We’ve had a few discussions about the possibility of an upcoming recession including saving money for a recession as well as recession proofing your portfolio.

Well, the buzz about an upcoming recession hasn’t died off since then and people are still concerned. CNN/Money had a “ask the expert” column recently about investing in a recession. There’s definitely some sound advice in there, and he ends with a strong point: “But whatever you do, don’t get fixated on the recession buzz. A buzz is a distraction, not a basis for an investing strategy.” Keep things in perspective and remember the long-term.

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A common problem for the small investor is building up enough capital to make investments in a particular stock that might be appealing. So what exactly can you do if you only have enough money to buy a dozen shares or so of a stock?

Money Magazine has a short article on this issue, concluding in the end that it’s better just to stick to a mutual fund rather than shoot for a few shares in an individual stock.

We’ve talked a bit about buying index funds, and this might be just the option for a small investor looking to get his or her feet wet.

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People love lists and when it comes to personal finance and investing ideas, this is no exception. Listing the ten ways to save for retirement or the six best places to invest your money are always easy to read and usually have a bit of something interesting to say. Of course, it’s hard to really get any vital information from these snippets, but at least they get the ball rolling.

The WSJ has yet another little article featuring six money mistakes that people make that could end up costing them a lot of money later on. Some basics here we see frequently such as paying needless fund fees and investing too conservatively during retirement. But, there’s some interesting ones such as starting a divorce war and maintaining an unhealthy lifestyle. Some interesting ideas here and it’s always a good idea to remind yourself what you might be doing better to protect and grow your financial security.

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One of the key features of this website, like most other personal finance sites, is to help keep you informed on all the issues you might face in your financial life. This includes information on loans, credit cards, real estate, mortgages, investments, budgeting, etc.

I think the best thing you can do as an investor, or even someone trying to get a handle on their finances, is to educate yourself as much as possible. The better educated you are about investing, your retirement and your finances, the better prepared you will be to make good decisions.

Sometimes, however, you might find you need some professional help to give you a more informed decision. Perhaps the best strategy is to educate yourself as best as possible and then allow a financial advisor to put together the best package for you. Or not. You may be perfectly capable of making these decisions yourself and putting your own portfolio together.

There’s a good article at Kiplinger.com that addresses some of things you might think about in order to find the right professional to manage your money.

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A rather overlooked vehicle for investments is with real estate trust deeds. With a relatively low margin of risk and a pretty nice return of about 12% they make a nice addition for retirement income or an IRA investment portfolio.

Diamond Bay Investments specializes in real estate trust deed investments and will work to get you started on putting a portion of your investment portfolio to work earning some much needed retirement cash flow. You’ll generally see returns in the 11-14% range and since Diamond Bay coordinates all aspects of the trust deed investments, the risks are much more contained. You can learn more at there website where they have more information on these high return investments.

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You can’t turn around these days without reading another article about green products and green living. This constant barrage of information regarding global warming and the state of our environment has made innovative technologies targeting the green market a hot commodity. New startups in greentech or cleantech are hitting the street much like we saw internet startups towards the end of the 1990s.

The question is, are there some good investment opportunities in this emerging market? A recent article in Forbes suggested it was too soon for solar stocks. This might just be the case for other greentech startups as well.

This is certainly a market worth looking into and following as leaders begin to emerge. You can stay informed at sites such as cleantech.com, greentechmedia.com, and prognog.com.

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I’ve longed enjoyed the common sense, straightforward advice you find over at the Motley Fool, and the information in this article on trying to beat the market is no exception. There’s some nice advice in this little article, mainly that you shouldn’t try to beat the market unless you’re willing to put in the work…and even then, don’t count on it. To put it simply they say “either commit to investing, or commit to indexing.”

Now, the article does mention that most mutual funds fail to beat the market, noting that “some 75% of fund managers fail to beat the S&P 500 on an annual basis.” So why are there so many mutual funds out there pegging away, shooting for higher returns? Simple, it’s a very lucrative market. The article claims that “fund companies are pulling in some $117 billion per year simply in fees.” No wonder we talked about selling your mutual funds the other day.

The bottom line is this: if you don’t want to sweat it out and spend countless hours feverishly hunting for just the right stock combo to buy in order to beat the market, sit back, relax and invest in a nice, consistent index fund. Not quite as sexy as you might like, but relatively safe and reliable.

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Interesting article today from Yahoo Finance, This is Your Brain on Money. It basically features “five ways your brain can trick you into making financial blunders, and how to avoid them.” The information comes from Jason Zweig’s book Your Money and Your Brain: How the New Science of Neuroeconomics Can Help Make You Rich.

There’s some pretty good, general advice for investors in the article. Although there is nothing specific on how to invest your money, it does highlight some of the basic problems we make when we try to wrap our brains around spending and investing.

