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What the experts say

Four-legged strategy; Time to buy timber?; Personal loans are back

Four-legged strategyIt’s that time of year again to ponder the “Dogs of the Dow,” said Donna Kardos Yesalavich in The Wall Street Journal. The so-called dogs are the 10 components of the Dow Jones industrial average that over the previous year paid out the highest dividends relative to stock price. For the past two decades, buying and holding them for 12 months has been a popular strategy: It’s seen as a way to scoop up dividend-paying stocks while identifying laggards that should, in theory, do better in the year ahead. While the tactic “hasn’t always been fortuitous,” it did well in 2010, when the dogs had a total return of 21 percent, versus 14 percent overall for the Dow. So who’s in the dog house this year? Eight members of the pack are back, joined by new pups Johnson & Johnson and Intel Corp.

Time to buy timber?While investors bid up the price of gold, silver, and other commodities found underfoot, some long-term investors have set their sights higher, said Alyssa Abkowitz in SmartMoney. The housing bust “hammered” forest-product companies, in some cases cutting their stocks in half. Now, after bottoming in early 2009, timber shares show promise for investors who have time to be patient. “Of course, no one expects a quick turnaround in the housing market.” But many forest-related firms pay healthy dividends, and timber prices will rebound eventually. Russell Croft, whose Croft Value Fund invests heavily in the sector, notes that the wait for a turnaround offers a payoff of its own. “The longer the tree grows,” he says, “the more value it gains.”

Personal loans are back With home-equity loans tough to get, the old-fashioned personal loan is making a comeback, said Anne Kates Smith in Kiplinger’s Personal Finance. Wells Fargo, for example, has recently seen “applications grow at double-digit rates.” Because these “simple-to-use” loans typically carry a lower rate than credit cards, they may be a good bet for borrowers who want to consolidate credit card debt. Personal loans are available through most banks, credit unions, and credit card companies, and usually carry no origination fees or prepayment penalties. And because the rate and payoff period are set, so too is the monthly payment.

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