What the experts say

Market mistakes to avoid in 2012

Investors would be wise to avoid four key mistakes heading into the New Year, said John F. Wasik in Reuters.com. First, even though the 2011 market delivered a “herky-jerky ride,” don’t sit 2012 out. “The ‘all in or all out’ approach will deprive you of profits,” especially from unexpected quarters. Second, don’t ignore inflation. Protect your portfolio with Treasury Inflation-Protected Securities, which pay a premium based on increases to the cost of living. Third, make a goals statement that will govern your investing strategy, whether you’re saving for retirement or college. Finally, don’t try to time the market. You’re “competing with light-speed robo-traders,” and “volatility is now the rule rather than the exception.” Hedging risk and having predetermined goals will position you for healthy returns.

New pay plans for financial advice

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Is paying your financial adviser a percentage of your assets under management really the best option for you? asked Daisy Maxey in The Wall Street Journal. Some advisers are rewriting standard payment rules and offering flat or hourly fees or a price plan based on a client’s net worth. A flat fee “works well for investors with limited assets or limited needs,” particularly those who don’t need ongoing advice. If that’s your choice, make sure to have your adviser specify what services you’ll get. A net worth payment structure works like an asset-based one: Investors pay a portion of their net worth, but can save money because the fee percentages are often lower compared with those of asset-based payment plans. Hourly fees “ensure that investors pay only for the advice they need,” but takers should be cautious: Advisers may try to “keep the meter running.”

Lean times for bank stocks

Welcome to a “new, more austere era for bank stocks,” said Simeon Hyman in Bloomberg.com. The Federal Reserve has announced plans to put 31 big U.S. banks through tough stress tests early next year, which could “put the kibosh” on the banks’ plans to raise dividends. In October, the Fed rejected MetLife’s plan to raise its payout to shareholders until after the tests, and blocked similar efforts by Bank of America earlier this year. Dividend yields on bank stocks, which doubled to 3.6 percent between 2000 and 2007, now hover around 2 percent. After the stress tests, they’re unlikely to rise.