Five Financial Moves You Should Definitely Make and Five Financial Moves You Should Definately Not Make!

Despite recent gains in the stock market, portfolios remain badly damaged by the market performance of the past 18 months. With jobs still falling away at a rapid clip, the recession is still a serious concern and policymakers are scrambling to implement expensive and complex solutions.

As we wade through these difficult times, how should you think about your own financial situation. A good starting point is to remember what Kipling wrote. Keep your head about you as everyone is losing theirs.

It is a great temptation in times such as these to think things will never get better. But if history shows us anything, things do eventually improve. In fact, judging by the standards of past economic shocks, this recession is getting long in the tooth. The average recession since World War II has lasted 11 months, and the longest was 16 months in 1981-82. Our current crisis is 15 months old.

Also, hints of bottoming are starting to surface. Oil prices have begun to rise, indicating some increased demand. China is importing aluminum again. In addition, the stimulus plan will start to kick in later this year, creating jobs and, perhaps, helping soothe some of the enormous fears in the marketplace.

So, there are definitely brighter times ahead. Until then, here are some strategies to help you keep your head about you. Five things that you definitely should do and five things you definitely should not do, as you weigh how to protect and build your assets.

Let us start with the five things you should definitely do:

Too many of us overextended ourselves during the past decade with credit cards and other debt. These bills now hang over people like the Sword of Damocles.

1. Reduce Your Expensive Debt

The first order of business is to reduce this expensive debt, even before saving for retirement or investing in the stock market. One smart strategy is to take advantage of much lower gasoline prices. One year ago, gas cost more than $4 a gallon in much of the country. Today, it is less than half that. You should devote the money you save to eliminating your credit-card debt.

2. Get On a Budget

Thrift is the new black. That means getting on a budget, measuring exactly what you spend and looking for ways to save money. Perhaps you are eating out more than you appreciate or spending too much on a cup of coffee. Budgeting is a lost discipline for many people and one that should be rediscovered.

There are several free Web sites, such as Quicken.com and Wesabe.com, that can help you sort out your spending and give you a sense of where you can save money.

You upload password information for your credit cards and other accounts, and the sites aggregate and sort the data, so you can see how much you’re spending on, say, groceries, eating out and movies. You can then track your spending habits over time and make adjustments to save money.

What’s more, some of these sites, notably Wesabe, also have active communities discussing various budgeting issues. If you are just getting started on developing budgeting discipline, talking with others who are doing the same can help make it easier.

3. Guard Against Inflation

Currently, inflation is a relative nonissue, and most commentators, not to mention the Federal Reserve believe that it will not become a problem anytime soon.

Yet, many things are taking place that could raise the specter of inflation in rapid order.

For starters, the federal government is spending money like a drunken sailor. There’s the nearly $800 billion stimulus program, a proposed budget of $4 trillion, up from $3 trillion in the previous year and hundreds of billions more in bank, real-estate and credit-rescue packages. On top of that, short-term interest rates, set by the Fed, are essentially at zero and quite low in other countries as well.

All of which is like so much kindling waiting for a spark. Once that spark hits, growth and inflation could come roaring back to life.

For that reason, it is smart to have a portion of your fixed-income investments in Treasury inflation-protected securities, or TIPS. These bonds are backed by the U.S. government, like normal Treasurys, but also have built-in protections that boost returns to account for inflation.

Another inflation-hedging strategy is to invest in commodities. When growth resumes, demand for oil, copper and other commodities will rise, making their prices increase. A warning, though: Given the volatility of commodities, financial planners recommend that investors have no more than 5% to 10% of their portfolio in this sector.

4. Have a Stock-Market Strategy

Despite the recent sprint in share prices, investors remain leery of the stock market. It will take more than a four-week rally to soothe the pain caused by the stock market since it tumbled from its late-2007 highs. When so much doubt surrounds the stock market, it’s usually a time to think about investing in equities. Despite the horrid pain most of us have suffered in the market during the past 18 months, stocks, like the economy, will not remain down forever.

That does not mean going whole-hog into the market, however. Consider coming at stocks first through your retirement account. For many of us, that account has a longer time horizon and built-in tax efficiencies, and often comes with a corporate match which is essentially free money.

Outside of your retirement account, be sure to maintain a diversified approach among stocks, bonds and cash. A good rule of thumb is to use your age as the percentage of assets you should have in safer bond investments. Thus, if you are 50, you would be split 50-50 between stocks and bonds. If you want to be more conservative, you would carve back some of the stock exposure and leave it in cash.

