What the experts say
Dreading summer’s end; How to be a contrarian; State perks for home buyers
Dreading summer’s endAs Labor Day approaches, investors have good reason to feel skittish, said Brett Arends in The Wall Street Journal. Historically, September has been none too kind to investors. “It was, of course, in September last year that Lehman collapsed and everything fell apart.” In fact, September has marked the start of nearly every notable bear market. On average, since 1926, investors have lost nearly 1 percent during September, according to Kenneth French of Dartmouth’s Tuck School of Business. “It’s the only month with a negative average return.” Experts have no explanation for this phenomenon, though everything from bad luck to seasonal affective disorder has been blamed. “So what, if anything, should you do?” Sit tight. Getting out of the market for just one month will cost more than it’s worth.
How to be a contrarianOld-fashioned diversification didn’t do a whole lot of good during the past year’s sudden downturn, said Thomas M. Anderson in Kiplinger’s Personal Finance. Thanks to globalization and financial innovation, many assets tend to move in tandem, which makes it hard to protect a portfolio simply through spreading it out. “About the only things that made money during the downturn were Treasury bonds and cash.” The best strategy now is to seek out investments with a low correlation to U.S. stocks. Funds that specialize in merger arbitrage tend to defy market norms. “Long-short funds”—which bet that share prices will fall—also “march to their own drumbeat.” Whichever route you choose, plan to put no more than 10 percent of your portfolio into such contrarian funds.
State perks for home buyersMany states have rolled out their bailouts for homeowners, said Sarah Morgan in SmartMoney. “These programs include loan financing, down-payment assistance, and state tax credits,” most of them geared toward first-time or low-income buyers. Programs vary from state to state, but 15 states are giving low- or no-interest advances on a first-time buyer’s $8,000 federal credit. Some also offer so-called mortgage credit certificates, which let qualified homeowners claim about 20 percent of their mortgage interest as a tax credit. These are nice perks if you’re already thinking about buying a home—just don’t do so simply for the sake of freebies.