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Compass F inan ce Investment Moves When it comes to your money, the more well- informed you are, the better. Here, the team at Evensky & Katz offers some sage advice on the topic and on what we might expect in the financial market for years to come. T e x t by D ena R o ch é According to Evensky & Katz, investment markets in 2014 could see more of the same as the world economy continues to distance itself from the financial crisis hangover and edge toward sustained growth. There are a few thunderclouds lingering overhead, as The Fed begins the long process of reversing its intervention in financial markets, and investors wonder whether U.S. stock markets have gotten ahead of themselves and become a bit too pricey. Long-term investors however, should stay focused on taking profits and managing risk, and should avoid the temptation to try and time markets. U.S. stocks soared throughout 2013, so it’s wise to rebalance and take profits while maintaining long-term investments in stocks equal to your desired level of risk. Expect Europe to make the turn back to sustained growth after struggling through recession. Owning European funds or stocks is a good portfolio complement to U.S. Stocks. Additionally, U.S. Bonds will likely remain plagued by low yields and rising rates. Short to intermediate maturity, investment grade bonds, however, remain a long-term hold, because they help smooth the bumpiness that inevitably appears in world stock markets. Here are a few moves to make NOW: • Stop looking backward, look forward. Future returns are likely to be much lower than in the past. Rebalance your portfolio based on your criteria for return needs and risk. If you don’t have a strategic vision, get one. • Get real. Reasonable long-term expectations for returns are 8.5% for stock and 5% for bonds. If you factor in taxes, expenses and inflation, you’re left with about 2% in a balanced portfolio. The best strategy is to focus on managing investment costs with EFTs and core and satellite implementation. Saving .5% will increase your return 25%. • Investing is fun but earning an extra 5% on your portfolio won’t mean much if your insurance coverage is botched up. A grandson in a bad car accident driving your car with inadequate liability coverage can wipe you out. Make sure to start the new year with a thorough review of your insurance coverage. 44