What the experts say

Fear inflation? Try energy

Inflation worries are making energy stocks attractive again, said Will Swarts in SmartMoney. While gold is the go-to investment during times of rising prices, its price was high even before a recent spike triggered by the Fed’s announcement of a $600 billion bond-repurchase program. Energy stocks are a more affordable hedge. Inflation actually boosts the bottom line of oil and gas producers, like ExxonMobil and EOG Resources, because they’re able to pass on cost increases to customers. The stocks are also reasonably priced, thanks in part to the Deepwater Horizon oil spill and subsequent ban on offshore drilling, which ended recently. Inflation-phobes could put up to 10 percent of their portfolio into an energy-focused fund, such as the Rydex Energy fund or Fidelity Select Energy fund. Why not more? If inflation fears prove unfounded, energy stocks could take a hit.

Getting a bank’s blessing

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Homebuyers have long been told to get preapproval for a loan before they get serious about shopping, said Lynnley Browning in The New York Times. Unlike prequalification, which is based on a credit check and unverified financial information, preapproval is a “rigorous assessment of the maximum amount a buyer can afford to borrow.” But new lending rules that went into effect this year have made lenders reluctant to give buyers such a blessing. To avoid losing a dream home to a preapproved bidder, potential buyers “should ask lenders, early on, exactly what their preapproval process entails, and push for a preapproval.” Failing that, they should ask real estate agents in advance whether a prequalification will do.

The dangers of compartmentalizing

Most people mentally divide their finances among different buckets, said Bob Frick in Kiplinger’s Personal Finance. Sometimes that makes sense. “But the practice can also make us behave irrationally.” The person who hoards money in a savings account earning less than 1 percent but carries a balance on a high-interest credit card is a classic example. Ditto anyone who values a gift card more than cash. But this type of “mental accounting” is particularly worrisome when it affects investment decisions. If you get too nervous about declining assets and too excited about rising ones, you’re certain to “sell low and buy high.”