Florida Prepaid college plan deadline is Monday

Thinking about buying a prepaid college plan before the prices go up again? You have until 11:59 p.m. Monday to enroll. After that, you will have to wait until October, when next year's plans are unveiled.

The costs of the most popular four-year university plans have skyrocketed in recent years. This year, it costs $45,367 for a newborn, which can be paid installments of $856 a month for five years or $282 a month until the child goes to college. All mandatory fees are included in this year's price.

Prepaid is also offering a plan where students can get a bachelor's degree at a state college, formerly known as a community college, for $16,514 for a newborn. The full value can be transferred to a university if the child goes there instead, but it will likely cover less than 40 percent of tuition and fees.

For more information or to enroll, go to http://www.myfloridaprepaid.com.

Women Wealth & Wisdom - Estate Planning Strategies

Much to do with estate planning strategies is the same for men and women, but conditions particular to women influence the way that women should conduct their financial management and the allocation of their estates.

Women have the potential to be in charge of their finances at any time, whether by choice or circumstance – death and divorce are two factors that could contribute to women needing to make their financial decisions independently.

The first stage of estate planning strategies involves a careful assessment of your property and investments. Working either alone or with a financial professional, create an inventory of your estate value, including any life insurance that will be distributed to your heirs.

If you take the time to plan for the allocation of your estate, you can avoid unnecessary taxes that will whittle away at your estate. If your estate – combined with your husband’s if applicable – is worth more than one million dollars, you should consult a financial professional on how to best shelter your estate. You can give gifts, create credit shelters, and invest in trusts in order to reduce the taxes deducted from your estate.

Your will is an important part of your estate planning strategy. If you have minor children, your will is the place to name guardians and establish your wishes about how you want your children to be raised. If you don’t provide clear instructions of your wishes, it will be left to the state to decide the placement of your kids. Even if you are not the primary income earner in your family, or if you are not making an income at all, your will is a legal record of your wishes and intentions and should not be overlooked.

Estate planning strategies also involves setting up trusts – which is most important in the provision for children. You can use trusts to allocate money for the support of your children when they are young, and set terms to include your wishes for their education.

https://www.axa-equitable.com/learning-center/womens-guide/estate-planning-strategies.html

Life Insurance for the Homemaker

It’s arguably the most important job there is: motherhood. The challenges are great, the rewards are many, but most of them are not financial. So, just what is motherhood worth on the open market?

Not-so-Minimum Wage

In its ninth annual “Mom Salary Survey”, conducted in 2009, Salary.com attempts to answer that very question by polling more than 12,000 mothers. Based on the tasks they perform and time put toward each, the Salary.com’s online calculator estimates the salary a mother would be entitled to if she were paid for her time, effort and performance at over $120,000¹.

Uncovering a Disturbing Fact

More than a fun tool, the salary.com calculator uncovers a serious truth: it would be expensive to replace Mom. Certainly the emotional value of a mother is priceless. But if the unfortunate circumstance should arise where Dad needed to bring in a team of caretakers to perform the functions Mom once handled, the expense could be crippling. Still, so many women - both those who work outside the home and those who work within – remain chronically underinsured.

Generally, women who have paying jobs outside the home are more likely to have some sort of employer-sponsored life insurance. But relying solely on employer-sponsored coverage could be risky, especially in today’s volatile job market: Lose the job and you lose the insurance.

Stay-at-home moms are the most likely to be completely uninsured, due in part to the perception that life insurance protection is intended to safeguard against lost wages versus lost “value.” In the event of Mom’s death, Dad would still need to work full-time to support the family. Think what it would cost to hire a full-time maid/babysitter, chauffeur, tutor, cook and personal assistant to run the household in his absence. The younger the children, the more expensive round-the-clock help could be.

Why the Lack of Coverage?

Cost tends to be a concern when it comes to purchasing life insurance. In such cases, Term policies – those that only last a designated number of years (the term) – may be an affordable option. Rates are based on a person’s age, gender, health and other risk factors. For example, in 2008, it was estimated that a non-smoking, 40-year-old female in good health could qualify for $500,000 of coverage for about $300 per year. Consider this: the average 2008 cost of cable TV in the U.S. was $71 a month or $852 per year. Mom’s life can potentially be insured for less than half the cost of cable. Term policies could potentially be a reasonable short-term strategy, but the downside is that the coverage will end and you will have to reapply for coverage when you are older and possibly in worse health, most likely resulting in higher renewal premiums.

Permanent life insurance policies are another option. Permanent coverage remains in force throughout your lifetime without any required re-qualification so long as premiums are paid according to schedule. Policy types include Universal, Survivorship, and Variable life, among others – all with varying features best explained privately by a licensed insurance professional.

How Much Coverage is Enough?

According to the 2007 AXA Equitable Protection Report, on average, Americans between the ages of 25 to 65 have an insurance shortfall of nearly $180,000. Families with dependent children register the largest shortfall – upwards of $370,000.

Lack of knowledge about real coverage needs in case of death contributes to this alarming insurance gap. To determine how much insurance coverage your family needs, consider the immediate financial obligations that would arise if you died unexpectedly, including the cost of your final arrangements. Then, consider the long-term financial ramifications of not having your earnings – or in the case of a stay-at-home parent, the cost of replacing those duties with hired help. Also, figure in the cost of your mortgage and other long-term debt obligations and the cost of your children’s educations. A financial professional can help properly assess coverage needs to ensure your family has the appropriate amount of protection.

The Value of Life Insurance

Mothers are usually the nucleus of their family. They nurture and support each member and make daily sacrifices for the betterment of the people they love most. Surely, no mother intends to leave her family in financial distress in the event of her untimely death.

Life insurance is an important component of every family’s financial strategy, and may be much more affordable than you think.

https://www.axa-equitable.com/learning-center/womens-guide/life-insurance-for-homemaker.html

The Finances of Divorce

No one gets married expecting to get divorced. Unfortunately, with the national divorce rate at around 40 percent, many marriages will end. Going through a divorce is never easy, not emotionally or financially. Whether your split is amicable or contentious, there are certain steps you can take to protect yourself and begin planning for your personal financial future.

Money

In many marriages, one spouse tends to handle most of the couple’s finances, often acting both as banker and bill payer. If you are not the spouse in this role, it would be wise to educate yourself about where your marital money is – bank accounts, stocks and bonds, real estate, insurance policies, retirement plans, etc. – that way you can be sure you get your fair share in the divorce. Even if you have been the family’s banker, it can be helpful to gather all financial information in one place for easy reference.

Collect Financial Information

Take an accurate inventory of your joint assets in bank and brokerage accounts, property holdings, insurance policies, collectibles, qualified retirement accounts, and the like: this will be important as you separate. Make a list of what you think might constitute personal or separate property versus marital property. Property and assets owned by you and your husband individually before you were married are not considered marital property unless you legally changed the ownership rights during the course of the marriage.

