If you’re like most investors last year’s portfolio losses have not only caused you a great deal of financial strain, but also given you a full measure of doubt about how—and where—to begin to invest again. While it may be tempting to look towards esoteric strategies or follow popular investing gurus and TV personalities to get back on track, we’re confident that the fundamentals—not bells and whistles—are the best way to find investments worthy of your hard-earned dollars.
Though our focus is in fixed income assets such as corporate and municipal bonds, FDIC-Insured certificates of deposit (CDs) and corporate notes, the fundamentals are similar across all asset types. The first of the four fundamentals is an old nugget of financial wisdom passed down by financial professionals over the years: buy what you know.
Buying what you know can mean many things—at the most basic level it is investing in companies whose products you personally use, companies that you know well, and/or states, counties and school districts you live and pay tax in. While there are outliers and exceptions to this rule, buying what you know puts you in a position to access, and assess with your expertise and experience, important information quickly without relying on pundits, paid advisors or costly investment newsletters. In short, making smart and timely investment decisions depend on confidence, and confidence depends on getting good information. There are few better ways to do this than buying what you know.
One way to help gain this confidence, as pedestrian as it sounds, is to start doing your homework now. For example, if you’re looking to diversify your portfolio by investing in corporate bonds, be familiar with the company’s investor relations—found on most company websites; the company’s bond ratings, which you can find at a variety of free sites including our Bonds for Less (www.bondsforless.com) platform; and FINRA Market Data (www.finra.org/marketgdata) for trace reporting (which gives you a detailed history of both the particular bond you’re considering and the financials of the company).
If you’re considering investing in tax free municipal bonds, check up on the municipality at www.emma.msrb.org to get official statements and trade activity information; also, go to the municipality’s website or give them a call for more detailed information. As with corporate bonds, information is also available on munis at Bonds for Less.
Irrespective of the asset, know your basic terminology. Websites like Investopedia (www.investopedia.com), Investing in Bonds (www.investinginbonds.com), and FINRA (www.finra.org/investors/smartinvesting/index.htm) are useful for brushing up on your financial vocabulary and enhancing your investment know-how. All these sites can help you to get back on track financially by returning to the fundamentals.
Thanks for the catch. We have updated it.