I think everyone should constantly think about growing their financial base. See, it’s just not enough to have money in the bank because inflation is continuously beating down the value of your hard earned money. So it’s important, for sure, to make sure your money is at least keeping pace with inflation but ideally is well ahead.

The best way to make your money grow is to invest it in something safe that will appreciate in value over time almost certainly. Now, I know, we can’t always bet on a sure thing… and there always will be winners and losers… but I will still say that you have to make sure – to the extent you can – that your overall money pot grows. So it’s important to diversify your investments.

To grow your money, you have to also make sure you are comfortable with risk, to some extent. Because there always will be money-losers among your investments. So part of the trick is to understand your own zest for risk and pick a level you’re comfortable with. That said, if you’re a daredevil at heart, I’d say keep your daredevilry to things outside the domain of investments… go ride a dirt bike or surf some mean waves… but don’t bring your voracious appetite for risk into your investments.

Now, when I say investments, I don’t just mean stocks… I mean everything… invest in an education, buy a home, buy other growth assets if you want to – there are lots of ways to earn money. But… unfortunately, none of them are too easy. Let’s face it – growing your money is hard.

So… bringing the discussion back to my domain – of investments in securities of various types, stocks, bonds, ETFs, mutual funds, etc. – what’s the best thing you can do to make money in the market?

Well, basically, you have three choices.

1) You can put yourself through some sort of educational program, such as a business school, to comprehensively learn how to evaluate businesses, analyze their corporate and marketing strategies, read their accounting statements and calculate what they are worth. Then use this theoretical knowledge to make investments. I use the term theoretical because many of us who’ve gone to business school know that while an education is a great foundation for future success, the real world always holds lessons that cannot be learned in school but only when you’re out in the field, buying and selling stocks.

But let’s face it, a business degree is not for everyone (J and I’m glad that’s the case because we need engineers, doctors, scientists, artists, musicians and so on… ). Moreover, a business degree is no guarantee that you will do well in your investments. Unfortunately, Wall Street isn’t a straight arrow. So perhaps this isn’t your best bet.

I will also say that while there are a few who succeed at individual investing in a cocoon, most people don’t. With investing, it is important to be immersed in an information ecosystem with the right set of folks constantly updating you on various company-specific or macro-economic matters… because, today, the world is one big interlinked mass and events across the globe have repercussions where you’d least expect them if you are not in the loop.

Investing really is a full-time job… so I don’t think it’s for everyone. Plus, let’s face it; getting a real education is actually quite expensive with sky-high tuition that in itself could take a long time to recover.

2) You could do it yourself… which is to say, not go to business school but self-school yourself through investment books. The problem with this approach is that you likely will not know where to start. See, even the best of investing books – like Peter Lynch’s One Up On Wall Street – give you the basics in a very general manner but do not give you all the tools you need to dive deep into analyzing investments. The other problem with self-schooling is that you could end up with completely useless but well marketed guides by fraudsters who claim to have made a lot of money and are willing to let you in on their secrets… those ones are disastrous right off the bat. Even if you do pick all the right books, you will have to go through Wall Street’s school of hard knocks and if you’re not careful, you could squander all your cash away. So… this is an option and one that many choose, but inevitably with one single result… failure over the long run!

3) You could hire an experienced and ethical investment advisor. But this one has its own set of catches. See, picking a good investment advisor is never easy. There are many with very convincing personalities and PR skills but who just don’t have the chops to make your money work for you. You also have to beware of the few frauds out there that prey on innocents and put your money in risky investments without any real consideration for anyone but themselves. Then there’s also the issue of advisory fees which a lot of investors balk at paying. But, if you really do the math, this is likely your least expensive route – from a fees perspective because advisory fees are well below what you’d spend on going through school or losing money through a DIY plan, and from a capital loss perspective because even bad investment advisors are sensitive about their personal track record, will want your repeat business and will strive to at least get you positive or market-matching returns.

If you do your research well though (easy to do with the Internet nowadays), you could end up with a fabulous investment advisor with a great investment record, who sincerely and ethically advises you on trades. I must also warn you – good advisors don’t come cheap but that’s because they almost inevitably are more than worth the cost they extract from you. Good advisors also attract other good advisors and money managers in a self-reinforcing system of information flow, diversity of investments and so on… which is invaluable for your investments over the long run.

So, if you are so inclined, I’d certainly encourage you to follow Path #1 and hop on-board. If Path #2 is what you’re inclined towards… all I can say is think again…and if it’s Path #3 then do your research well so you know you’re in good hands.

