow)/gold ratio is important because it indicates the optimism for financial assets versus that of hard assets. A rising ratio demonstrates high confidence in the economy and falling inflation expectations while a declining ratio indicates low confidence in the economy and rising inflation expectations.
Although the current Dow/gold ratio of 9.3x is significantly lower than the peak of 45x that was reached in 1999, it is still nearly 9x higher than the levels that were reached at the bottoms of the 1930s and 1970s bear markets.
During 2009, a significant increase in the ratio from 7.0x to 10.1x occurred, which rivaled the largest counter-trend move seen during the 1929-1932 stock bear market when the ratio increased from below 10x to above 14x.
Following that move in 1930, the Dow/gold ratio resumed its contraction during the remainder of the Great Depression era. Similar to that era, stocks are currently in a bear market relative to gold. This suggests that the Dow/gold ratio will not bottom until it reaches levels closer to those of the prior bear market bottoms, at roughly 1 to 2 units of Dow per ounce of gold.”
Time to Diversify and Rebalance Your Portfolio
Finance experts often recommend you keep a balanced, diversified portfolio, especially in high-risk times. This can help you ride out the tough times and benefit from the good ones.
"It's really important to understand how your asset allocation changes throughout the year, especially in times of heightened market volatility, which is clearly the situation we've been in for the last year and a half," says Chris McDermott, vice president of marketing product management at Fidelity Investments in Boston on BankRate.com. "Assuming you know what your investment benchmark goals are, you need to look at how your investment mix changes as the market changes."
For instance, if you’re looking for aggressive growth, Fidelity recommends making your portfolio up of:
As your portfolio nears your goal, Fidelity suggests putting:
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50 percent of your portfolio in bonds
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30 percent in short-term investments
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20 percent in domestic stocks
Ideally, you should analyze and potentially rebalance your portfolio at least once a year.
Once You Have a Plan, Stick to It
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How to “Not” Lose Sleep Worrying …
With guided sleep meditations by leading meditation expert Mary Maddux and music by a renowned meditation music composer with 20 years experience, this CD will help you find deep rest and sleep ... even in today’s volatile financial market.
Sleep Easy CD users have reported:
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Falling asleep faster
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Waking up less throughout the night
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Falling back to sleep faster when awakened during the night
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Feeling more rested the next morning
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While it’s important to watch your portfolio and make adjustments if it goes too far off course, it’s also important to not make snap decisions out of panic. These can often lead to costly mistakes that may have evened out if you’d stuck with them for the long haul.
"It's very important to have a long-term financial plan in place and try not to get too bogged down in the short term," John Bajkowski, a financial analyst at the American Association of Individual Investors in Chicago told BankRate.com. "Take the big picture view and make sure you're comfortable dealing with market extremes.
"It's always easy when things are going well, but the market has tested us lately, and the people that panicked at the end of last year and sold off their equity positions are now probably sorry they did so," he says. "That's why you need to have a long-term plan in place, and stick with it."
How can you help yourself to stay resilient and strong -- mentally and physically -- so you can weather the storm and ultimately benefit from your long-term financial plan?
Become friends with the mind-body fitness program called SheaNetics from MySheaNetics.com.
SheaNetics, founded by fitness expert Shea Vaughn, blends ancient and contemporary movements with eastern philosophy, creating a stylized approach to fitness designed to improve the quality of today's western living.
The SheaNetics program incorporates the philosophy that "fitness is both a state of the body and mind" and is based on the Five Living Principles, which include perseverance, integrity and self-control. They are an inspirational force that will help you create a positive lifestyle with a healthy body and the supportive mental and emotional paradigm to deal with these changing and demanding times. One encourages the other and together SheaNetics from MySheaNetics.com will help you find balance, self-confidence and a personal state of well-being.
And remember, investments are only one aspect of a secure financial picture. For more tips to better your financial health, stay tuned to the SixWise.com "Be Safe, Live Long & Prosper" e-newsletter.
Recommended Reading
What It Takes to Be Ready for Retirement Financially: An Essential Overview
Is the Derivatives Market Dooming Your Financial Future?
Sources
U.S. Securities and Exchange Commission
SafeHaven.com January 8, 2010
BankRate.com
USAToday.com December 31, 2009