Additionally, if applicable, you should collect all information about money you may owe – especially personal loans, credit cards and educational loan debt. You should also review your tax returns for the last two years. Make copies of everything and keep them someplace secure, whether in your own safe deposit box or the possession of a trusted friend or family member. If you do not already know, find out who your advisors are and what role they play in your financial life.

If you intend to petition for spousal support, collect copies of home loan, tax, car, utility, insurance and maintenance bills, and track other daily living expenses. Make sure you also have copies of your will, trusts and any other legal documents created during the course of the marriage. If you have a pre- or post-nuptial agreement, you will need a copy of that as well. It is also wise to make sure you have a record of all your account passwords, as well as your spouse’s social security number. If your name is not on your utility bills, add it. This could help you more easily open a new account after you divorce.

Beneficiary Designations

Typically, spouses become the default beneficiary on financial accounts. Once you decide to divorce, be sure to update your beneficiary designations. This not only should be done in your will, but also for pensions and retirement plans, life insurance policies, annuity contracts, investments and veteran benefits if applicable.

The Best Defense: A Good Offense

If you know or suspect your divorce is going to be unfriendly, you need to protect yourself. Contact credit-reporting agencies, such as Equifax, and make them aware of your situation. Open a savings and checking account in your name alone. If you took your husband’s name but will now be reverting back to your maiden name, you can open the accounts in your married name and change them after the divorce decree is issued and your name change is finalized. Fund your new accounts with as much money as you think you’ll need to sustain you through the divorce. These two actions may help protect your credit score if your spouse tries to abuse joint accounts or write bad checks during your split.

What about Retirement?

When it comes to dividing retirement assets, different rules apply depending on your state of residence and the length of your marriage. Some assets may be treated as community property and divided equally: others may favor the higher wage earner. Determining the actual value of assets becomes quite important, and it may be worthwhile to hire a professional appraiser to estimate the future value of current assets before you agree to anything. Additionally, a qualified financial professional, along with legal and tax advisors, could help you determine which assets you are entitled to, what percentage you can expect to receive, and which forms need to be filed to ensure all is transferred correctly and there are no undue tax consequences.

Assuming you are eligible to receive a portion of your spouse’s pension or other qualified plan, it is important to find out if there are survivor rights. If so, you could still collect benefits throughout your own retirement even if your spouse passes away.

Do not overlook future Social Security benefits. If you were married for at least 10 years and never remarried, you can qualify for 50 percent of your ex-spouse’s benefits when you both reach 62, even if he has remarried or hasn’t retired. You can receive 100 percent if he has passed away. If you qualify based on your own history, you’ll receive the larger of the payments. Note that you will have to be divorced at least two years before filing a claim. For more information, visit www.ssa.gov.

Everyone’s Future

Divorce obviously affects the two spouses who are choosing to separate. But, the impact it has on the couple’s children must also be considered. In addition to the emotional tumult children may experience, their financial futures will be impacted as well.

If you have dependent children, make sure the cost of higher education (and who will pay for what) is clearly delineated in your divorce settlement. A 50/50 split is not always fair, especially if you earn less or put your career on hold to be a full-time caregiver to your children. With the help of attorneys and financial professionals who can project anticipated college costs, you should be able to reach an equitable resolution so the children’s educational goals remain intact long after their parents’ marriage is dissolved.

Your agreement should also determine which parent would be responsible for carrying the healthcare benefits of the children and how the cost for any medical needs not covered will be divided. If you have depended on your husband’s medical insurance, you likely will no longer be covered once your divorce is final and will have to obtain health insurance benefits on your own.

When evaluating spousal and child support, be sure the contract language is very specific in case future circumstances change or the contract is legally challenged. Also, it is financially wise to adjust the payments to account for inflation, especially if they will be made over many years. Keep in mind that in some cases, spousal support may not be awarded.

A New Chapter, a New Financial Strategy

Your financial strategy and retirement plan will undoubtedly be affected by your change in marital status. After you have made sure your credit is safe, your beneficiaries are changed, and you are getting your rightful share of retirement assets, you need to craft a fresh plan for your new beginning. Ask for help. A reliable financial professional can guide your development of a new approach to your financial future. Together, you can assess your income-to-obligation scenario and implement a realistic strategy to help support your goals.

https://www.axa-equitable.com/learning-center/womens-guide/finances-of-divorce.html

Women Wealth & Wisdom - Starting Your Own Business

Women have made great strides in entering the business world and starting their own business ventures. In the U.S. there are more than 10 million women-owned firms employing more than 13 million people and generating a jaw-dropping $1.9 trillion in sales. The trend of women in business continues to tick upward. Women-owned firms have grown 42 percent in the past two decades – almost twice the rate of all firms (24%).

Women become entrepreneurs for a variety of reasons, but two common denominators exist in successful businesses: a calculated blend of passion and planning. It is a great idea to build a business around something about which you are already well versed. Rather than spending time and money learning a new skill set and acquiring the knowledge you need to get a new business off the ground, stay in your area of expertise. Put your effort and resources toward your new venture in something you already know.

Before you jump into the market and launch your business product or service, there are some thoughtful and creative steps to help ensure you create a strong company foundation. Consider your mission – your company model and ethics. Write a business statement and a company profile to solidify your motives, your intentions and your goals. You will need to articulate your business to future investors and clients, so make sure that you spend the time to develop a clear mandate and plan.

Know your market. Opening in the right location for your specific product or service can make the difference between success and failure. There is no need to reinvent the wheel where business is concerned. Many successful enterprises are built by taking an existing idea and tweaking it in a novel or superior way. Take the time to study the field. Learn who your competitors are and what they are doing. If there are no similar enterprises in your area, ask yourself why not. Make sure that you are not overlooking something that other potential business owner might have noticed that would prevent such an idea from being successful.

Things to do to help you get started:

• Research your field and gather information
• Join organizations and associations that focus on your field and subscribe to publications that focus on your business
• Prepare a comprehensive business plan and update your plan regularly.
• Identify all potential revenue sources.
• Spend regular time building business relationships and networking
• Set aside time every day to pick up the phone and follow up on or generate a new business lead
• Avoid doing everything yourself – delegate responsibilities to your staff or seek assistance from experienced subcontractors.

There is a wealth of resources available to help you get that business started. Be sure to look for government and bank grants, many that apply specifically to women entrepreneurs. Seek the help of a banker, an attorney, an account and a financial professional to help you lay the groundwork and explore the many facets of starting your own business.

https://www.axa-equitable.com/learning-center/womens-guide/starting-own-business.html

Time for dividend-paying stocks?