Steve Pomeranz is a Managing Director for United Capital Financial Advisers, LLC, “United Capital”, and owner of On The Money. On The Money is not affiliated with United Capital.

Central banks all over the world, including here in the U.S., are still sore from the after-effects of the banking meltdown in 2009 and are doing all they can to keep their economies from stalling.

To counter economic slowdowns, central banks rely on tools such as their ability to influence interest rates. The theory being that by lowering interest rates, central banks make it easier and financially more attractive for corporations, governments and individuals to borrow more and plough their borrowings into business investments and purchases, such as homes, appliances and cars, to keep factories humming, grow employment and stimulate the economy in a benevolently reinforcing cycle.

In the U.S., our central bank – The Federal Reserve – controls interest rates through something called the Fed Funds Rate which ultimately impacts the rate of all business, municipal and individual borrowings – and impacts the interest we earn… on our investments in CDs, savings accounts and bonds, and pay for credit cards, our mortgages and so on.

I won’t go into too many details but the Federal Reserve tweaks the Fed Funds Rate in steps of 25 basis points or a fourth of a percentage point, and right now, this rate is at 0.25%… one more step down and it will fall to zero, which the Fed would never do. So a rate of 0.25% is the lowest it can ever be and the Federal Reserve has almost unambiguously hinted that it plans to leave rates at this all-time low for at least a few more quarters.

Now, more recently, central bank fears have flared up again because of election results in places like France and Greece where citizens have voted in candidates that oppose much-needed austerity measures and reforms to rebalance national economies. Election results in Greece, for example, have renewed fears of a complete collapse of Greece’s economy… which will have repercussions across Europe and the rest of the world in today’s increasingly interlinked global marketplace… and which psychologically makes the dollar a safer place to park your money in relative to other currencies.

Therefore, most central bankers have no desire to raise interest rates.

The downside of this for income seeking investors is, as I said earlier, that the rates they receive on CDs and such are well below inflation. For example, according to BankRate.com, the best rate on a 1-year CD right now is 1.15% and the average rate is only 0.70%. You could invest in US Treasury bonds which are safe but the best rate you’ll get is even lower – merely 0.19% for a 1-year Treasury Bill and merely 1.98% for a 10-year Treasury bond.   Compare that to inflation at 2.7% every year and you know your CD or bond investments just aren’t going to cut it. You clearly need to earn more.

While that’s your downside as an individual, your upside is that things like mortgage rates are currently at all-time lows (3.84% for a 30-year fixed rate mortgage), making this a great time to borrow.

And though individuals limit their borrowings to what they need, corporations and municipalities, especially those with solid balance sheets and good credit history, are having a ball… because credit’s almost never been so cheap. For example, the Financial Times recently reported that IBM sold $600 million of 7-year debt with an all-time record-low interest rate of only 1.875%. IBM went one step further and also issued $900 million in three year notes at 0.75%. Other robust companies such as Warren Buffett’s Berkshire Hathaway also know that they will likely never see such low interest rates again and issued debt in the billions. And despite these low interest rate returns, IBM and Berkshire had no problem finding buyers for their debt because domestic and foreign buyers also see our Dollar as a safe-haven currency while world economies are shaky.

So… what’s an individual investor to do to earn a decent inflation-beating return and then some???

The answer, fortunately, is quite simple.  Invest in solid companies that are benefiting from this low interest rate environment. See, when IBM borrows money at low rates, its interest expense goes down considerably, its profits go higher… and its shares do well. So as opposed to buying IBM-like debt and earning paltry CD-like rates, buy their stocks. And buy dividend-paying stocks that yield more than inflation.

And as I have often stated, while the world is in trouble, the U.S. economy appears to be more stable than the rest and U.S. companies are at the forefront of growth in places like China and India. So someone like an IBM can take its low-cost money and out-expand its competition in emerging markets or invest in better infrastructure, and so set itself for better long-term success and profits where over time your rate of return will outdo government bonds and other fixed income investments. And just to clarify, I am not recommending IBM but merely using it as an example.

So, fret not, do your research view market dips as opportunities to buy solid companies at reasonable prices to generate inflation-beating returns.

Steve Pomeranz is a Managing Director for United Capital Financial Advisers, LLC, “United Capital”, and owner of On The Money. On The Money is not affiliated with United Capital.

