The Power of Change in Personal Finance

It seems that change is the underlying theme in the American culture today. With the new administration in the White House and a fresh sense of “new” things to come, people are looking to change their old ways and move on to a new and perhaps better way of life. When it comes to personal finance, there is a resounding difference in what people are searching for in their investments and portfolios. It is only natural to have such an inclination since most Americans have lost a huge chunk of their hard-earned money in a blink of an eye. Real estate investments and hedge funds were all the rage years ago but all that will soon be replaced by safer and more defensive investments. Let the recent financial crisis be a lesson for all of us. We should all rebuild our savings in a safer and more cost-effective way by revisiting our portfolio in a new light. We should practice the power of change in managing our portfolio. Here’s how.

Change mutual fund to index funds

Many of today’s mutual funds are constantly failing to meet the benchmark S&P500 index, and yet people are still putting their money in such investments. Whether they are blinded by the possible huge profits or by the security and simplicity the product brings, it doesn’t change the fact that these mutual funds have been performing poorly for a while now while they still charge huge annual fees and short-term taxes. You’re probably losing a lot of money in this instrument as it is, so don’t you think it’s time to enlist the power of change in this area? Any financial expert or adviser would tell you that there are numerous passively managed index funds that charge minimal yearly fees and without excessive taxes. Some examples would be the Diamonds Trust, Series 1 (DIA) and the S&P Depository Receipts (SPY). They are simple, less risky than a lot of investments, and cost-effective; perfect for the average investor.

Change treasury bonds to municipal bonds

A municipal bond works like the traditional bond, but it is issued by a city or local government, which is exempt of state or federal income tax. Treasury bonds have always performed better than municipal bonds since the beginning. Currently, however, the yields on municipal bonds are higher than those of federal treasury bonds. Contact your personal stock broker or financial adviser and you’ll see. You can take advantage of guaranteed this tax-free income by investing your money in Vanguard Intermediate Term Tax Exempt Fund or T. Rowe Price Tax-Free Income Fund, to name just a few.

Change traditional energy to renewable energy

The recently passed economic stimulus package has set aside billions of dollars to back up Barack Obama’s agenda to make America energy independent. This signifies a lot of changes in how we collect and use up energy from now on. These include less drilling for oil, more wind farms, and a search for cleaner alternatives to coal. One emerging trend is the use of solar energy. Many companies are currently beginning to shift their operations in accordance with the utilization of solar energy. For instance, Sempra Energy (SRE) is working on thin film panels instead of their old silicon competitors because they are significantly cheaper and more cost-effective in the long run. Also, many states are giving incentives to residential as well as commercial building owners who install solar panels in the developments. GP