MONEY Ask the Expert

3 Simple Ways to Build a Low-Risk Portfolio

Investing illustration
Robert A. Di Ieso, Jr.

Q: My 89-year-old father has $750,000 after selling his Medtronic stock and paying capital gains. He’d like to make a low-risk investment with easy accessibility, but one that would give him more than a savings account. Any suggestions? — Karen

A: Before your father gets too focused on where he should reinvest the proceeds of this sale, it’s important to ask how this fits into the bigger picture of his finances, says Shari Burns, a chartered financial analyst and managing director with United Capital in Seattle.

Given the current state of the bond market — interest rates are very low but poised to move higher this year, which would threaten the value of older bonds — there is no simple answer for making a low-risk investment that is easily accessible and that pays more than just a savings account.

“Preserving principal is one priority, and getting a better return than a savings account is another,” says Burns, noting that any time you look for additional reward, you’re taking on additional risk.

With that in mind, your father needs to think about his priorities and his timeline. Let’s consider three scenarios:

Scenario # 1: He needs all the proceeds of the stock sale to support his cost of living.

Under this scenario, he should start with how much he needs and for roughly how many years. Working backwards will help him determine the right balance of risk and reward.

In simplistic terms, his $750,000 translates to $75,000 in annual income for the next 10 years. To keep up with inflation and preserve capital consider a mix of cash and individual bonds.

Burns suggests keeping $250,000 in a savings account to draw on over the next few years. “If short-term rates go up, then the interest on the savings account will rise,” she says.

Your dad can then invest the remaining $500,000 in a laddered bond portfolio of individual Treasury securities. A simple way to build such a “ladder” is to divide that money equally among Treasuries maturing in two-year increments, starting with 2-year notes and going out to 10-year securities.

At current rates, those Treasuries are paying out 0.72%, 1.29%, 1.74%, 2.07% and 2.33% respectively. So combined, this $500,000 ladder will average 1.63% per year or $8,140 in annual income for the first few years.

“As you spend down the savings account, you will replenish your cash as bonds mature in the years that remain,” she says. “After 10 years your portfolio will be depleted.” It’s important to point out that because your father is holding these bonds to maturity, rising rates aren’t a concern.

Scenario #2: He doesn’t need the additional income but will rest easy knowing it’s safe.

Under the second scenario — which we’ll venture to say is the most likely based on the size of this single holding – he will probably want to keep about 70% to 75% of these funds in cash and a short-term bond fund, such as the Vanguard Short-Term Bond Index VANGUARD SHORT-TERM BOND INDEX INV VBISX 0.19% .

The remaining 25% to 30% should go to a low-cost stock fund, such as the Schwab S&P 500 Index fund SCHWAB S&P 500 SWPPX 0.28% or the Vanguard Total World Stock Index fund VANGUARD TOTAL WORLD STK INDEX INV VTWSX 0.24% . “The stock portion of the portfolio will provide growth over time, which will keep the total portfolio ahead of inflation,” she says. Because neither the bond market nor the stock market are exactly cheap, however, it makes sense to dollar-cost average into these portfolios over the next six months to a year.

Scenario #3: He wants to preserve wealth to eventually pass this on to his heirs or charity.

Finally, if your father is more focused on long-term wealth preservation, he may want to rethink his goal and invest for the long term, she says. “He will want the capital to rise faster than inflation to maintain the purchasing power of his wealth,” she says. Use the same approach described above, only plan to bring the equity portion up to 50% to 60% of this segment of the portfolio.

Read next: The Low-Risk, High-Reward Way to Buy Your First Investment Property

MONEY Ask the Expert

The Best Way To Buy Stocks Warren Buffett Likes

Investing illustration
Robert A. Di Ieso, Jr.

Q: I’d like information on the “dividend aristocrats” that Warren Buffett has talked about. Should I buy them through a fund or a direct purchase plan? — Sheron Milliner

A: There’s no hard-and-fast rule about what stocks qualify as “dividend aristocrats,” but the moniker typically refers to companies that have consistently paid and raised their dividends — without fail — for at least several consecutive years.