Last week I vacationed in Italy spending time in Venice, Florence, Rome and the Almafi coast. For those of you who have not yet been but are considering a trip, you will find the Italian people to be warm and helpful and, in my opinion, possessing the best food in the world.

As is my custom when I travel, I love to talk with local residents about their lives and try to get a pulse on their “take “on life.  This year it is even more fascinating because of the serious economic problems most of Europe is facing.

One person I met was a young American woman, who has spent the last 9 years in Italy as a travel writer and guide. She spends her time writing about food and takes tourists to local restaurants to sample Italy’s wonderful food and wines. I specifically wanted to know how, as an outsider who has worked in the country for a long time, she viewed the current situation. She has noticed, she said, that many of the smaller, locally owned businesses had closed and were replaced by high-end chain stores like Prada, Gucci, Cartier and many others of similar ilk. Personally, I saw this on every stop of my trip.

She also mentioned that times were very hard for the average Italian. Gas was close to $9 per gallon and taxes in general, were very high. The VAT tax on consumer purchases was a whopping 21% and she expressed the general view of many Italians that the best jobs to have were government jobs which were paying $10,000 Euro a month!

The next person I asked was my Roman guide to one of the city’s many underground excavations.  This gentleman has a lot of experience as I have used him in the past and has worked his whole life in and around the city of Rome. He is entrepreneurial…a scrapper so to speak, working more like an American than a typical Italian. He will take you anywhere, arrange anything including transportation and give you the kind of experience which makes him worth every single dollar (whoops, Euro).

I asked him for his thoughts on the current situation. He says it’s bad for Italians right now. The government is trying to collect every euro of tax it can which he estimated would be 68 cents of every euro he earned. So he does what most Italians do, he works for cash or if he must accept a credit card he has created an off-shore company to receive the payment.

This brings to light the challenge facing Italy and the other countries on the periphery of the EU. These countries are severely in debt and their challenge is to raise enough money to pay down the debt or at the very least, operate without taking on anymore. They have two basic choices; Raise revenue by increasing taxes or create a more open business environment to let the entrepreneurial spirit of the Italian people express itself. Italians, in general are a firmly mercantile culture. Venice and Florence were trading capitals of the world for centuries. Rome, of course was the seat of power for centuries and trading is in their blood.

The challenge for every country caught in the debt trap, and this includes the United States, is balancing the need to reduce its debt by raising revenue while at the same time, creating an environment to kindle man’s natural “animal spirits”.

We’ve Been Here Before

In the late 1979′s, this country was stuck in a recession accompanied by high inflation. This was the period in which I had just begun to work and raise a fledgling family.  Becoming more aware of the economy and various job opportunities for myself and my wife, we both noticed a peculiar anomaly. We figured that it hardly mattered to us economically whether or not she worked.  We calculated that tax rates were so high; her extra income would push us into a higher tax bracket taking an even larger chunk of her earnings. Higher taxes proved a huge disincentive so she eventually stopped working.  And, like my friendly Italian tour guide, I thought the best job one could have was that of a postal employee. Government service was safe, secure and represented steady income—very important in bad times. Of course, in better times we now know it’s better to take calculated risks to build your financial future.

Will the countries in the EU learn this lesson? It’s hard to say but at this point their economic future is in doubt. Let’s hope however, that they figure it out very soon and do the right thing.

Steve Pomeranz is a Managing Director for United Capital Financial Advisers, LLC, “United Capital”, and owner of On The Money. On The Money is not affiliated with United Capital.

Ever wonder why markets make sudden moves from one extreme to the other? Or why when the outlook of the economy is good or bad then so is the market?

Well, many times stock market movements are based on more than new information such as earnings reports or corporate downgrades… markets are quite often moved by investor sentiment. Psychological factors affect not only the average investor, but also professional money managers who tend to be driven by greed, euphoria and fear! 

Behavioral Finance 

There’s a dedicated field that studies the impact of emotions, psychology and behavior on investing and financial decisions – it’s called Behavioral Finance.

It tells us that just as there is the cycle of stock market movements, there is also the cycle of “market emotions”… and these two cycles tend to move in tandem.

When the market is at its peak, most investors are in a state of emotional euphoria (except those that shorted the market early). Then as the market trends downward to a bottom, investors’ emotions shift from slight anxiety at first to a low of despondency or even depression.

And this shift in emotions impacts investment decisions, posits Behavioral Finance. 

Quiz Time  

So let’s take a short quiz to gauge your investor sentiment.