Even with the recent runup in stocks, you still might have a larger-than-usual chunk of your assets in bonds these days, because bonds did well last year and have remained solid this year. If that is the case, rebalancing toward stocks makes sense, especially with their prices so low.

Preserve What You Have

One of the lessons of the past few years is that the stock market and your home are not ATMs. They are assets that can rise and fall. Having a strategy to preserve your gains is prudent in these challenging times.

Along with diversification of assets, stocks, bonds and cash, maintain diversification in the stock market, as well. Buy broad, low-fee index funds, rather than individual stocks, to lower your exposure to risk.

And maintain a rainy-day fund in safer places, such as TIPS, certificates of deposit or highly rated municipal or corporate bonds. A good rule of thumb is to have a reserve of six months’ earnings in case of a job loss.

So, what should you definitely not do?

With things the way they are, it is tempting to simply opt out altogether. Fear of financial-system failure, the uncertain nature of the stock market and just a sense of foreboding have people thinking that it is smarter to keep their money in the backyard, a mattress or an empty can.

1. Do not Bury Your Money in the Backyard

But it really is not the way to deal with you money. The bank-insurance system works for holdings under $250,000. I know because my bank once failed, and the transfer of assets was seamless. So, at least keep your cash in certificates of deposit earning some sort of return. An overabundance of fear and caution can cost you money. Do not let that happen to you.

2. Do not Chase Returns

This is a great temptation in any market, but especially so today. Bonds had a great run last year, but some analysts believe they may just be the next bubble waiting to burst.

In short, do not double down on an asset that has had such a tremendous run. You are likely coming to the game too late, since most of the gains have already been made. That can skew your portfolio too sharply in a single direction, making you vulnerable to a decline in previously hot asset groups.

Look at it this way. In the past few years, the temptation to chase returns led people to buy too many houses, invest too heavily in a soaring stock market and aggressively bid up oil. All of it ended badly.

3. Do not Abandon Diversification

There is a great desire now to stay safe by holding only cash or only Treasurys. This kind of behavior is really just the same as chasing performance. Be disciplined. Stick to a diversified strategy and rebalance your holdings every year to reduce your exposure to the high-fliers.

4. Do not Stop Saving for Retirement

In times of turmoil, we tend to focus on what is right in front of us: the current bills, the savings account and what the day will bring. But we are all still going to want to retire at some point, so that means remaining disciplined about saving for retirement.

Employer 401(k) programs remain a good vehicle, even if the stock market has smacked their holdings. These programs allow you to invest money tax-deferred, and many companies, as noted, provide a corporate matching program.

Rather than ignoring your account statements, as many of us have done, take a look at them and make sure that your holdings are diversified and balanced. Ignoring your savings, or discontinuing them, will come back to haunt you when you want to leave off working and relax on the beach.

5. Do not Ignore Common Sense

Much heartbreak in the recent past has stemmed from an ignorance of common sense. Fraudsters promising overabundant returns snookered many investors. Some people viewed housing and the stock markets as never-can-lose gambits. Others spent far more than they had.

Personal finance, at its heart, boils down to common sense. You have to eliminate your high-cost debt and get on a budget. You must save for retirement. And you need to make sure that you own a home you can afford and enjoy, as opposed to seeing it as a get-rich-quick scheme.

In short your best financial strategies involve the following:

Being prudent, saving money and investing wisely. Getting back to these very basics will help all of us rebuild our portfolios and set sail for a better day.

Wallstreet.com Providing Financially Statigic Moves You should use to make and keep your finances on the positive, regardless of the economic times.

Do you think Cash is Really King? If you think cash is king, then you should Think again.

When the stock market goes down and stays down, some people react by cashing out their investments.

These moves in and out of cash are usually driven by fear, not a hard look at fundamentals and history. What is worse is that this approach is costly in more ways than one.

First, investors exit the market after their investment values have already fallen. They must sell their stocks at a loss.

Second, markets rally and often recover quickly. By the time investors overcome their fears and are ready to re-invest, it is likely that they have missed the best gains of the recovery.

So, the net result: selling low and buying high, not a formula for investing success. And, then, of course, there is the issue of the return on cash. In the current market, yields on cash investments such as money market mutual funds and certificates of deposit are well below the rate of inflation. Cash returns tend to move in concert with the Federal Reserve?s federal funds, rate which has fallen from 5.25% on Sept. 18, 2007 to 0.25% as of June 5, 2009.