These are challenging times to invest for income. Historically low interest rates have been holding down bond yields. Even if rates stay low for a significant amount of time, they are likely to rise at some point in the future. If that happens, it would depress prices on all bonds, especially many long-duration fixed-income securities. What’s more, expansionary monetary policy and large government debts heighten the risk of inflation, which is one of the biggest threats to any fixed income stream.

There are many income-producing alternatives to consider. Thanks to strong corporate balance sheets and low valuations, many dividend-yielding stocks now offer the potential for sustainable dividend payouts and the possibility of capital appreciation.

Their appeal isn’t limited to the current climate, however. Historically, stocks with healthy dividend yields have tended to offer the potential for strong long-term returns, with less volatility than the market as a whole. Prior to about 1960, the lion’s share of returns in the equity markets came from dividends.

Dividend investing has been overlooked somewhat in recent decades, as investors focused instead on stocks’ potential for price gains. But for many years, dividends were the primary reason to invest in the stock market. Dividend-paying stocks are the decathletes of the equity market. They don’t usually come in first in any one event. But as an asset class they have tended to be consistent—and that consistency can help them win over the long term.

Historically, shares with strong dividend payouts also have been considerably less volatile than the market as a whole—typically lagging the broad market during rallies and holding up better during market declines.

To incorporate dividend-paying shares into your investment mix, consider shifting a portion of your existing equity and fixed-income allocations into a fund that generates income through equities. This may boost the income your portfolio generates, while providing diversification away from both your stock and bond allocations.

The role dividend-paying stocks play in your portfolio is up to you, based on your risk tolerance, time horizon, and other factors. But almost any long-term investor can benefit from them.

https://guidance.fidelity.com/viewpoints/dividend-paying-stocks?ccsource=email

When to Sell Your Stocks

By: Carl Richards

So if you find yourself in the enviable position of having chosen a few winning individual stocks, how do you make the decision?

First, it’s often better to be lucky than smart, so it makes sense to be honest with yourself if you invested, for example, in Apple. As you’ve watched the price go up, did you make the decision to invest because you’re smart, brave or just lucky? If you’re being honest, most people would acknowledge that when you pick an individual stock or two and they subsequently triple in price, that outcome is more often than not a result of luck and not some inherent skill.

Second, review how these investments fit within the context of your financial life. Choosing to keep an individual stock just because it went up does not qualify as a valid reason. So when you’re asking the question of whether it’s time to sell, take a step back and consider the following:

1) Clearly identify your financial goals. A simple (but not easy) process, identifying your financial goals should include defining what you think you want the future to look like. Don’t spend hours or days on this task, and give yourself some slack. It’s life, after all. Things will change, and it makes sense to revisit and redefine your goals periodically. These goals really are nothing more than educated guesses, but they’re at least a set of markers in the sand, something that you can use as a reference point for your decision making.

2) Make a plan to get there. Again don’t spend too much time here because the variables that go into building a plan are nothing more than guesses. Still, the process is important. Using the information you have, estimate how how much you can save for the next 36 months, make a guess at the rate of return you hope to earn and carefully consider what risks you’re comfortable taking.

3) After you define some goals and build a simple plan, decide if your current investments fit the plan.

4) If the investments don’t fit, sell! Now, you need to be prepared psychologically to sell. I can promise you that if you make the decision to sell an investment, because it aligns with your plan, the stock will triple over the next couple months after you sell.

If you make the decision to continue to hold an investment because it does fit in the context of your plan, it will lose 20 percent of its value over the next three months. There’s no guarantee that comes with the decision to buy or hold, but be prepared that your decision may be tested. That’s just Murphy’s Law.

Making the decision to sell or hold an investment is relatively simple when we’re aware of the cognitive traps of fear and greed. It should be clear to anyone that if you own an investment that has tripled in price, and you made that investment based on luck, it would be wise to take some of the profit and go home.

Investment decisions like buying or holding are best made when you do so in the context of your financial goals. Picking the next Apple is not a financial goal. Saving for retirement or having enough money to send your kids to college are financial goals. Once we’re clear about the why, about the goals, and we have a simple framework to represent a plan to get there, making investment decisions becomes much more simple.

http://bucks.blogs.nytimes.com/2011/01/24/when-to-sell-your-stocks/?ref=your-money

Are You a Secret Apple Stockholder?

Wall Street Journal - 20 January 2011

If you're like most Americans, you probably figure the news about Steve Jobs and Apple doesn't affect you directly.

Sure, you're probably concerned for Mr. Jobs's well-being. (The Apple CEO, who has a history of medical problems, is taking an indefinite leave for unspecified health reasons.) And you may take a general interest in news about the leadership of one of America's most prominent and successful companies.

But you may nonetheless think, "This doesn't have anything to do with me. I don't work for Apple. It's not going to affect my iPhone, iPad or MacBook. I don't hold any Apple stock in my portfolio."

Right?

Think again.

You may not know it, but you are probably a secret Apple stockholder. And maybe a big one.

Apple is everywhere on Wall Street. Few stocks are as widely held in regular mutual funds as well as in hedge funds. Few affect the performance of so many retirement portfolios. This is especially unusual because Apple is such a volatile growth stock. In recent years it's fallen by two-thirds and it's quadrupled. Most of the other shares that crop up in every portfolio are dull ones like Exxon Mobil or Procter & Gamble or Johnson & Johnson.

According to a review of company filings that I conducted using FactSet, a market data provider, an astonishing 4,100 mutual funds hold stock in Apple. (That compares to just 3,630 for Exxon and J&J and 3,200 for P&G, although the figure for Microsoft is even higher at almost 4,800.)

And many of the funds holding Apple are making very big bets on the stock on your behalf: More than 750 of them have invested at least 5% of their entire portfolio in this one stock. Seven hundred and fifty. (The figure for Exxon: just 188.)

Many people don’t plan for retirement

We all want a secure retirement where we don’t have to worry about making ends meet. After spending 30 or more years in the workforce, its time to kick back and enjoy our golden years. Unfortunately, many people don’t plan for retirement and just assume that their company pension, 401(k) or Social Security will take care of them. That’s a dangerous assumption and a recipe for disaster.

Here are some eye-opening statistics from saperston.com:

• The latest census figures indicate that only one in every ten Americans today is financially prepared to retire when they reach age 65. Here are a few other facts on retirement gathered from a variety of sources.

• Forty-seven percent of U.S. households are not covered by either a defined benefit or defined contribution plan (The WEFA Group). Twenty-five percent of employees who qualify for 401(k) plans do not contribute to them (an estimate from Buck Consultants).

• At the end of WWII, there were 42 workers paying into Social Security for each person receiving benefits. Today, barely three people contribute for each recipient. Projections are that by 2030, when most baby boomers will have retired, just two working people will contribute for each person receiving benefits (Social Security Administration, Trust Funds Report, 1992).