Say you have a thousand dollars and must pick one of the following investment choices:

Investment A: Gives you a 50% chance of gaining $1,000, and a 50% chance of gaining $0.

Investment B: Gives you a 100% chance of gaining $500.

Which do you chose?

Well, if you chose B, you’re like most investors who tend to avoid losses and concentrate on gains.

With A, you can either gain $1,000 or $0, so your average gain is $500 – the same as your gain with B.

So the great thing about this example is that in both choices, your average gain is the same, and investors that chose A are no better off than those that chose B. 

Key Takeaways 

So here are a few Behavioral Finance theories to keep in mind when you make investing decisions:

• Emotional and psychological factors impact our decisions.
• People will base decisions on perceived gains rather than perceived losses. (That’s what our quiz also showed us.)
• Losses have more of an emotional impact than equivalent gains. This reinforces the earlier point that individuals are more loss-averse than gain-driven.
• Investment decisions are usually based on beliefs and feelings and not on facts. So even though you may do a lot of analysis on a stock, ultimately, it’s perhaps your emotions that influence how and when you pull the trigger. Scary… ‘coz it sort of sounds like why people might pull the trigger of a gun in real life – their edgy emotions more than rational thought!

Things to Remember 

So based on all of the above… when investing:

• Remove as much emotion as possible and stick to your game plan.
• Do your research and due diligence, and understand the upsides and risks.
• If your investment is solid, do not deviate from it just to follow the masses or to time the market. Hang tight, ride out the storms, and you will come out better-off in the end.  (Remember how Buffet sat out the dot-com boom despite a lot of heavy criticism, but came out a hero.)

Fundamentals impact market moves, but so does investor behavior. So avoid making investment mistakes, and allow professional advisors to manage your investments or guide you through the process.

If you want to know more about your risk tolerance and investor sentiment, feel free to call my office at 1-866-Money-01.

Increasingly, it looks like theU.S.economy is intrinsically strong but not the economies of our trading partners and international customers. In addition to economic weakness in the Euro zone, there’s the Arab Spring and its likely impact on oil prices, as I mentioned in my earlier commentary on the possibility of a sharp spike in oil prices. We now also have more evidence that the so called growth economies ofChinaandAsiaare feeling the strain of rampant inflation in basic commodities such as food and sky high real estate prices that are putting a damper on housing construction. As a result, theU.S.economy will likely grow more modestly and job creation and salaries and benefits in theU.S.will continue to be constrained. So, it appears more and more that we will see slow but sustainable growth in the years ahead… some say possibly for another decade.

How then should you position yourself to get ahead despite slow economic growth scenario? Here are a few steps to help you combat economic sluggishness and still come out ahead.

1. Pay down your debts. Basically, your money in the bank isn’t doing much to add to your wealth. With interest rates near zero, your savings are not even keeping up with inflation. So why have that money lose value? Instead, use your spare cash to pay down debt. And let me emphasize, it’s your spare cash I am talking about, not all your savings – because you must stash away for a rainy day, should you get laid off or otherwise suffer a loss of income.

2. Think Like a CEO. You really are CEO of your own family. And like all good CEOs, you cannot afford to be blind-sided by unexpected events. In fact, more than a corporate CEO, the head of a household with children and dependents has a lot more to lose if things go awry unexpectedly. So always keep your ears open, understand early warnings such as pay freezes that may signal layoffs or trouble ahead, and plan your finances for all eventualities. And like all smart CEOs, anticipate and address problems before they take you by surprise and threaten your financial well being.

3. Recalibrate your lifestyle. I’ve often mentioned this in my commentaries. When times are tough, do what’s wise – downsize your needs, make do with less, shun extravagances and save as much as you can. You can do this very simply by cutting down on lattes by brewing coffee at home (a $5.99 pound of home-brewed coffee can save you hundreds of dollars when done consistently), stretching out the life of your car, or say, buying a second-hand car with low miles instead of getting a new one, packing a healthy snack and carrying your own soda as opposed to eating out at work, fewer trips to the mall, and so on.

4. Set aside your ego, forget about status. This is tied to the point above. Most of us spend a fair amount of our hard-earned money trying to impress other people – be it designer clothes, a swanky car, or meeting them at a fancy restaurant. Now, I am all for living a good life if you can clearly afford it. But why buy a million dollar house or a BMW when you really can only afford a $500,000 house or a Honda? What’s more, many of these status investments rapidly lose value over time and contribute nothing to your retirement portfolio or real quality of life. So shun status and go for real savings.

