What the experts say

Too much employer stock?

Employees seem to be “snapping up” their companies’ stocks again, said Jilian Mincer in SmartMoney. Firms that administer employee stock-purchase plans, which often allow employees to buy stock at a discount, have reported a jump in contributions for 2010. It stands to reason: “Markets are up,” and the discounts allow some employees to take profits instantly. But many advisers say only fools allow more than 10 percent of their net worth to be tied up in their employers’ stock. “If the business goes bad, they can lose their investment and their job.” If you can score a deal on company stock, by all means do—just plan to sell off the excess as soon as you can.

The income dilemma

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Living off savings is an uphill battle right now, said Brett Arends in The Wall Street Journal. Yields on most bonds are near record lows, and the price of many household items is rising “much faster” than the official inflation rate. What’s an income investor to do? Among other things, put some money in a ladder of CDs that mature at different times over the next two years. As far as bonds go, Treasury inflation-protected securities (TIPS), though pricey, may be your “least bad” option. Dividend-paying blue-chip companies, such as AT&T and Chevron, also make sense. Another tactic: Prepay expenses by, say, stocking up on nonperishable food or negotiating a lower price on next year’s rent by offering to pay up front.

Watch the shorts

Everybody knows by now that analysts’ stock recommendations should be treated as suspect, said John Waggoner in USA Today. But a study by the Mays Business School at Texas A&M found that the buy/sell recommendations of these ethically compromised Wall Streeters can be very useful if compared against how the same stocks are being treated by short-sellers. The upshot: Sell or avoid stocks that have “buy” recommendations from analysts and a good deal of short activity; buy stocks labeled as “sells” that aren’t being shorted much. If more than 5 percent of a company’s stock is being shorted, at least be wary, says the study’s lead author, Edward Swanson. “I won’t buy stocks that have more than 10 percent short interest,” he says.