Magazines Implore Investors to Examine Finances

In these lazy days of summer, while everyone has vacation-on-the-brain, a sense of urgency pervades business magazines this month, imploring investors to snap out of thoughts of leisure and pay attention to their financial situations at this crucial moment in the economic and market cycle.

"The strategic decisions you reach at this point in the recovery will determine your investing results not only for the coming 12 months but for the next five years or more," writes Michael Sivy in "The Best Places For Your Money Now," Money magazine's August cover story.

We're smack in the middle of a very typical bull market, despite the unexciting returns so far this year, the author says, and the concerns over oil prices, inflation and unemployment have been overblown. "The long-term fundamentals of the economy and the market are more positive for stocks than they have been since 1999. By contrast, prospects for fixed-income investments and real estate are the dimmest they've been in a decade."

For the best stock buys now, Sivy suggests investors look at financial services, consumer-spending plays, classic growth sectors such as computers and pharmaceuticals, and inflation hedges such as commodity producers. He lists eight stock recommendations in those groups. For current income, Sivy favors high-yield stocks, preferred shares — or any alternative to long-term bonds because of their interest rate sensitivity. The author warns that real estate is another potential casualty of rising rates.

But before tackling investments, Penelope Wang runs through a personal finance checkup in "First Things First," urging investors to cover the basics of lowering credit card balances, setting up emergency funds, maximizing 401(k) plans and locking in low mortgage rates now.

In "Portfolio Tuneup," Donna Rosato and Cybele Weisser look at several investors at crossroads: "a young saver ready to buy her first fund, a soon-to-be married couple poised to blend two portfolios, a family planning for retirement and college for three children, and a couple with decades of investing behind them." The writers break down their portfolios and suggest what changes they need to make.

Finally, in "The Money 100," Adrienne Carter lays out the magazine's pick of the top 100 mutual funds.

Fortune takes a similar pressing tone in its special issue, "Retire Rich: How To Get Set For Life," advising investors to take advantage of the moment. "The rally in stocks over the past year has been just strong enough to rekindle the fantasy," the magazine reads. "Not only is retirement beginning to feel possible again, but it feels full of possibility."

But first, investors must determine how much they'll need to retire. Not an easy task, explains Lee Eisenberg in "The Number." David Stires names his best stock and mutual fund picks for the year ahead, favoring health care, energy, financials and select media stocks, in "The Fortune 40: Finding Stocks You Can Bet On." Yuval Rosenberg lays out 15 ways to max out your investment income, including 11 stocks and equity funds with good dividend yields and four bond funds suited to weather a rising rate environment, in "Yield of Dreams."

But managing your money wisely doesn't have to be all work and no play, says SmartMoney magazine in the August issue. In fact, writers Matthew Heimer and Beverly Goodman set out to help readers save a bundle and still have a life in "Save Yourself $150,000: 4 Big Moves To Make Now."

"Where does frugality cross the line between savvy and silly?" they ask. When you aren't saving enough to justify your corner-cutting sacrifices, then forget about the small stuff, the writers say, and focus on a few key big items instead. "In any given year, you'll spend tens or hundreds of times more on the big-ticket items in your budget — your house, your car, your medical bills — than on cappuccino and compact discs. It stands to reason that you'll find the biggest savings in those same places."

So the article posits: "How could a middle-to-upper-income household trim its expenses to set aside an extra $150,000 over 10 years — on top of what they're already stashing in 401(k) plans, college-savings accounts and such? And could they do it without feeling like martyrs to miserliness?"

The writers studied data on the expenditures of households with income of more than $75,000 per year and found that by focusing on home, cars, investments and insurance, a family could come up with at least $137,500 in savings by making a few strategic moves. They then came up with other smaller and equally painless tips to save another $12,500.

For example, replacing a 30-year home loan with a hybrid adjustable-rate mortgage that has a much lower interest rate can cut a mortgage payment by hundreds of dollars a month. Or, buy a used instead of new car. Lower fuel efficiency and faster depreciation can make new cars more expensive than ever, but thanks to the popularity of leases in the late 1990s and sales incentives, there is a glut of "gently used" cars in the secondary market.

Also, where you save can be just as important as how much you save, says the article, so focus on mutual funds and brokerages with low fees and expenses. And since the average upper-income household pays around $4,900 a year in premiums, looking for better insurance deals, including switching from permanent life to term life and maintaining higher deductibles on house and car, can pay off dramatically.

Some of the smaller things readers can do? Use energy-efficient air conditioning systems on the remaining hot days ahead and fly with discount airlines for that last summer fling.

Copyright © 2008 Donald W. Reynolds National Center for Business Journalism