5. Invest by buying low. A beaten down economy offers tremendous investment opportunity. Many times, sellers that have not been financially disciplined end up selling their assets dirt cheap, and quite often well below even their intrinsic value. If you’ve been good about saving cash, as I hope you have, then a downturn is a great time to buy anything – beaten down stocks, discounted equipment, foreclosed property, distressed businesses, and so on.

6. Invest in yourself. If you have the time and see dark clouds ahead in your field of work, then beefing up your skills is always a good idea – so do a few relevant courses – cross-training, as it’s called – so you have more to offer on your resume, should you have to re-enter the job market. For example, a lot of companies seek Internet and computer savvy individuals in these times, so make sure you learn key technical skills such as Internet marketing, programming, mobile application development, or professional programs such as QuickBooks that could help you in the workplace.

7. Learn to work on the go. Many companies look for ways to reduce costs in a slow economy, with many preferring work-from-home employees to reduce office expenses. So get a little computer savvy and see how you can leverage things like free wireless networks at coffee shops. In addition, get familiar with online job forums that offer part time and remote working options, so you are prepared should the need arise. In any case, if you have the time, you could easily supplement your income by taking on work-from-home opportunities sitting right at home, and plow these additional savings aside.

8. Volunteer. Here I mean volunteering for professional gigs. Like helping out at a day-care, or at a startup using your existing skills, or perhaps even at a local library or school – because sometimes, these internships build valuable contacts and help you learn new skills.

9. Position yourself for success. Consulting firm McKinsey and Company predicts that six fields – namely, healthcare, business services, leisure and hospitality, construction, manufacturing, and retail – will see the most job growth in the coming decade. So if you’re at the stage where you can switch fields, consider getting into one of these six fields so you have above average job prospects and pay.

Follow the guidelines above, and you will have a healthy bank account, which in turn will finance investments in beaten down assets such as stocks or property. And give you far more peace of mind, good health and happiness in the long run.

Do you know the two most powerful words in the investment dictionary? The two words which have the greatest impact for success or failure?

The two words that would have protected you from losing a fortune in 2008 and saved the investors of Enron, World Com and Lehman Brothers from the loss of their entire fortunes?

The two words? Asset Allocation – otherwise known as the art of diversification.

Let’s see how asset allocation works so you can learn some simple ideas to put to work immediately.

First, there are only two types of investments. Investments where you loan money and investments where you own something.

Invest in real estate or stocks? –Own something.

Invest in a CD or municipal bonds? – Lend money.

These types of investments (own and loan) translate into Stocks and Bonds. Since owning and loaning are very different, Stocks and Bonds are excellent “diversifiers.”  For example, we know stocks have the high potential rate of return and can be extremely volatile, while bonds have a lower return (think CD’s) and don’t go up or down quite so much. Therefore, the first and most important decision you will have to make is: How much do I put into stocks and how much into Bonds. Since this decision will have the greatest effect on your future return, it should be chosen very carefully. You can find many tools on-line which will advise you on the proper mix for your age and risk tolerance.

But wait, there’s more. Not all stocks are the same, so breaking them down a little more can add to your diversification.

There are large companies, mid size and small companies. These different size companies tend to rise and fall at different times – so investing in them will help you diversify and may increase your rate of return and reduce volatility.  In addition, adding international stocks which also rise and fall at different times may also increase the possibility of a higher return with reduced volatility.

Getting to the final point, segregating your purchases among these different categories will give you a level of diversification which may help you dodge extreme movements in the markets. Protecting yourself from market extremes is one of the most significant ways to become a successful investor.

Fortunately, all of these categories can be found through the purchase of mutual funds and if you have money in a 401k plan, many plans now offer a range of investment alternatives exactly along these lines.

Remember, if you spend some time becoming a knowledgeable asset allocator, you will be greatly rewarded for a small amount if effort.

For more information to help you learn the techniques of asset allocation, take a look at Asset Allocation for Dummies. This book is easy to understand and does a terrific job of taking you through the steps necessary to succeed on your own. If you need further help, contact a Certified Financial Planner in your area to help you.

Sometimes for my market commentary, I like to read the commentaries of other’s.  Today I would like to share Vitaliy Katsenelson’s piece, “Don’t Look To The Market For Advice” published on April 5, 2012 at www.gurufocus.com.