The exact number of years is up for debate. Standard & Poor’s runs several equity indexes that track these types of companies. One benchmark that focuses on S&P 500 companies requires at least 25 consecutive years of dividend increases; a broader-based U.S. index looks for stocks that have boosted their payouts for 20 years or more; and a European version defines a dividend aristocrat as a stock that has boosted its payments for at least 10 straight years.

The dividend itself doesn’t have to be that large either — “it just has to be sustainable,” says Ron Weiner, CEO of investment advisory firm RDM Financial Group. “A company is showing its confidence in growth by increasing dividends as opposed to doing a one-time stock buyback or cash distribution.”

Companies that qualify as aristocrats tend to be value-oriented blue chips — think PepsiCo PEPSICO INC. PEP -0.37% , Johnson & Johnson JOHNSON & JOHNSON JNJ -0.23% , and Walmart WAL-MART STORES INC. WMT -0.81% — as opposed to high-flying newbies.

That said, a company’s place in the court isn’t guaranteed. Banks were for many years dividend aristocrats, but many cut their payouts in the aftermath of the financial crisis.

For that reason – and for the sake of diversification – Weiner’s advice to investors interested in this strategy is to look for an exchange-traded fund (ETF) or mutual fund that focuses on dozens or hundreds of companies with track records for paying and boosting their dividends.

The SPDR S&P Dividend ETF (SDY), for example, limits its universe to stocks that have increased their dividends for 20 consecutive years. Again, this isn’t to say it’s a forgone conclusion that these companies will continue to up their payouts. As Morningstar analyst Michael Rawson notes, because the fund weights its holdings by yield, it tends to favor lower-quality midcaps and value holdings.

Another ETF in this niche, the ProShares S&P 500 Dividend Aristocrats (NOBL), focuses on companies in the index with a 25-year record of dividend increase, but it gives equal weighting to all of its holdings.

It’s important to note that investors looking for income won’t necessarily find the highest yields among this group. Again, the key is consistency, says Weiner. “The point is to find good companies that have demonstrated that they can consistently grow their businesses over time.”

Although Weiner has used passive funds to tap into this group, he thinks active management may have an advantage here. “If something big happens, managers can react faster than an index,” says Weiner, whose firm has invested in the Goldman Sachs Rising Dividend Growth fund.

At the same time the fund sticks with companies that have raised their dividends an average of 10% a year over the last 10 years, its managers look for companies with the wherewithal to continue raising dividends in a meaningful way.

You could put together your own portfolio of dividend aristocrats by using one of the above portfolios as a starting point, but Weiner doesn’t recommend that approach. Even if you did assemble a diverse mix of dividend payers, keeping tabs on these companies is practically a full-time job.

“You can’t just buy and hold, and not pay attention,” says Weiner. “Aristocrats do get overthrown.”

MONEY Ask the Expert

When It’s Risky to Be Conservative With Stocks

Investing illustration
Robert A. Di Ieso, Jr.

Q: I’m 26 years old and have $100,000 invested in mutual funds, with 50% in stocks and 50% in bonds. Is this the right strategy for my age? — Oliver in Hillside, New Jersey

A: The right investment strategy is, ultimately, the one that makes the most sense for your goals, your risk tolerance, and your time horizon.

That said, if this money is for retirement, you should probably lighten up on the bonds given your age. “My recommendation for someone this age is to increase their stock exposure to up to 80% or 90% of the total portfolio,” says Brian Cochran, a certified financial planner with John Moore & Associates in Albuquerque, N.M.

If you’re wary of stocks, you’re not alone. “This is extremely common among people of this generation,” says Cochran. “Growing up during the financial crisis and recession seems to have left a bad taste in their mouths.” In a UBS Wealth Management survey published last year, in fact, millennials (people ages 21 through 36) reported having just 28% of their assets in equities – and a whopping 52% in cash.

Here’s the thing: Over the long term, it’s actually risky to be too conservative.