• Social Security benefits will replace only 16% of the income of married couples earning $50,000 to $100,000 and only 9.5% of the income of married couples earning $100,000 and only 9.5% of the income of married couples earning $100,000-plus (Office of Research and Economic Analysis, Pension and Welfare Administration).

• Sixty-nine percent of American adults aged 25 to 44 expect to retire in the “traditional” sense of spending retirement in leisure. But reality hits home as they near retirement-63% of 45- to 54-year-olds expect a retirement of leisure, and only 49% of those 55 or older say the same (Aetna Life Insurance and Annuity Co.).

• Working people tend to think their retirement lifestyle will be better than their current lifestyle, but retirees report their standard of living has declined. Example: Twenty-six percent of workers say they are “just making ends meet,” but only 16% think they will live this way in retirement. Of retirees, 20% are “just making ends meet,” while 16% describe their pre-retirement lifestyle this way (Employee Benefit Research Institute).

• A Baby Boom Retirement Savings Index, published each year by Merrill Lynch, shows that as of November ’94, baby boomers were saving only 38.2% of what they will need to maintain growth-adjusted living standards in retirement. The index is basically unchanged in the three years the index has been published (Merrill Lynch Strategic Planning).

http://seekingalpha.com/article/247438-a-basic-retirement-plan-and-9-dividend-income-stocks-to-help-get-you-there?source=email_investment_ideas

There is an app for that latte!

By: Christina Wise, Investor's Business Daily

Although the coffee chain is well known for its drinks, it's also moving into the digital realm. The company plans to role out a mobile payment system by the end of March.

It's introducing a free app for smart phones that allows customers to link prepaid cards to their phones. They can buy coffee with their handsets by calling up an on-screen bar code that Starbucks employees read with a scanner.

The Starbucks group that helped develop the app said they'd noticed that many of Starbucks' customers have smart phones. So they think it will be something people will use. There are also versions of the Starbucks app for iPhones and Blackberries.

An Optimistic Start to Investing in 2011

By: Paul Sullivan, New York Times, January 7, 2011

People who spend their days studying investment options are optimistic about 2011. After all, 2010 ended on a positive note, from a return perspective, and this year is off to a solid start.

But the reality is that most investors still have portfolios filled with capital losses and fresh memories of the financial collapse, and they remain hesitant to take on risk.

Still, the professionals agreed that the risk to investors’ financial health this year could come as much from keeping their money in cash as from trying to do too much with it.

If the predictions hold true, this could be a good year for investors who choose wisely. But as everyone should be aware of by now, things do not always go as planned.

Most analysts said equities were poised for growth this year.

The reason for this is that many American companies are trading at relatively low price-to-earnings ratios, with estimates around 12 to 13 times earnings, when actual ratios are probably closer to 17 times. The companies also have large cash reserves that they will look to start spending.

An S.& P. close above 1,500 for the year is well within reach.

For those who do not want to base everything on appreciation, look at dividend-paying stocks. Dividend-paying stocks could be a first step for investors moving out of bonds.

Big hopes for big stocks

By: Andrew Bary, Barron's — 01/08/11

...The prevailing view on Wall Street is that large-caps finally will shine in 2011 because a prolonged slump has left stocks like Microsoft (MSFT

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), Cisco Systems (CSCO

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), Wal-Mart Stores (WMT

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) , PepsiCo (PEP

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), (JPMorgan Chase (JPM

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), Johnson & Johnson (JNJ

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) and much of the drug, technology and financial-services industries at modest price to earnings ratios. In addition, large-caps give investors more exposure to high-growth markets overseas, given the global reach of multinationals like Coca-Cola (KO

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Investors look to cloud for tech stock picks

By Jim Finkle

BOSTON (Reuters) - Jeffrey Saut simply looks up to remind himself which tech stocks will be hot in 2011.

Saut, chief investment strategist for brokerage Raymond James, says he is betting on companies that are leaders in cloud computing -- using Internet technology to move computers and information away from desktops and into remote data centers.

Despite the surge in cloud computing stock prices last year, investors are expecting an encore in 2011 as the revenue growth for these companies rises faster than the broader technology landscape.

Will Danoff, who manages the $72 billion Fidelity Contrafund, is among the most closely watched investors who has embraced the cloud. He says that the cloud is one of his investing strategies for 2011 because he expects companies that sell into the sector to outperform the broader market.

IT research firm Gartner estimates that companies that sell software as a cloud-based service will see revenue growth accelerate this year, climbing 16.2 percent. Last year sales grew an estimated 15.7 percent.

The sector is drawing attention because its sales are revving up just as growth in overall technology spending is on the decline. Gartner sees worldwide tech spending growth slowing to 5.1 percent this year, down from 5.4 percent in 2010.

MOMENTUM PLAY

Some investors are nervous about the high valuations commanded by cloud computing companies, whose volatile trading has led to precipitous declines on some days last year.

But there is simply too much momentum behind the sector to falter this year. "It will probably still emerge as a leader," said Steve Goldman, market strategist at Weeden & Co in Greenwich, Connecticut.

The optimism on the sector is underpinned by the belief that companies behind them are fundamentally reshaping the way businesses use technology, investors and analysts said.

Cloud leaders like Salesforce.com sell their software through web browsers, saving customers the expense and time of buying and maintaining expensive computer servers.

Besides ease of use, cloud computing saves money by providing huge economies of scale. It offers businesses centralized software, storage and computing services that are less expensive to procure. That model is somewhat similar to the one that online retailers like Amazon use to provide discounted goods to consumers.

TOP PERFORMERS

The big names in cloud computing also rank among last year's top-performing stocks: VMware Inc, which sells software to build clouds, saw its shares more than double in 2011. Salesforce.com, which sells software that workers access over the Internet from web browsers, soared 80 percent.

NetApp Inc and EMC Corp, which both sell equipment for storing data in the cloud, were also top gainers in 2010.

Wall Street analysts say they are constantly peppered with questions from portfolio managers eager to profit from the surge in popularity of cloud stocks.

Industry analysts say that cloud computing projects tend to generate quick returns on investments, which means that companies are able to quickly recoup the money they spend on the projects and see tangible benefits to their businesses.

That resonates with Fidelity's Danoff, who holds cloud players including Google Inc, Amazon, Salesforce, NetApp and Citrix Systems Inc.

Fifteen billion new connected devices

"...In 2010, total traffic crossing the Internet was roughly 245 exabytes. This is greater than all the previous years combined. Over the next five years, 1 billion more people will join the global online community with 15 billion new connected devices, including PCs, smartphones, tablets, embedded devices, and smart TVs. We estimate this will increase the data footprint across the Internet to over 1,000 exabytes..."

