Financial Makeover: Regaining Confidence

ByABC News
June 14, 2002, 1:46 PM

June 17 -- Anne has lost confidence in her investing abilities over the past year because she lost a significant portion of her retirement account. She needs to rebuild her confidence so she can make sound investment decisions for her retirement.

The good news is that she is still young and has a new job that looks promising for building up her retirement account. She should continue to max out her contributions every year to enjoy the full effect of the matching incentive her company offers.

If she still has additional funds to contribute to her retirement account, she should by all means do so. She should think about establishing a Roth IRA for these additional funds.

Moderation Is Key

Anne's new career will provide her with discretionary income that should be invested. To do this, she should develop a long-term vision of her future.

She probably was heavily weighted in large-cap growth stocks at the top of the bull market, and is now hearing all about value investing. Like most things in life moderation, is key. She needs a diversified portfolio that will preserve her future wealth, as well as grow it.

Anne is going to need a balanced portfolio of about 50 percent U.S. Equities, 40 percent fixed income, and 10 percent international equities. She can spread out her U.S. equities risk by using good no-load mutual funds. Here are some suggestions to get started:

Suggested Asset Allocation

CategoryMutual FundSymbolAllocation

Large/Mid-Cap Oakmark Equity & Income OAKBX 20%

Small-Cap Value Third Avenue Value TAVFX 15%

Small-Cap Growth Baron Small Cap BSCFX 15%

International Equity Tweedy, Browne Global Value TBGVX 10%

Fixed Income Dodge & Cox Income DODIX 40%

Morningstar has a user-friendly system for researching all of your mutual fund investments. Often the public library will have its services on reference. If not, go to its Web site, www.morningstar.com, and use the free mutual fund analysis tools.