Diversification: to balance (as an investment portfolio) defensively by dividing funds among securities of different industries or of different classes. Lets take a look at some investment possibilities: Remember, Your portfolio and your goals are directly related to your age. Always seek some professional advise for long term goals. You have time to recover from riskier investments in your younger days than when you are nearing retirement age.

Stocks:

 There are several ways to purchase stock. You can purchase stock through a broker or, in some cases, directly from the issuing company. You can use an online service, such as www.sharebuilder.com or www.netstockdirect.com, which offers a convenient and low-fee way to purchase individual stocks.

 One of the first things to consider in building a portfolio is that it is not necessary to own a stock in every industry. There are over 90 different industry classifications and no one needs to be that diverse. To many investors think diversity is owning stock in 10 companies even though 8 of them are in the Tech sector. Nothing wrong with playing a hot sector yet the reason for diversification is to spread the risk. Over dependence on any one industry can hurt a portfolio's performance if there is some bad news about that industry. Bad news in one company can unsettle the entire sector. Spread your risk by investing in different sectors. I have always liked to have at least one gold related stock out of ten.  Also look to diversify with exchanges as well. 

DRIPs: Some companies that pay out dividends have a program called a DRIP (Dividend Reinvestment Plan). A DRIP automatically takes the dividends that you earn each year and buys more shares of the Company for you. This way, your ownership (or equity stake) in the Company continues to grow over time, even though you haven't actually put any additional money into it. Some companies even offer a discount off the price of the stock if you sign up for dividend reinvestment. 

Socially Responsible Investments: There are ways to invest your money that also help other people or causes. There are companies that make special efforts to sell safe products, help the environment, or give a percentage of earnings to charities. There are also special funds that invest money to help socially responsible causes. The Social Investment Forum can give you a list of these funds. (612) 333-8338.

Looking beyond your stock portfolio:


U.S. Savings Bond: The government depends on borrowing money from individuals and institutions to operate. A U.S. Savings Bond is a safe and reliable investment. You can buy a savings bond for as low as $25. The maturity, the date the bond expires, varies. If the bond has a life of 3-10 years, it is called a Treasury Note. If it's life is 10 years or longer, it is called a bond. A 30 year Treasury bond is known as the long bond and sets a standard for interest rates. A U.S. Savings bond has little risk, but also has a lower interest rate than other kinds of bonds. 
   

Municipal Bond: Issued by states, cities and other local governments, a municipal bond is a way for a local government to raise money. One difference, however, is that the interest earned is tax-free. Municipal bonds are more risky than a U.S. Savings Bond, but often offer a higher interest rate. Unlike U.S. Bonds, a Municipal bond can be called early, which means you will be paid back before the date of maturity. This means that you will earn back less money than you originally expected. You can buy a municipal bond through a broker or the selling agency directly.

Corporate Bond: A Corporate Bond is an IOU from a Company, such as Nike or Disney, to the bond holder, as a way for the Company to borrow money. Owning a corporate bond is riskier than a government bond but usually returns a higher interest rate. Like municipal bonds, a corporate bond can be called or paid back early. Sometimes, though, a bond will have a call-protection which means that it cannot be paid back before the maturity date set at the time of purchase. You buy a corporate bond through a broker or directly from the company. 

Bond-ratings: All municipal and corporate bonds are rated for safety. Two agencies provide ratings on the bonds, Moody's and Standard & Poor's. Moody's uses Aaa as best and D as worst. Standard & Poor's uses AAA as best and C as worst. All bonds rated Baa (Moody's) or BBB (S&P) or above are considered "Investment Grade". Bonds with ratings of Caa/CCC or below are considered "Junk Bonds" or "High-Yield Bonds" because they belong to riskier companies or municipalities but they also offer higher interest rates. Even if long-term interest rates begin to rise somewhat in 2003, junk bonds could be the best-performing asset class of the year.

Real estate: Investing in real estate can be relatively complex, but it is often worth the extra work. When compared to other financial investments, like bonds or CD's, the return on investment for real estate purchases can often be greater. The key to real estate investing is equity. Determine an amount of equity that you want to achieve. When you reach your goal, it's time to sell or refinance. Determining the proper amount of equity may require the assistance of a real estate professional.
 
Real Estate Investment Trusts. REITs are a valuable investment option for today's speculator, and a great addition to any portfolio. A REIT is a company that buys, develops, manages and sells real estate assets. REITs allow participants to invest in a professionally-managed portfolio of real estate properties. REITs qualify as pass-through entities, companies who are able distribute the majority of income cash flows to investors without taxation at the corporate level (providing that certain conditions are met). As pass-through entities, whose main function is to pass profits on to investors, a REIT's business activities are generally restricted to generation of property rental income. 

Another major advantage of REIT investment is its liquidity as compared to traditional private real estate ownership which are not very easy to liquidate. One reason for the liquid nature of REIT investments is that its shares are primarily traded on major exchanges, making it easier to buy and sell REIT assets/shares than to buy and sell properties in private markets.   http://www.reitnet.com/reits101/

Commodities: Commodity is a general word for something that can be bought and sold and has intrinsic value. Some examples of commodities are gold, silver, other metals, meat, soybeans and foreign currency. Investing in commodities is high risk because the value of these products can rise and fall dramatically. Companies with a strong balance sheet, good management and diversified businesses are better positioned to withstand volatility in the commodities market.
 

In the mid-1980's the first independent coin grading companies were established, providing the public with unbiased coin authentication and grading certification. Since then, millions of coins have been examined and placed in certified slabs by these numismatic experts. Each slab contains a label with the name of the grading company, the type of coin and grade, and a serial number and bar code to make for easy tracking and authentication.

I invest in Morgan Silver dollars graded MS 65 or better. Its best to start small like just Carson City mints (CC) or New Orleans (O) as it is nearly impossible to collect all the coins.   
 

Morgan dollars were not minted in the years 1905 through 1920, and in 1921 the minting of Morgan dollars resumed until peace dollars were released later that year. During the 1960s, 1974 and 1975 Morgan dollars were melted again due to the rising cost of silver. 

 It happened once again in 1980 when silver reached $50.00 per ounce.  One dealer had several hundred thousand Morgan & peace dollars melted at that time.

 These cards now sell regularly on Ebay for well over $1,000

 Last year I accumulated hundreds of select players and over the years have bought and sold thousands on a regular basis. My best advice on investing in collectibles, is to buy a price guide and do some research first. 
 
Have fun investing in the New Year!

John Gernannt is editor/owner of Equitymovers.com. He has been investing in a wide range of equities for over twenty-five years. For the last five years John uses his website and newsletter to provide information to investors.