This from Intel Corporation's quarterly report.

Careful Consideration of Risk Tolerance

There are many things to consider when determining the answer to a seemingly simple question, "What is my risk tolerance?" The answer will vary based on your age, experience, net worth, risk capital and the actual investment or trade being considered. Once you have thought this through, you will be able to apply this knowledge to a balanced and diversified program of investing and trading.

Spreading your risk around, even if it is all high risk, decreases your overall exposure to any single investment or trade. With appropriate diversification, the probability of total loss is greatly reduced. This comes back to preservation of capital.

Knowing your risk tolerance goes far beyond being able to sleep at night or stressing over your trades. It is a complex process of analyzing your personal financial situation and balancing it against your goals and objectives. Ultimately, knowing you risk tolerance - and keeping to investments that fit within it - should keep you from complete financial ruin.

Risk Tolerance - Investment Experience

When it comes to determining your risk tolerance, your level of investing experience must also be considered. Are you new to investing and trading? Have you been doing this for some time but are branching into a new area, like selling options? It is prudent to begin new ventures with some degree of caution, and trading or investing is no different. Get some experience under your belt before committing too much capital. Always remember the old cliché and strive for "preservation of capital." It only makes sense to take on the appropriate risk for your situation if the worst-case scenario will leave you able to live to fight another day.

Understand Your Investment Objectives

Your investment objectives must also be considered when calculating how much risk can be assumed. If you are saving for a child's college education or your retirement, how much risk do you really want to take with those funds? Conversely, more risk could be taken if you are using true risk capital or disposable income to attempt to earn extra income.

Interestingly, some people seem quite alright with using retirement funds to trade higher-risk instruments. If you are doing this for the sole purpose of sheltering the trades from tax exposure, make sure you fully understand what you are doing. Such a strategy may be alright if you are experienced, are using only a portion of your IRA funds for this purpose and are not risking your ability to retire on a single trade.

However, if you are applying your entire IRA, have little or no net worth and are just trying to avoid tax exposure for that "sure thing" trade, you need to rethink the notion of taking on this much risk. With this in mind, why would a low net worth individual need to take that much risk with retirement funds? In other words, just because you can do something doesn't always mean you should.

Risk Capital

Net worth and available risk capital should be important considerations when determining risk tolerance. Net worth is simply your assets minus your liabilities. Risk capital is money available to invest or trade that will not affect your lifestyle if lost. It should be defined as liquid capital, or capital that can easily be converted into cash.

Therefore, an investor or trader with a high net worth can assume more risk. The smaller the percentage of your overall net worth the investment or trade makes up, the more aggressive the risk tolerance can be.

Unfortunately, those with little to no net worth or with limited risk capital are often drawn to riskier investments like futures or options because of the lure of quick, easy and large profits. The problem with this is that when you are "trading with the rent" it is difficult to have your head in the game. Also, when too much risk is assumed with too little capital, a trader can be forced out of a position too early.

On the other hand, if an undercapitalized trader using limited or defined risk instruments "goes bust", it may not take that trader long to recover. Contrast this with the high-net-worth trader who puts everything into one risky trade and loses - it will take this trader much longer to recover.

Risk Tolerance - Time Frame

An often seen cliché is that of what we'll refer to as "age-based" risk tolerance. It is conventional wisdom that a younger investor has a long-term time horizon in terms of the need for investments and can take more risk. Following this logic, an older individual has a short investment horizon, especially once that individual is retired, and would have low risk tolerance. While this may be true in general, there are certainly a number of other considerations that come into play.

First, we need to consider investment. When will funds be needed? If the time horizon is relatively short, risk tolerance should shift to be more conservative. For long-term investments, there is room for more aggressive investing.

Be careful, however, about blindly following conventional wisdom. For example, don't think that just because you are 65 that you must shift everything to conservative investments, such as certificates of deposit or Treasury bills. While this may be appropriate for some, it may not be appropriate for all - such as for an individual who has enough to retire and live off of the interest of his or her investments without touching the principal. With today's growing life expectancies and advancing medical science, the 65-year-old investor may still have a 20-year (or more) time horizon.

How are Social Security payouts calculated?

The size of your monthly check is arrived at by a series of calculations.

Your primary insurance amount, or PIA — the benefit you would get at full retirement age — determines the size of your monthly retirement check. According to the Social Security Administration's website, the PIA is based on the Average Indexed Monthly Earnings, or AIME, as applied to an inflation-adjusted formula. The PIA is then adjusted for whether you take retirement before or after your normal retirement age — 66 for those now reaching retirement age, but gradually adjusted to age 67 for those born after 1954.

You can begin drawing reduced Social Security as early as 62. For every month you delay after reaching full retirement age, up to age 70, the monthly benefit increases.

According to a recent report of the Senate Special Committee on Aging, for someone with an AIME of $5,000 in 2009, the PIA would total $1,971.

In keeping with the original intent behind Social Security - a way to lift seniors out of poverty - lower-wage earners get a higher proportion of their earnings than higher wage earners.

The maximum monthly benefit that can be received in 2010 is $2,346.

Stocks for the Buy-and-Hold Investor

By Jamie Dlugosch, TheStreet.com Contributor

Depending on your viewpoint, the market is either teetering on the brink of a potential collapse and correction or simply building a base for more gains. Knowing the outcome at this point in the game is a guess at best.

I can make a case for both. On one hand, a market that puts up a record gain for December is long due of a pause. On the other hand, stimulus, value vs. bonds, a strengthening job market, a more-optimistic consumer and impressive corporate earnings suggest that stocks are due for more gains.

These are very difficult circumstances for traders. In fact, the conditions are perfect for those patient investors who adhere to a buy-and-hold strategy.

Goldman Sachs. Signs of a market top: The king of deal-making is in the news with respect to its investment in Internet fad and social network king Facebook. It is interesting to note that one of the company's fund managers took a pass on the deal, citing that an investment in Facebook did not fit the investment strategy of the fund. Funny: Goldman will make a ton of money selling the deal to others, but the investment was not strong enough for its own proprietary product.

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Starbucks. The coffee shop purveyor is ditching its name in its logo. I don't know about you, but I know Starbucks the name, not Starbucks the logo. This move seems questionable at best but will have little impact on future value. Recently on "Mad Money," Jim Cramer flagged Starbux as one of several stocks with the most to gain from exposure to China, and it was one of Goldman Sachs' 10 best stock picks for 2011.

Gap. Shares of the iconic retailer sank nearly 7% on Thursday after reporting a decline in same-store sales. I thought the holiday season was a plus for retailers, but apparently not all stores sell equally. Gap has struggled for years, and the brand may be tiring. If you needed an excuse to exit the name, this might have been it.

