What the experts say

Real estate that pays dividends; Currency in a global village; When not to pay off a credit card

Real estate that pays dividends

A “shrinking economy” and “frozen credit markets” bode badly for the investment vehicles known as real estate investment trusts, said David Landis in Kiplinger’s Personal Finance. Still, preferred shares in these trusts are worth a closer look. “While the holders of common stock can expect rising dividends and share prices during good times,” they also face the biggest risks. By contrast, “preferred investors settle for safer, bond-like returns.” REITs typically pay most of their profits as dividends, so preferred shareholders are first in line. For that reason, “a REIT would have to eliminate its common dividend before it could reduce its preferred payout.” Investors can buy a basket of REITs via a mutual fund or buy individual REITs via a brokerage account. One caveat: “REIT dividends are taxable at rates as high as 35 percent, so the shares are best held in tax-deferred accounts.”

Currency in a global village

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Everyone lives with some degree of currency risk, said Ben Levisohn in BusinessWeek. The sudden costs caused by big swings in the value of one country’s currency relative to another can be devastating for those who own or invest in real estate abroad. For the rest of us, the risk is limited to trips abroad or to the foreign-foods aisle of the grocery store—but no one can avoid exposure altogether. “The key is finding the right level of exposure.” Most investors should keep about 20 percent of their portfolios in international stock and bond funds, says Aaron Gurwitz, head of global investment strategy at Barclays Wealth. With real estate, “effective hedging often comes through financial planning, rather than financial products.” Certified financial planner Lisa Kirchenbauer recommends that owners of houses abroad keep three to five years’ worth of house-related expenses in the local currency.

When not to pay off a credit card

Personal finance experts have long preached the importance of paying off your credit card balances, said Kimberly Palmer in U.S. News & World Report. But the uncertainty of steady income in this economy has prompted one notable guru, Suze Orman, to recant such recommendations. The “Queen of Personal Finance” recently went on The Oprah Winfrey Show and announced that her “advice has changed” for workers worried about their jobs. People who haven’t already set aside eight months’ worth of fallback money for expenses, she suggested, should only make minimum payments until they’ve accumulated a cash cushion. Then they should work on removing the rest of their balances, starting with the highest-interest-rate cards.

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