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Lipper

Investment tips

- Alan Lavine and Gail Liberman



When it comes to money, it's all about saving, investing and owing less. Here are a few unique ways to get ahead.

  • Keep inflation in mind both when you make purchases and when you invest. To contain the cost of inflation, which many expect will increase in the foreseeable future, consider buying as many things as you can in bulk at big box stories like Sam's Club and Costco. Also keep inflation in mind when you invest. Stocks, real estate stock funds; gold and precious metals mutual funds; and treasury inflation protection securities (TIPS) should help preserve the purchasing power of your money. Don't bet the ranch on these types of investments. Financial planners say you should have about 5 to 10 percent of your assets in precious metals stock funds and/or gold bullion. Depending on your age, you might invest 50 percent of your assets in blue chip stocks that pay dividends. Be sure you keep about six months of your wages in cash to meet emergencies.

  • Got money tied up in bank CDs? If rates rise, you're stuck--unless you're willing to cash out early and pay an interest penalty. But if interest rates rise high enough, you can cash out your old CD and reinvest in a new one and at least break even on the cost. Our calculations have shown that if rate rise over one-half-of-one percent, you might break even by selling your three year CD you owned for one year and reinvest the proceeds in a new three-year CD. Your best bet is to check with your banker to help you figure out your break-even rate.

  • You can postpone income taxes on U.S. Treasury bill investments if you buy them so they mature in the following year. T-bills sell at a discount to face value. Buy at year end and you don't pay taxes on the interest income until the following year. In addition, you won't pay state income taxes on U.S. bond income.

  • Use dollar cost averaging to invest in mutual funds. The idea is to invest every month. So when your fund's price drops, you buy more shares. Over the long term, the average cost of your investment will be lower than the market price when you sell. For example, assume you invested $100 per month in the Vanguard Index 500 Fund over the past 20 years: Your money would be worth more than $42,000.

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    Spouses Gail Liberman and Alan Lavine are syndicated columnists. You can purchase Alan Lavine & Gail Liberman's latest book Quick Steps to Financial Stability (QUE Publishing 2006) online at www.moneycouple.com or at your local bookstore. E-mail them at MWliblav@aol.com.


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