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There comes a time in every investor’s trading life when for whatever reason you need to pull you money out of one investment or another and put your cash on the sidelines. It might be when you’re shifting your portfolio around due to risk control or you could simply be waiting while you figure out your next move. When the stock market begins hitting new highs every few days like it has recently, investors tend to get a bit skittish while they wait for the fall. If you’re in the same position and you’ve recently taken some profits and stepped aside for the time being, you might be wondering what to do with your new found cash.

If you’ve found that now is a good time to pull some risk out of your portfolio you might simply want to sideline your cash for the time being. The question, of course, is where do you put it? Your broker probably has a few different interest bearing account into which you can easily shift some cash, and of course there’s always a CD. Online savings accounts such as Emigrant Direct and ING are also possible candidates.

The key things you want to think about is how long you want your money out and where you think interest rates are headed. If you only need to put your cash aside for a few weeks or a couple of months, a CD is probably out of the question since the better paying rates are for a longer terms and you could face penalties for early withdrawal. However, if you think interest rates are headed down and you don’t mind tying up your money for awhile, then a CD can be a great option.

The most important aspect of putting your money on the sidelines is to shop around for the best deal and stay informed regarding the details of each account. Interest rates will vary dramatically between banks and even between different vehicles in the same bank. Compare rates at a site like bankrate.com to see the most competitive rates available online.

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As has been well documented just about everywhere, the Fed cut the funds rates last month to 4.75%. Opinion is mixed as to whether or not another rate cut is in our future, but they’re certainly not going up anytime soon. The Fed issued this half-point cut largely to quell fears within the credit markets and to alleviate some of the problems that the cheap money of the last few years has offered…i.e. see the sub-prime lending fiasco, et al.

So now, of course, we’re seeing interest rates fall in other areas as well. Unfortunately for home owners/buyers, a reduction in the Fed fund rate does not necessarily translate into reduced mortgage rates. There are certainly some rates that are tied to the Fed fund such as home equity lines of credit, adjustable car loans, business loans and more, but others, such as a fixed-rate first mortgage can go either up or down since they are determined by many different factors…one of which is inflation that just happens to usually go up when the Fed cuts rates.

One of the areas that does generally follow the Fed fund rate is with interest rates on high-yield savings accounts such as ING Direct and Emigrant Direct. Now, there isn’t a perfect correlation here, but generally these rates stick close to each other, and we’re seeing that now.

ING Direct dropped their interest rates to 4.30% a couple of weeks ago. Emigrant Direct held out a bit longer but finally succumbed recently and has dropped their rate to 4.75%. This drop was widely anticipated and one reason I suggested locking into some rates now in as you recession proof your portfolio. You can still get a rate over 5.00% if you shop around a little on a site like bankrate.com, but most of the biggies have all gone under that mark.

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With all the changes happening today in the finance world, it is absolutely imperative that you get your financial house in order. This includes coming up with a solid and well-thought out financial plan. We have previously discussed assessing your risk profile as well as making a recession proof portfolio. These two points alone should drive home the point that financial planning is necessary.

A financial plan will, at its most basic level, consist of coming up with a comprehensive budget. You need to list all of your real and potential expenses and get them down on paper. If you’d like, you can make two columns: one listing your monthly budget and another listing the actual amount spent. You also need to list the sources of income.

Once you’ve established what you need to spend your money on, how much you have coming in, and how much of a difference there might be between the two, you’re ready to start making a financial plan. This planning phase should include both long and short-term time frames. You need to establish where you want to be in 10 years as well in 10 months.

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Make sure your investment portfolio is recession proof by following the tips provided here.

Every few years, the US economy seems to cycle around and take a turn for the worse. Oftentimes, these dips are small and the economy quickly recovers. Other times the downturn lasts a bit longer and we endure a recession. Recently, as the economy has been suffering due to the mortgage crisis and credit problems, there has been a lot of talk about another recession. Whether or not this plays out, you should be ready to make your investment portfolio solid and able to withstand an extended downturn.

Be Prepared. The first thing you really need to do before you look at the market and the economy for answers is to look at your own situation. Where can you trim expenses? Are you paying out a lot in interest through credit card debt and other loans. As the economy turns down, you need to position yourself to weather the storm. You can’t be prepared to make it through the lean times if you’re paying half your income towards interest debt and unnecessary incidentals. See this article for more advice on saving money for a financial emergency to get you started.

Limit Your Financial Exposure. You really want to start playing defense when a recession looms on the horizon. Don’t be aggressive with risky stocks or other high risk investments. Instead, put your money where it will be safe. You don’t have to drop it all into government bonds, but a few short-term bonds might be a good idea. Consider looking to invest in stocks from large companies with a solid financial history. These firms may also lose a bit in a touch economy, but they are certainly going to be more resilient than a small start-up in an unsteady industry.

Diversify your Holdings. Diversity in your financial portfolio is always a good idea, but when a recession hits it’s a necessity. You want to make sure your stock holdings cover a large range of industries, especially those less prone to cyclical moves. Industries that sell consumer staples or those that deal in health care tend to hold up in a slowdown. You want to avoid industries that focus on luxury items or discretionary spending goods. Ultimately, diversify your holds and be prepared to invest in some short-term bond, bank CDs, international stocks and other domestic, large-cap, dividend-paying stocks.