It was highlighted recently as a retail stock that could rally in 2011.

Citigroup. The huge financial services firm weathered the financial crisis storm. Investors in this giant penny stock (according to the SEC, a penny stock is defined based on share price below $5 per share) have made a killing betting on the eventual recovery. Today banks are poised for profits with an upward sloping yield curve. Banks and big banks in particular make for great buy-and-hold investments.

Ford. The recovery in the auto industry has been impressive. Ford's ability to avoid bankruptcy was due in part to a strategy of focusing on smaller cars. Perhaps it was just luck, but more likely it was strong management. Look for more of the same in 2011. Ford is another great buy-and-hold stock.

Target: The discount retailer lost $4 per share on Thursday after reporting same-store sales grew by less than 1%. That disappointing result was well below expectations. Shares now trade near its 200-moving day average of $54 per share. It would be easy to panic, but I would view the selling as a buying opportunity.

IBM: An interesting article from Forbes examines IBM's efforts in the area of cloud computing. In my opinion, it is overstating the obvious. IBM missed the boat on cloud and is now looking to use its mainframe and storage power to ride the wave. Success in cloud could make IBM a worthwhile buy-and-hold possibility for investors.

Salesforce.com: Speaking of cloud computing, investors should note that shares of CRM are up some $10 so far in 2011. With a market still deciding which way to go, the momentum investors are riding this stock higher. Talk of its demise look to be premature. I would not trade this stock. Instead, this is a wave to ride.

Netflix: Momentum investors can be fickle folks. Look no further than Netflix. Shares have been trading aggressively lower since peaking late last year. This is not a stock to buy and hold -- in fact, it might be a name worth dumping. If the momentum crowd gives up and moves on, things could turn ugly.

SPDR Gold Trust: Has gold lost its luster? At a minimum, it appears to have lost its can't-lose trading position. A weaker dollar creates inflation and thus higher gold prices. Lately we are seeing a stronger dollar thanks to a stronger economy. Previously, investors presumed a stronger economy implied higher inflation. Not so much today with gold down so far this year. I would view such a state to be temporary. We will not have a stronger economy without creating some sort of inflationary consequence. As such, buy and hold gold.

Research In Motion: The big player in smart devices unveiled its tablet computer this week. Apparently everyone does have Apple envy. My sense is that RIM's move is too little too late. Anyone remember the fate of Palm? It may take a bit more time, but Research In Motion's fate is likely to be similar.

AT&T: Verizon is coming, Verizon is coming. Perhaps in a move to pre-empt Apple's iPhone on Verizon , AT&T announced this week that it would be selling a cheap version of the Apple 3G. Again, investors looking for clues about such a strategy need only look at Palm's fate. Deep discounting of phone equipment was the kiss of death. Consumers are willing to pay for top-tier technology. Intense competition on the low end ensures that not enough volume exists to make the effort worthwhile. 2011 will be a tough year for AT&T.

However, it recently increased its dividend payout, and it's one of 2011's top-yielding Dow stocks.

BP: A new government report regarding the Gulf of Mexico oil spill further implicates BP and Transocean. The giant oil company response is to shrug. Not a smart move, in my opinion. The matter at hand is litigation, and the more evidence against British Petroleum, the more expensive the settlements or judgments. Will these companies ever learn?

An Investing Plan Gone to the Dogs

By: Dave Kansas, Wall Street Journal, 9 January 2011

Everyone is hunting for higher yields, but they're not so easy to find, especially in the fixed-income market. That has more people searching for dividends in the stock market.

One of the most venerable dividend plays in the stock market is the so-called Dogs of the Dow strategy. It is an investment plan focused on capturing the highest dividend payouts among the 30 blue-chip stocks in the Dow Jones Industrial Average, the oldest, most widely cited stock-market indicator in the world.

Some Dog players focus on the five-highest dividend yielders, other focus on the 10-highest dividend yielders, usually establishing the Dow Dog group at the start of each year. Building a standard Dog portfolio consists of buying an equal number of shares in each Dog stock.

The fundamental underpinning of Dog investing flows from the bedrock notion of annual portfolio rebalancing. Dividend yields -- which are just the annual dividend divided by the stock price -- tend to rise as stock prices decline. Therefore, picking the highest-yielding Dow stocks should put you among the stocks that lagged in the 30-stock blue-chip measure the year before. Rather than chasing winners, you are picking up the laggards -- the dog stocks -- hoping their fortunes will turn, which is usually a solid bet among blue chips.

This year's Dow 10: AT&T (yielding about 5.85%), Verizon Communications (5.46%), Pfizer (4.57%), Merck (4.22%), Kraft (3.68%), Johnson & Johnson (3.49%), Intel (3.42%), DuPont (3.29%), McDonald's (3.18%) and Chevron (3.16%).

A glance tells you a few things. One, telecommunications stocks are paying hearty yields, and some skeptics wonder how long that will last. Vodafone Group, which isn't among the Dow industrials, pays 4.87%, and Qwest Communications pays 4.2%. Also, drug stocks have struggled in recent years -- three are among the Dogs.

The Dogs, whether you choose five or 10, have a better dividend yield than the market. The Standard & Poor's 500-stock index has a dividend yield of 1.87%, down from 2.09% one year ago, mainly due to its 13% rise in 2010. The Dow industrials yield 2.46%, a reflection of the blue chips' willingness to raise and maintain dividends even as the average rose 11% last year.

The advantage of the Dog strategy is that you get paid a solid dividend yield and you have the added advantage of potential capital appreciation in share price.

The Dogs of the Dow is popular, but how successful has it been? In the last 10 years, the 10-stock Dow Dogs have beaten the Dow industrials on a total-return basis five times. The five-stock Dow Dogs have beat the average six times.

Over the past 20 years, the Dow Dogs 10 have recorded an annual average return of 11.62%; the Dow Dogs 5, 13.78%; and the Dow industrials, 11.61%.

Perhaps surprisingly, given its popularity, the Dogs strategy doesn't attract a great deal of mutual-fund interest. That's partly due to the simplicity of the strategy. It's easy enough for a lot of investors to build their own Dog portfolio without having to fork over management fees.

Happy hound hunting!

Top 10 investing tips for 2011

By: Don Taylor

With an economy still on the mend and unemployment stubbornly high, it's important to make the best investing decisions for you and your family. The best strategy blends managing risk while investing to get the most bang for your buck.

Take these baby steps and follow the rest of Bankrate.com's 100 tips for 2011 and you can improve your financial life in the coming year.

Tip 1: Define or refine your life goals

What do you want out of life?

The trend in financial planning is to work with people to help them determine what they want out of life, and then establish financial objectives that will facilitate the client's ability to achieve those life goals. Money becomes the catalyst instead of the goal.