In the classic book The Wizard of Oz, the Wizard decreed that everyone who entered the Emerald City wear green-tinted glasses. Visitors and citizens were told that this was to protect them from the “brightness and glory.” In truth, though, the Wizard had lost his mojo and become a run-of-the-mill charlatan. There was no brightness and glory, just an ordinary city built out of stone and glass.

Bull markets are Emerald Cities of our own making. In a bull market it is decreed that investors and the media shall wear green-tinted glasses. Suddenly, all economic news and fundamental facts turn green and glittery — there is no bad news, only shades of good.

In a bear market the mandate is different: Everyone is to wear red-tinted glasses. The Emerald City is no more. Now all news comes in three shades of Soviet Kremlin red: bad, ugly and downright devastating.

This happens because we are human. The pressure of rising prices in bull markets or falling prices in bear markets leads us to engage in backward analysis. Instead of first analyzing the events and only then forming an opinion, we look at the market reaction to the news and let it dictate what we should think.

In the long run, stock prices follow fundamentals like cash flow and earnings growth. In the short run — well, this old cowboy saying tells it all: “Nobody but cattle know why they stampede, and they ain’t talking.”

The danger of wearing glasses determined by the market is that reality will not be suspended forever, no matter the tint of your shades. By following the “color decree,” you are effectively taking advice from the market on how to analyze, what to pay attention to and what to buy or sell. This is the sure road to buy-high-sell-low despair. The market is the worst giver of advice — it’s prone to tell you what you should have done, not what you should do.

Before the market mandated green glasses in October, investors were wearing blood-red shades. They were dreading significant risks threatening the global economy. Let’s quickly run through them and see if much has changed.

European recession and debt crisis: Greece went through an orderly default, the European Central Bank pumped liquidity into the system, and European bond yields declined. But a recession precipitated by governmental austerity is not off the table, and the PIIGS (Portugal, Ireland, Italy, Greece and Spain) still have to figure out how they will deal with their debt and lack of economic competitiveness.

Unraveling of the Chinese overcapacity bubble and potential hard landing: The Chinese government has guided growth down to 7.5 percent, but this may prove to be wishful thinking on its part. Cement and steel production has fallen, car sales are off, and Chinese manufacturing has contracted sharply for five months in a row.

Middle East tensions: An attack by Israel or the U.S. on Iran’s nuclear facilities would lead to a jump in oil prices and instability in the region. With the latest rhetoric from Prime Minister Benjamin Netanyahu and President Obama, this risk has greatly increased.

Japanese debt bubble: Japan is still the most indebted nation in the developed world and pays the lowest yields on its debt. Its population has aged six months since October and is that much closer to the tipping point where Japan’s savings rate turns negative and internal demand for its debt drops off a cliff. Disastrously higher interest rates, rising inflation and other fun stuff are sure to follow.

U.S. housing market: There are a lot of positive signals coming from this dark corner of the economy, but the question still remains: Will the housing market recover if interest rates inch higher from their all-time lows? That’s unlikely, because housing is too addicted to low interest rates. As a result, the recovery will have a lot of fits and starts.

U.S. corporate profit margins: They’ve hit record highs and risk declining toward their rightful place, leading to a drop in earnings. The U.S. needs robust economic growth for the margin problem to go away. The economy has shown improvement, but its rate of growth is unlikely to offer much excitement considering all the factors I’ve mentioned above.

U.S. budget deficit: The U.S. still has a tremendous hole in its budget, and nothing has been done to fix it. So far, the Super Committee, which was created to come up with a legislative solution, has not lived up to its name.

The danger of investing by “color decree” is that you start ignoring the negatives and positives, taking on more risk than you intended during the green phase and focusing only on risk during the red phase. So if you find that the recent market rally has you wearing green glasses, slip them off and take another look, because the global economy is still facing plenty of headwinds.

With the wild swings in the stock market, many of you are probably feeling a little unsure about having enough to live a comfortable retired life. So, today I plan to address just that – how comfortable should you feel about your retirement savings to date? Have you stashed away enough to live your golden years comfortably or do you need to play catch-up?

Well, as with most things financial… there is no straight answer, as many of you can guess – simply because we all have different standards of living. However, an organization called the Employee Benefit Research Institute – EBRI for short – puts out a report with detailed information on everything to do with Individual Account Retirement Plans.