Lock in Your Rate. When the economy slows down, the Fed usually begins to bump down interest rates to revive things again. You don’t want to be stuck in a savings account where the interest rate continually falls. Instead, consider a 6 or 12 month CD that you purchase before the rates are dropped. You can also consider government agency bonds as they tend to pay at a fairly consistent, and relatively high, rate of return when others fall.

You may not be able to completely avoid losing a little money in a recession, but you can probably slow the bleeding and possibly avoid any loses at all. You simply have to have a little foresight and manage your investment portfolio accordingly.

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Every individual, whether you are middle-aged investor, retired or a new college graduate, has something called a financial risk profile. Generally speaking, this is the amount of financial risk you can tolerate based on a host of criteria–including such things as your age, income, employment status, location, and so forth. Your risk profile may also takes into account preferences you have personally for a level of risk. Are you someone willing to take some chances or do you always go for the safe bet?

When you get ready to analyze your personal risk tolerance you have to take into account your current financial situation as well as plans you have for your immediate future and those in the long term. Are you saving up for a down payment on a house? Is your child about ready to graduate from high school and you are saving for college? What exactly are the big ticket items on your horizon? And furthermore, where do you see yourself in 20 years? How about in 30?

After you’ve factored in things like your age and income and then identified your spending plans–both short and long term–it is time to work through some hypothetical situations. For instance, imagine one of your investments has taken a turn for the worse and is down 20% or so. Do you jump ship right away to reduce any further losses, hold on and wait for the tide to turn, or do you take advantage of the lower price and invest some more? The way you see yourself handling this situation should tell you something about your financial risk tolerance.

Another hypothetical scenario you could place yourself in is something like a game show where you’ve reached a certain prize level, say $25,000, and now you have a decision to make. Do you walk away with your prize, just happy to have won? Do you choose to continue with a 50% to double up your money or possible lose it all? How about a 5% chance to win a million dollars once you’ve already go $50,000 in the bank? Try to put yourself in the contestant’s position and see what you might do. The way you’d play the game can help you figure out your own risk profile.

If you’re able to work through the basic components that make up your financial risk profile and come to a better understanding of what you are able to tolerate–both due to your present situation as well as your appetite for risk–you will be better equipped to work through your savings and investments.

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The Rule Of 72 is a simple and quite common financial rule which simply states that your investment will double it’s initial amount every 72 periods that it is compounded. The formula is written like this: 72/r - where r equals the rate of return per period.

In other words, if you have an initial amount such as $1000 and you have a fixed rate of return rate of, say, 20% p.a. your initial $1000 will double itself in just over three and a half years eg. 72/20 = 3.6.

This example is a very simple calculation that assumes you use the effective rate of return.

This sort of financial equation is very handy to use when you need to compare investment opportunities or loans (such as home loans).

The Rule Of 72 is commonly used in all areas of personal finance and real estate investing and stock investing.

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A few months back I decided to invest a little money through Prosper.com. If you haven’t heard of this site, or a similar one out of the UK called Zopa, it’s set up so that a group of individuals pool their money together and loan out money to other individuals.

The people looking to borrow money are rated based on their credit score, delinquent accounts, inquiries and so forth, and the better these factors are the better interest rate they can obtain. The people looking to loan out the money can choose to bid on whomever they choose based on how much of a credit risk they think the borrower is and how high of an interest rate they can get. Generally speaking, the higher the credit risk the higher the interest rate.

One of the appealing parts of P2P investments is the fact that your risk is reduced because you spread out your loans to a number of different individuals. You only need to commit a minimum of $50 at Prosper to any one borrower. If you transfer $500 to your account, you can distribute that to 10 different borrowers, or you can simply put it all in towards one borrower.

I had a lot of fun looking through the list of borrowers and picking out the ones I thought would provide the best risk/reward ratio. I spent a bit of time on this and finally picked out about 9 borrowers, none worse than a C credit rating and most of them AA and A. I ended up with an average interest rate of 10.92%, not too bad for a relatively safe investment. I think many Prosper lenders are able to get even higher rates with a little more work and risk.

Ultimately, I decided not to invest even more money in Prosper for two reasons. The first, and primary, is that if even one of my borrowers defaults my entire investment is a wash. Propser has safeguards in place to collect on the defaulted loans, but I have little faith that they would prove effective. Secondly, there is some lag time between bidding on an loan and the actual funding, in addition to some other time my money is simply sitting in my Prosper account rather than an active loan. During that time, my money earns no interest since Prosper doesn’t pay interest on account balances. If they could just throw me 4.0% to hold my money in between loans, I’d feel a little better.

In the end I feel that sites like Prosper could provide a nice investment opportunity for individuals not to mention a nice place to find a loan for those looking for alternative lending options. These sites are still in their infancy and in time I’m sure they’ll work out the kinks and make this an even more attractive personal investment vehicle.

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