Stay In to Win Over the Long Term

Investing in stocks and bonds does involve volatility and risk. The way to manage this over the long term is with diversification through asset allocation. In good times and bad, strategic and tactical asset allocation can provide a cushion against the ups and downs of the stock market, while giving you exposure to the full range of opportunities around the world.

Cash Does Have an Important Role to Play

Cash may not be king, but it does have several important roles to play in a portfolio. The rule of thumb is that investors should maintain an emergency fund equal to at least six months of living expenses in a stable cash value account. This money provides a cushion to help weather any financial setbacks such as a job loss or illness. It is also helps investors avoid being forced to sell stock in a hurry, and at a potential loss, just to raise cash for everyday bills.

Cash is one element in a well diversified portfolio. And, thoughtful diversification is the key to surviving and thriving in financial markets. Achieving the right blend of stocks, bonds and cash is known as ?asset allocation.? It is a highly individualized process and should reflect a particular investor?s risk tolerance.

USAA has developed a robust range of cost-effective asset allocation products ranging from single-fund asset allocation solutions such as USAA Cornerstone Strategy Fund and USAA Balanced Strategy Fund to more in-depth offerings like the USAA Strategic Fund Adviser and Private Investment Management. These resource-rich solutions maintain a consistent approach and are guided by the Balanced Strategy Fund Investment Group?s careful monitoring of current events, thorough understanding of history and a firm belief the economic fundamentals ultimately drive investment performance.

To learn more, visit or call USAA today at 1-800-583-8293.

Consider the investment objectives, risks, charges and expenses of the USAA Mutual Funds, carefully before investing. Download a prospectus containing this and other information about the funds from USAA Investment Management Company, Distributor. Read it carefully before investing.

Lone Star Private Equity Buys Big at Mortgage Fire Sale

This is what happens when investors get scared and run?

The Lone Star Fund is looking to profit from the castoffs of the credit meltdown, buying billions of marked-down assets and betting on just some of them to rebound, reports the Wall Street Journal. The Dallas-based private-equity firm run by John Grayken has closed a deal on $6.7 billion in Merrill Lynch mortgage backed assets once valued at $30.6 billion. With Merrill financing 75%, Lone Star has some $8 billion to continue its bargain shopping after wrapping up a $10 billion fundraising push for its two newest funds. Grayken honed his investment strategy for Lone Star, while resolving bad debt during the savings-and-loan crisis in the 1980s, the Journal notes, adding that the fund made its name by buying distressed companies and turning them around.

American Spectrum Realty Third Quarter Results

American Spectrum Realty, Inc. The Company, (AMEX:AQQ), a real estate investment and management company whose headquarters are located in Houston, Texas, third quarter revenue.

Rental revenue for the three months ended September 30, 2008 increased $1,337,000, or 17.3%, in comparison to the three months ended September 30, 2007. This increase was primarily attributable to $838,000 in revenue generated from one office property acquired during the second quarter of 2008. Greater revenues from properties owned for the full three months ended September 30, 2008 and September 30, 2007 accounted for the remaining increase of $499,000. The increase in revenues from properties owned for the full three months ended September 30, 2008 and September 30, 2007 was primarily due to an increase in rental rates and lease termination revenue. The increase was partially offset by a decrease in occupancy. The weighted average occupancy of The Companys properties was 85% for the three months ended September 2008 compared to 88% for the three months ended September 30, 2007.

The Companys net loss for the three months ended September 30, 2008 was $2,186,000, or $1.59 per share, compared to a net loss of $3,202,000, or $2.32 per share, for the three months ended September 30, 2007. The net loss recorded during the third quarter of 2007 included a loss on extinguishment of debt of $2,413,000.

The Companys net loss for the nine months ended September 30, 2008 was $4,771,000, or $3.47 per share, compared to a net loss of $5,642,000, or $4.09 per share, for the nine months ended September 30, 2007. The net loss for the nine months ended September 30, 2008 included income from discontinued operations of $631,000 attributable to the Companys sale of Columbia, a non-core property located in South Carolina. The net loss for the nine months ended September 30, 2007 included the loss on extinguishment of debt of $2,413,000.

American Spectrum Realty, Inc. is a real estate investment company that owns 29 office, industrial and retail properties aggregating approximately 2.7 million square feet in California, Texas, Arizona and the Midwest. American Spectrum Realty Management, Inc., a wholly-owned subsidiary of American Spectrum Realty, Inc., manages and leases all properties owned by American Spectrum Realty and all third parties. Publicly traded on the American Stock Exchange since November 2001, American Spectrum Realtys business plan focuses on acquisition of value-added real estate investments in its core markets of California, Texas and Arizona.