So let me briefly give you EBRI’s data for average retirement savings in the U.S. based on age. Most Americans under 35 (years of age) have, on average, only $6,306 saved up for retirement. This number rises to $22,460 for those between 35 and 44; $43,797 for 45-54 year olds, $69,127 for the 55-64 age group, and a drop to $56,212 for the 65-75 age group. Pretty shocking, at first glance. But then again, perhaps this data merely reflects the sobering reality of America’s demographics – that a sizable percentage of our population barely makes enough to get by, let alone stash money away for retirement.

Now, some may say that if you’re below the average for your age group, you really should not feel bad about it. But I am not here to make you feel good about an under-average performance. For those of you who are below these averages, I’d like to say… please speak with a few investment advisors asap, and whatever your budget constraints, a good and stern advisor will surely be able to tell you where you can cut-back on spending and push your savings into a retirement account.

On the flip side, if you are above this average, as I know many of my listeners are, I will give you no reason to gloat. Because, let’s face it, going into retirement with $69,127 just isn’t gonna cut it. You need to save a lot, lot more to even give yourself the basics – food, housing, utilities, medical expenses, property taxes, rental, vacations, and so on.

So how much should you save for retirement. According to EBRI, plan your savings such that you draw down 4% of your nest egg annually for your retirement expenses… what that translates to is this: estimate your annual expenses in retirement, based of course on your lifestyle preferences… be very realistic and definitely factor in inflation at roughly 5% to be on the conservative side… then multiply that annual retirement expense by 25 – and that’s what you should have as a nest egg. So, for example, if you think you’ll need say $4,000 a month – that’s roughly $50,000 a year … multiply this $50,000 by 25 – it works out to $1.25 million – so that’s what you should target as your retirement savings. Now, when you compare this $1.25 million figure against the average of $69,127, you can see how most Americans are way, way behind on their savings and urgently need to do more to have a decent retirement. Heck, even if you budget just $1,000 per month, or $12,000 per year, you’re still looking at a target retirement savings of $300,000 which is roughly four times EBRI’s average of $69,127.

So averages in this case paint a very sobering story… and I hope the simple multiply-by-25 math is an easy guide to help you get in better shape for your own retirement. That said, more is still better because nowadays, many retirement advisors are advocating the Rule of 33, which simply says that if you factor in things like inflation, realistically, you’d be better off saving 33 times your estimated annual retirement expenses.

My advice to you is to relentlessly focus on saving for retirement. Cut expenses wherever you reasonably can, make a few sacrifices and painful choices, and save and invest for the long run. You will only thank me for this down the road… or you may just say, “Steve, you should have insisted I do more” but I am pretty sure you will not criticize me for giving you this advice. And here, I also mean to include the few of you who are multi-millionaires – because I have seen millions squandered away out of recklessness, hubris and poor planning.

So there you have it – a few simple guidelines on how to estimate your progress towards retirement… save as much as you can, and more than worrying about investing wisely – which has sunk many a fortune – stick to the old mantra of investing regularly… and you should do well… Good luck!

I recently covered BP’s (British Petroleum) Energy Outlook for 2030, as some of you may remember, and I wanted to go deeper into one prediction that potentially has a significant impact on Americans – that:

…a growing supply of biofuels and unconventional oil and gas will turn North America’s energy deficit into a small surplus.

BP broadly talks about North America, but I’m going to focus on the U.S. simply because our population is almost nine times that of Canada.

There is always talk and media coverage, on whether we will achieve energy self-sufficiency by expanding drilling within protected areas on the mainland and offshore. This talk typically gets amplified around election time when each party goes out of its way to cater to its own interest groups.

In order to clear through the rhetoric, let’s fill in the background. Americans account for about 4.4% of the world’s 7 billion population but consume about 26% of the world’s energy. Yet we only have about 3% of the world’s oil economically extractable reserves, making energy self sufficiency seem like an impossible goal. Today, we receive 84% of our energy from fossil fuels – coal, oil and natural gas, and the remaining 16% from hydro, nuclear and renewables such as solar and wind energy. Increasingly, the U.S. is focusing on bio-fuels by dedicating ever larger tracts of corn fields to the production of ethanol. In parallel, there is a strong move in theU.S. towards environmentally friendly construction, transportation, urban design and energy efficient appliances, which together are reducing our collective environmental impact. The government is providing loan guarantees, bio-fuel subsidies, tax incentives and so forth to make us more energy efficient.

