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BY WARREN BOROSON
NEWJERSEYNEWSROOM.COM
BOROSON ON MONEY
My own resolutions for 2010 were easy to make. They're the same resolutions I had made for 2009. Pure, pristine, untouched.
You know, the usual. Lose weight; simplify my portfolio; persuade Warren Buffett to anoint me as his successor when he retires from Berkshire Hathaway.
What follows are resolutions that some smart people in New Jersey suggest for readers of this column.
From Eve Kaplan, a fee-only (no products sold) Certified Financial Planner in Berkeley Heights. She can be reached at KaplanFinancialAdvisors.com or (908) 898-0549:
Consolidate where you invest. If you're like many other people, you have multiple brokerage accounts, IRAs at different institutions, etc. Every month, you receive numerous statements in the mail. All those statements give you the illusion that you own a diversified portfolio, but the reality is that your holdings are scattered across so many positions/locations that you can't see the forest for the trees.
Consolidate your holdings. Many people have multiple holdings of very similar mutual funds. How do you know if your holdings overlap, to the point of redundancy? Inventory all your mutual funds, and link each one with the most relevant benchmark used to measure fund performance (for example, the Standard & Poor's 500). If you're not sure of the answer, ask your adviser or broker – or consult the mutual fund company website.
If many mutual funds that you own use the same benchmark – and make up a big percentage of your portfolio – your portfolio is not so diversified as you thought. With stock or bond portfolios, make sure you don't have an overwhelming exposure to any one sector, like biotechnology or New Jersey municipals.
Consolidate your advice. I hear about folks who give (for example) one-third of their investments to broker No.1, another third to broker No. 2, and another third to broker No. 3 "to see how well each one is doing." This approach typically insures that the left hand doesn't know what the right hand is doing – unless you're tracking everything on a spreadsheet.
Know how your professionals get paid. This is a biggy because so many people fail to ask, "What does it cost?" and "How do you get paid?" It's useful to know how much your broker earns (that is, how much you yourself pay) for selling A, B, or C shares. Do you know why you were advised to buy (for example) an annuity? Is it truly in your best interest – or just another profitable product for the broker to sell?
Think Big Picture. Your financial life consists of a number of moving parts. If you don't work with an objective financial adviser, the only person coordinating these moving parts is ... you. Only a financial planner can do that – preferably a fee-only planner who offers objective advice because he or she isn't compensated by commissions.
From Marylou Reeves, CFP, president, Thomas Mack Associates, Rockaway:
1. Max out your 401 (k) contribution.
2. Make a contribution to your IRA.
3. Today, start a 529 College Savings Plan for your child or grandchild.
4. Consider converting an existing IRA to Roth status, especially if you are too young to call yourself a "boomer."
5. Sit down with your financial planner for a review of your portfolio and to review what your investment objectives are.
