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Well, so far the beginning of 2009 has felt quite similar to the last part of 2008. That, however, does not mean that there aren’t opportunities out there for us to take advantage of. Two common questions I’ve been getting from you are ‘should i still do this whole re-balancing thing?’ and ‘what do I need to know about re-financing?’ In today’s show I tackle both of these issues.
I’m going to go out on a limb and say that right now might be the best time ever to re-finance the mortgage on your home. The reason I say this is that rates are artificially low. Due to the housing debacle and the overall slow-down of the economy, the government is trying to figure out anything they can to 1) boost the economy and 2) unload homes. Because of this, rates are now hovering in the 4.5% – 5.0% range. Re-financing your home is similar to buying a car in that you have to know what you are doing and know what to look for. As you listen to the show I will define and explain some of the following issues:
The second topic I touch on in the show is re-balancing. 2008 was the best and worst of times for asset allocation. What I mean by this is that for the first three quarters of 2008, asset allocation held up great. A well-diversified and properly allocated portfolio was able to experience a great deal less volatility than the broad markets. Then came the fourth quarter when fear gripped the markets and punished any asset class not tied to cash. Every asset class began losing, and when asset classes move in the same direction, correlation coefficients are out the window. This link from SmartMoney provides a very useful asset allocation tool based on your response to a brief questionnaire. Consider using this tool to reevaluate your risk tolerance and to re-balance your portfolio.
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