But also get this: North America is home to an incredible abundance of hydrocarbons trapped in hard- to- reach offshore and on-land formations such as shale rock and oil sands – far more than any other part of the world. Estimates suggest that theU.S.has 2 trillion barrels of this hard-to-get fuel andCanadahas 2.4 trillion barrels – well above the Middle East andNorth Africa’s $1.2 trillion of conventional oil reserves. The good news is that technology innovation is now making it economically viable to extract this stuff at an ever increasing rate-using techniques such as horizontal drilling to increase natural gas production in the U.S. from virtually zero to meeting 20% of our needs today. Where we once fretted about not having enough natural gas, we are now worried about finding potential buyers for this stuff. It’s a great problem to have!

A lot of this innovation has been spurred by record-high oil prices over the past decade. If we do succeed in reducing our dependence on foreign energy, the heavy-handed oil driven diplomacy of producing nations such as Iran, Russia and Venezuela will receive a body blow from our own increases in production, innovation and energy efficiency. Also, other virtues and benefits emerge from this abundance. The U.S. could strategically help friendly nations extract their own reserves and reduce their dependency on foreign oil creating a virtuous cycle for the good guys. What this means is the U.S. could, once again, take the lead on energy production and change our history going forward.

If in fact, all of this plays out, the price of oil could drop significantly, increase corporate profits, spur further innovation and lead our innovative companies’ back into a newer, stronger leadership role in the years ahead. Energy independence will also reduce the amount we pay as a nation for foreign oil, reduce our trade deficit, help scale back our national debt and make us economically stronger.

So, my dear readers, I am very bullish on the U.S. over the long-run because time and again, we appear to prove our prowess by successfully innovating ourselves out of adversity into newer positions of strength.

Now, that said, this golden future is not yet upon us and there are many among us who doubt we can substantially reduce our dependence on foreign oil and gas. Undoubtedly, there will be significant hiccups along the way, so caution is warranted. I think it’s a simply question of when we will work out our energy issues, not if. … so the bet is to always keep a fundamental faith in our long-term economic prospects.

In March 2010, Citigroup announced a 1-for-10 reverse split on their outstanding common shares, set to go into effect in May 2010.

If you owned Citi shares or were planning on buying some, you may have wondered what this really meant for you.

 Stock Splits Explained

A stock split normally happens when management of a publicly traded company believes the company’s shares have risen to a level that is too expensive for the small investor to afford them. As the price of a stock rises, a lot of buyers are effectively shut-out from trading the stock (Think Apple at $600!).

Let’s use an example. Say ABC Company has 2 million shares outstanding at $100 per share. Investors typically like to buy shares in round lots, so 100 shares of ABC cost $10,000. While this may be okay for institutional investors, $10,000 may be too much for individual investors.

To make the stock more attractive and affordable for investors of all stripes, ABC management decides to do a 2-for-1 stock split. So where someone held 100 shares worth $100 each, they own 200 shares worth $50 each after the split. Additionally, someone can now buy 100 shares for $5,000 (as opposed to $10,000 before the split).

 Reverse Stock Split

A reverse split is the opposite of a normal stock split.

Companies opt for a reverse split when shares fall to a level where mutual funds, pension funds and institutions are either not allowed to purchase shares, or simply won’t, because many companies selling for under $5 are considered too speculative.

For example, when shares fall below $1, they are removed (delisted) from the New York Stock Exchange. Delisted securities then trade over-the-counter (OTC) or on pink sheets, and will see trading volume and liquidity drop.

A reverse split consolidates many shares into one. For example, if ABC shares drop to $0.80 (80 cents), a 1-for-10 reverse split will reissue 1 share in lieu of 10, with a new price of $8, which helps ABC avoid delisting.

 In a reverse split:

• the company buys shares from those who hold less than a round lot
• major players – mutual funds, pension funds and institutions – get back into the stock, which increases trading volume and liquidity
• the company lowers the number of shares and as a result the stock price rises
• the stock can re-list on a major exchange and stay away from OTC or pink sheets

 Even though ABC’s stock price increases after a reverse split, the market capitalization (outstanding shares x price per share) stays the same because the number of shares goes down by a factor of 10 but the price per share goes up 10 times, balancing each other out.

 Your Plan

In a reverse split, if you own less than 100 shares, you may be forced to sell and may want to consider buying more shares to reach a round lot. Splits also create temporary arbitrage opportunities due to share price fluctuations, which some investors try to cash-in on. However, if none of that applies to you then just sit tight and don’t worry.

Theoretically a split should have no bearing at all on a company’s share price. But many believe that shares trade lower after a reverse split. It sure feels like that some times. But concentrate on the business, not the split shenanigans. If the business prospers, your shares will do just fine.