Don't get drawn into the vague generalities of a comfortable retirement, an education for your children or travel abroad. When you know what you're working toward, you'll be more committed to investing for those goals.

Tip 2: Get the big picture of your financial plan

Financial planning is a lot more than just managing your investments. A comprehensive financial plan looks at the big picture. It includes a review of your insurance, employee benefits, income taxes, investments, retirement and estate planning, as well as personal financial statements, your attitudes toward risk, and your goals.

A good planner is the captain of your financial ship. The Certified Financial Planner Board of Standards Inc. has a wealth of consumer-friendly information, including the publication "How to choose a financial planner."

Tip 3: Create an investment policy statement

Whether you do it yourself or work with a financial planner, you should have an investment policy statement that serves as a guide on how you want to invest.

This guide should include the investor's philosophy toward investing, investment objectives, the investor's attitude toward risk, a target asset allocation, guidelines for monitoring portfolio performance and an approach to portfolio rebalancing.

Other items should cover tax considerations, estate planning goals, fees and expenses, and trading costs. It should spell out an approved list of investments, and whether the investor allows trading on margin, short selling and investing in derivative securities. And it should also spell out whether the investor's account allows discretionary trading by the account manager.

Tip 4: Know your risk tolerance

Know how you feel about risk in investing.

The "Investment Risk Tolerance Quiz" offered by Rutgers University's New Jersey Agricultural Experiment Station, can give you a quick read on your risk tolerance. If you find yourself tossing and turning at night and it's not your mattress but rather the markets keeping you awake, then it's time to dial down the risk in your portfolio.

Knowing your risk tolerance will help you decide how to invest your money. Conservative investors may not be comfortable with investing much money in the stock market because of its volatility. Lower volatility means lower potential returns, so a conservative investor will have to save a higher percentage of his income to be on track to meet his financial goals.

Investors have to manage their investments considering twin risks: the risk that their investments lose principal and the risk that their investments lose purchasing power. Conservative investors can protect principal by investing in certificates of deposit insured by the Federal Deposit Insurance Corp., but the FDIC doesn't protect the purchasing power of those deposits. Keep an eye on your purchasing power, too.

Tip 5: Review and rebalance your portfolio

Calendar rebalancing is one approach to adjusting how you've invested. Others include target rebalancing and tactical rebalancing. Calendar rebalancing has you adjust your portfolio on a regular basis. Target rebalancing waits until an asset allocation is above (or below) the maximum (or minimum) target asset allocation. Tactical asset allocation has you reducing or increasing the allocation to an asset class based on your outlook for that asset class.

An active management portfolio strategy rebalances the percentage of assets held in various categories in order to take advantage of market pricing anomalies or strong market sectors.

Investment allocations in financial securities are typically split between stocks, bonds and cash. The investment allocation that's right for you will depend on your risk tolerance, investment goals and market outlook. You may decide that an allocation of 50 percent stocks, 30 percent bonds and 20 percent cash is right for you. If this year's stock performance brought your stock allocation up to 60 percent, then rebalancing the portfolio will get you back to your target allocation.

Tax and other considerations like estate planning can influence your desire and ability to rebalance your portfolio.

Tip 6: Establish an emergency fund

Establishing an emergency fund is where most consumers should start investing.

Starting out, it's best for the money to be invested in liquid and safe investments like a money market account or a money market mutual fund.

Financial planners typically suggest the fund hold three to six months' worth in living expenses. The more risk you face in the workplace, the more you should have available.

Counting on cash advances from your credit cards or loans from your 401(k) plan are not viable financial backstops because the credit card companies can raise the interest rates to obscene percentages and a plan loan won't help you if your financial emergency is getting laid off from your job since a 401(k) loan comes due when you leave an employer.

Tip 7: Review your approved list

Your "approved list" is the stocks and bonds you're willing to invest in and the cash you plan to hold. Even within those basic categories you can invest in individual securities, mutual funds or exchange-traded funds, or ETFs.

If your portfolio doesn't have an international component, looking beyond domestic investments can make sense, and not just for stocks.

Expanding the list to include commodities, precious metals and real estate can give your portfolio diversification. Learning how to hedge portfolio risk with options and futures contracts is best left to a discussion between you and your investment professional.

Tip 8: Roth IRA conversions and more

The Internal Revenue Service removed the income limitations for Roth IRA conversions, starting in the 2010 tax year. Unfortunately, there are still income limitations on who can contribute to a Roth IRA. That forces taxpayers with incomes above the contribution limits who want to hold retirement assets in a Roth IRA to perform the intermediate step of contributing to a traditional IRA and then making a converting contribution to a Roth IRA.

If investment returns don't pan out, taxpayers have the ability to recharacterize their Roth IRA contribution as a contribution to a traditional IRA. The taxpayer has this option up until Oct. 15 of the tax year following the conversion year. Converting in January 2011 gives you the flexibility to recharacterize over 21 months. Investors should have a better read on the recovery and tax code changes over that time span.

Work with your tax professional to determine if converting your traditional IRAs to Roth IRAs makes sense.

Tip 9: Estimate your retirement nest egg needs

You need a sense of how big your investment portfolio should be at retirement. The Employee Benefit Research Institute's 2010 Retirement Confidence Survey concluded that only 46 percent of workers or their spouses have attempted to estimate their retirement nest egg needs.

If you construct a household spending plan (or budget), you can use the total annual expenses as a guide to what you might need in retirement.

Financial planner recommendations typically range from 75 percent to 100 percent of your annual expenses while working, but exclude money budgeted for retirement savings. You'll be taking distributions from these accounts, not funding them.

Bankrate's retirement calculators can help you right-size your nest egg by estimating your income needs in retirement, considering how much you have already put aside and deciding on your pre-retirement savings goals.

Tip 10: Capture the match in your retirement plan

If your company's 401(k) or 403(b) plan has your employer matching contributions, then you should contribute up to the limits of the company match. A typical 401(k) matching program has the employer contributing 50 cents for every dollar you contribute up to a limit of 3 percent of salary. You contribute 6 percent, the company contributes 3 percent, and you just made a 50 percent return on your money.

https://news.fidelity.com/news/article.jhtml?guid=/FidelityNewsPage/pages/investing-tips-for-2011&topic=investing

A Social Security Reality Check

by Lisa Smith

Once upon a time, workers were told that Social Security was but one leg of a three-legged stool that would support them during retirement. Private pensions and personal investments would serve as the other two legs. As time passed, most employers eliminated their pension plans. Instead of defined-benefit plans, workers were given access to defined-contribution plans. The three-legged stool then became the two-legged stool.

