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What the experts say

Beware currency speculating; A better way to judge funds; Taxes: Don’t withhold too much

Beware currency speculating With the dollar weak and interest rates on savings accounts low, “even normally timid investors are hearing the siren song of foreign currencies,” said Jane Birnbaum in The New York Times. “The question is whether they should heed it.” Currency trading is, in some respects, easier than ever: Exchange-traded funds that track foreign currencies and foreign certificates of deposit are available online. Still, betting on the rise and fall of other currencies is “not for the faint of heart.” Unless you’re committed to closely following the markets—and have money to lose—stick with the more moderate approach: Invest in some foreign stocks or bonds, or American companies that derive profits from overseas. Think of it as a “long-term insurance to hedge a weak dollar.” Not as a way to get rich quick.

A better way to judge fundsMost mutual fund investors measure performance in calendar years, but a better measure is how funds do in up markets and in down markets, said John Waggoner in USA Today. “We now have handy recent examples of both kinds of stock markets to make comparisons.” The last true bull market ran from Oct. 9, 2002, to Oct. 9, 2007. “Since then, the market has been essentially sliding downhill.” Funds that have done well in both stretches tend to be run by experienced managers who scrutinize balance sheets, look closely at price, and don’t let their egos get the best of them. Some we like are American Funds Fundamental Investors, Davis New York Venture, and Pioneer Cullen Value. What about funds that have topped recent quarterly or annual rankings? “Funds that shoot the lights out one year tend to shoot themselves in the foot eventually.”

Taxes: Don’t withhold too much A “juicy tax refund” may seem a cause for celebration, said Bill Bischoff in SmartMoney. Actually, it means you had to wait unnecessarily for money that could have come in handy last year. “If you’re getting a large refund, you’ve given the Internal Revenue Service an interest-free loan of your money,” probably because it was easier to have the government withhold too much from your paycheck than too little. If your employer withheld too much, refile your W-4—with fewer exemptions if you owed money and more exemptions if the IRS owed you. If income from self-employment or investing was the culprit, adjust your estimated taxes accordingly. Ideally, you’ll end up with only a small payment to make to the IRS next April.

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