) -- For most, 2009 was a year to forget.

Wall Street imploded. Retirement savings evaporated by as much as 50%. Unemployment cracked 10%. Crooks bilked investors out of billions with modern Ponzi schemes. "Too big to fail" meant massive bailouts for some institutions, but a death knell for others. Credit lines were tighter than the jeans you wore in college.

The silver lining, if there is one, is that the lessons learned during the past year can be used to set the stage for a prosperous, or at least safer, 2010.

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Here are a few considerations for the New Year:

Assess your risk tolerance

Nothing ventured, nothing gained. That rule of thumb is a double-edged sword for equity investing. Making the most of a post-recession bull market means sticking your neck out and taking some chances, but the trade-off between risk and reward can be tricky. As one financial adviser recently confided, it's frustrating when clients want better-than-average returns while demanding the safety of bonds.

You can't have it both ways. Anyone who so much as dabbles in the stock market needs to fully understand his risk tolerance. Assume the worst and, if you can live through it, plunge in with hopes for the best.

Do you consider yourself conservative when it comes to financial matters or are you more of a risk taker? Does every dollar matter to you or are you able to shake off a 40% loss and chalk it up to "win some, lose some"? Did the crash of the past 18 months influence how you view your tolerance for losses?

These questions, as much psychological as mathematical, need to be answered as you develop a New Year strategy in the coming weeks.


Most advisers recommend rebalancing investment portfolios and retirement plans at least once a year.

That should be more than the financial equivalent of changing smoke detector batteries. Resolve in 2010 to be ever-mindful of the adjustments and fine tuning that your strategy requires.

Risk tolerance is more than just a gauge of how much you're willing to lose in the pursuit of increased gains. It also needs to apply directly to your age bracket. The younger you are, when the rapid growth of your funds is crucial, the more risk you should take. Portfolios and retirement plans should weigh heavily on equities when you're under 40 and gradually shift to safer investments, like bonds and Treasuries, as the gray hairs multiply. By the time you approach retirement, batten down the hatches, and cruise into the sunset with safe and stable investment products that limit your exposure to the volatility of the stock market.

The breakdown of your investments is a personal matter, and an adviser can help recommend the ideal strategy. As a rule of thumb, start as high as 85% in equities (if your risk tolerance permits it) and whittle your exposure down over the years to as low as 10% upon retirement is a starting point for the discussion.


Diversification is a ceaseless mantra for many advisers. It is for good reason.

Don't be over-reliant on tech stocks or pour every penny of your retirement plan into emerging market funds. Develop a healthy mix of sectors and balance your portfolio among the stable, usually reliable big-cap companies and the riskier, but often more profitable, small caps and emerging market plays.

The marketplace is often a study in equilibrium. As one segment tanks, another is on the rise. Spreading your money wisely can shield you from a meltdown.

Heavy metal

Although reports of its demise may be exaggerated, especially if inflation fears come true, gold prices' drop in recent days may be temporary. Whether its record-setting spike gets back on track, gold bugs might do well to consider other precious metals as a back-up investment opportunity.

Think of silver, copper and platinum, all of which have industrial uses as well as serving as metallic hedges against the weak U.S. dollar. Silver prices have soared about 70% this year, an even better return than gold's 30% run. Platinum is high as it's been in nearly a year and a half, and its use in auto manufacturing (as a component of catalytic converters) could be more good news if a lasting economic recovery occurs and the industry rebounds.

Gain exposure through precious-metal exchange traded funds such as

SPDR Gold Trust

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iShares Silver Trust

(SLV) - Get Report


iPath Dow Jones -- AIG Copper Total Return Sub-Index ETN

(JJC) - Get Report

TheStreet Recommends


iPath Dow Jones-UBS Platinum Trust

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Consider a Roth IRA

Roth IRA conversions are all the rage. From the standpoint of advisers and firms like




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, it's not every day a new product offering comes along, and they aim to make the most of the opportunity.

But individuals need to carefully consider whether a Roth conversion is the right move.

Roth IRAs differ from traditional plans in several ways. While you don't get a tax deduction for making a contribution to a Roth IRA, those contributions grow without taxes and you don't have to pay taxes upon withdrawal in retirement. And Roth IRAs aren't subject to the same minimum distribution requirements that traditional IRAs are, so you can take out money when you want to.

Starting Jan. 1, investors will be able to move retirement assets, such as those from traditional IRA or 401(k) plans, to a Roth IRA regardless of their income level. The $100,000 salary cap will be waived.

Whether the advantage of tax-free investment growth, as offered by a Roth plan, is more beneficial than paying taxes upon distribution is a deciding factor. A Roth IRA may not make sense if you can't afford to pay the upfront taxes. Conversely, a Roth plan might be a worthy hedge against a rising tax bracket or the likelihood that the government will increase taxes.

Be prepared for tax changes

While most of us haven't started thinking about our 2009 tax bill yet, it's important to keep up on changes for 2010.

So far, only minimal news of what to expect from the IRS next year is starting to trickle in. But it would be wise to keep an eye on IRS-related news to get a head start on your upcoming tax strategy as such crucial issues as the Capital Gains Tax come into focus.

On Dec. 9, the House of Representatives approved the $31 billion TAX Extenders Act of 2009, legislation that would carry more than 50 existing tax incentives into the coming year. The bill already has the support of the Obama administration, though which elements that will pass muster in the Senate is unclear.

Among the items included in the House version:

deductions for state and municipal sales taxes; other deductions include a standard amount for property taxes and tuition expenses; an extension of tax-free distributions from IRA accounts for charitable contributions; and qualified environmental remediation expenses can be treated as deductions.

Scrutinize your adviser

Don't fall for the next Madoff. No matter how tight you are with your financial adviser, review his performance and credibility for added peace of mind.

A recent newsletter from

Brinton Eaton

, a New Jersey-based wealth manager, offered suggestions of what to ask.

Find out where assets are held in custody. Be wary of an advisory firm that's its own custodian, and be sure your assets are housed with an established third party.

Determine whether your adviser has ever been disciplined for improper conduct by checking for violations or disciplinary actions with state and federal agencies, as well as trade organizations.

Ask how your adviser's clients have fared throughout the recession and make sure his strategy weighs wealth preservation as much as wealth accumulation.

-- Reported by Joe Mont in Boston.

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