Looking Back at Social Security Benefits

As time passed and the economy faltered, investment values plummeted; the S&P 500 fell by nearly 40% at one point during the Great Recession, and many actively managed portfolios fell even more than that, wiping out a significant portion of workers' wealth in a single year. Hurt by the economic downturn, many employers stopped funding their defined-contribution plans, further hurting the workers' ability to fund their retirement.

As a result, with severely depleted savings and no pension plans, many workers found themselves sitting on a one-legged stool. Looking to the future, they may see Social Security as their sole source of retirement funding. While it's true that the Social Security program was created to help workers supplement their retirement income, the program was never intended to be the sole means of support for retirees. And worse yet, the program is in trouble.

Looking Ahead at Social Security Payout
In 2010, the future solvency of the Social Security program was in question and the contribution to retirement funding provided by Social Security was expected to decline. The government predicts that by 2037, the Social Security fund would be exhausted according to the 2010 OASDI Trustees Report.

Looking at that scenario in today's dollars, a person retiring at full retirement age would be entitled to a payout of about $2,300 per month and just under $28,000 per year. That number is based on earning the maximum taxable wage base every year of one's career from age 21 through age 66 (which was $106,800 in 2010 and indexed annually). Assuming you make that kind of money, which few people do, that's $2,300 per month.

Of course if you were making $106,800 per year you would probably be able to save some of it for retirement, but what about someone earning the average income, which has been in the $35,000 to $50,000 per year range? Funding a retirement becomes much harder and Social Security payments would amount to even less. Getting a check is likely to become even harder in the future, as the age at which workers become eligible for full benefits is likely to be extended. At some point in the future, age 70 may be the norm for collecting full benefits.

Do the Social Security Math
Investors who are fortunate enough to retire at the tail-end of a stock market bull run and are wise (or lucky) enough to cash out have a good chance of enjoying their golden years. Those unlucky enough to retire during or after a bear market may be forced to delay retirement. For example, the Great Recession of 2008 was a game-changer, erasing a decade’s worth of gains. The outlook for a financially secure retirement presented a troubled vision for a significant number of investors at the time. Few workers can afford a double-digit drop in the size of their nest eggs as they approach retirement age.

What can you do? Start by making a sound assessment of your situation. First, look at your projected income. What is the balance of your retirement savings? What do you realistically project that balance to be when you reach retirement age? Assuming a 4% drawdown rate on your retirement savings, how much income can you anticipate on a monthly basis? How much do you expect to earn from Social Security?

Now look at your expenses. How much do you spend today? What percentage of that do you anticipate spending in retirement? If there is a shortfall between your expected earnings and your expected savings, you'll need to consider your options for closing the gap. Working longer, saving more and downsizing your expectations may all be required.

Retirement Reality Check
If retirement is still on the distant horizon, you may be able to get back on track by increasing the amount you save each month. If retirement is looming but your funding is lacking, a revised spending plan may be in order. If your expected income won't cover your expected expenses, some expense reduction may help you keep your retirement date on track.

The Bottom Line
If no amount of cost cutting will get your income and expenses to line up, it may be time to rethink your retirement. Extending the date at which you plan to retire and taking a part-time job are two options to consider. Even if you remain on track despite the market doldrums, memories of the last bear market are a good reminder to remain vigilant - you never know what the future has in store.

http://www.investopedia.com/articles/retirement/09/retirement-reality-check.asp?partner=ntu1

Ultra-Wealthy Remain Risk-Averse

The ultra-wealthy are still pretty risk averse, according to a recent survey by the Institute for Private Investors, a membership organization for ultra-high-net worth individuals and families. But they may begin increasing allocations to global emerging markets and reducing cash in 2011.

The December survey of 72 IPI members, who have a mean net worth of $100 million, revealed that they believe their own portfolios underperformed the S&P 500’s 15 percent return for the year by about a third. But the funny thing is, they weren’t upset about it, said IPI president Kristi Kuechler.

“I heard over and over again that members were fine with reduced risk and giving up returns,” Kuechler said. “They wanted to feel like they were more in control of their investments and were reducing their expectations.”

Kuechler said she thinks some level of risk aversion and lowered expectations will continue this year among IPI members. “Investors seem to still have reluctance about going out on the risk spectrum,” she said. “There are still a fair number of people who are skeptical of a continued linear market rise.”

Wealth managers say their clients have expressed similar sentiments. “We’re very definitely seeing what the IPI survey shows,” said Stephen Prostano, president and chief operating officer for Boston-based Silver Bridge Advisors. “We have been moving towards goals-based investing and clients do not want to take risk at the expense of capital they need to maintain their lifestyle.”

Matt Cooper, president, private client services for Beacon Pointe Advisors of Newport Beach, Ca. agreed. “The wounds from 2008 are still very raw,” Cooper said. “I think people are seeing that the downside losses in a portfolio are always more important than the upside. And as baby boomers near retirement they see that cash outflows from the portfolio exaggerate the downside, making them more cautious.”

Global Investments Viewed Favorably

And yet, growing interest in global investments by the wealthy suggests the ultra high-net-worth may be willing to be a little bit more adventurous in 2011. Nearly two-thirds of IPI members surveyed said they plan to increase allocations to global long-only equity.

“It’s a sign that things may be shifting, although it’s too early to tell,” Kuechler said. “If you invest in long-only global, you’re going to have to accept a lot of ups and downs.”

According to Eric Bennett, chairman and chief executive of Dallas-based Tolleson Wealth Management, many wealthy investors are enthusiastic about investing abroad because they’ve seen the growth in emerging markets with their own eyes.

“We’re seeing a lot of interest in overseas investment,” Bennett said. “People who come back from countries like China, India and Brazil see what’s going on there and talk about it. I think South American countries will be getting more attention because there are more democracies there.”

Another sign that wealthy investors may be less conservative this year is the IPI survey’s finding that slightly over a third of surveyed members expect to reduce their allocation to cash.

But Kuechler said the “reservoir of skepticism” among very wealthy investors remains high. “They are very skeptical about whether the recovery will last,” she said, noting that the theme of the organization’s upcoming winter forum in San Francisco next month is “Bubble, Bubble, Toil and Trouble.”

Wealth managers around the country echoed those sentiments.

“There is an overhang of concern,” Bennett said. “Clients are concerned about how there can be sustainable growth without job creation and a recovery in housing prices.”

Apprehension that the economy may slump without continued stimulus was also pervasive, wealth managers said.

“People are afraid that growth will stop if the Federal Reserve Board takes its foot off the gas pedal,” said Adrian Conje, chief investment officer at Atlanta-based investment advisory firm Balentine. “At the end of the day, private sector expectations and confidence are more important than government actions for a self-sustained recovery.”

http://registeredrep.com/wealthmanagement/ultra_wealthy_remain_ris_averse/?cid=nl_wm