Historically, stocks have appreciated in the high single digits, says Cochran, and bonds have appreciated in the low single digits. With your allocation, that’s a difference of a couple percentage points a year, and it adds up. A $100,000 portfolio that appreciates 6% a year on average, for instance, would be worth about $600,000 in 30 years. One that grows 4% a year will end up at $331,000 or about half as much.

“The danger of a 50/50 allocation is that inflation could grow faster than a portfolio with that allocation,” says Cochran. “At 3% inflation, $1,000 today would be worth the equivalent of $412 in 30 years.”

And your time horizon may be even longer, possibly 40 years. “We’re preparing most clients in their 20s to retire around age 70,” says Cochran.

Meanwhile, after three decades of falling bond yields – which translates to rising bond prices – many experts warn that bond investors could actually lose money when interest rates finally move the other direction. “We don’t expect a lot of returns from bonds in the next two to three years,” he adds.

You can get a quick overview of where you should be using Bankrate.com’s asset allocation calculator.

If you have a retirement plan with a large brokerage, you should have access to some more robust planning tools, which will help you dial in that allocation in more detail.

If you’re still unsure, consider opting for a target-date retirement mutual fund that will allocate your assets based on your retirement age; you are probably looking at a 2060 target-date fund, says Cochran.

Alternatively, consider working with a fee-only financial planner to help you fine- tune your portfolio. In the end, these big-picture planning decisions carry even more weight than the individual stocks or funds you choose. Kudos to you for thinking about this now.

MONEY Ask the Expert

Why Stock Forecasts Are Often Off Target

Investing illustration
Robert A. Di Ieso, Jr.

Q: Investment web sites such as Yahoo list one-year price targets for stocks. How often are these correct? — Hal

A: Simply put, these numbers are based on where analysts collectively think a stock will be trading a year from now.

“The one-year number you see on Yahoo and other sites is the median or average opinion of these analysts,” says David Schneider, a certified financial planner and principal of Schneider Wealth Strategies in New York. He adds that the analysts who contribute to this target estimate typically work for investment banks and brokerage firms, as opposed to mutual funds or firms whose research is for their own internal use.

To come up with their individual estimates, these analysts have to project what a company’s business will look like a year from now, typically focusing on its earnings, among other factors.

Then they need to account for how much investors will be willing to pay for those earnings. In other words, after forecasting a company’s earnings — which is the “e” in a stock’s price/earings ratio — analysts have to determine the price (or “p”) that investors will assign that company.

This goes to show that a company’s stock price a year from now isn’t just a factor of it’s business prospects, but on the subjective opinions of analysts about investors’ confidence and passion for that stock.

An analyst could nail the estimate but be wrong on the P/E, or what Wall Street types refer to as the “multiple.” Conversely, an analyst could get the right multiple but miss the estimate, says Schneider. This only compounds any inaccuracies of these targets. Add to that all of the other things that influence stock prices — from interest rates to geopolitical events — and you can see why these targets are an educated guess at best.

Meanwhile, the numbers can vary from analyst to analyst and site to site.

The target for Apple APPLE INC. AAPL 0.67% , for example, was recently about $148 on Yahoo Finance, $146 on MarketWatch.com and $145 on Nasdaq.com. For electric car maker Tesla Motors TESLA MOTORS INC. TSLA 2.38% , which was recently trading at around $244 a share and has yet to report any profits, the differences are greater. On Yahoo Finance, the target estimate was $269. At Nasdaq.com it was $275 and on MarketWatch.com it was $258.

While it’s possible that the average or median recommendation may be predictive, research on individual recommendations isn’t encouraging. “Unless the target is close to the current price these things are pretty useless,” says Schneider, noting that there have been numerous academic studies on the topic, most with the same conclusion.

An MIT Sloan School of Management working paper published in 2004, for example, found that 54% of analysts’ one-year forecasts hit their price targets at some point during that period.

The odds for success, however, diminished greatly if the targets were considerably higher than the current price. If the forecasted price was up to 10% higher than the current price, it had a 74% chance of meeting its target. If it was 10% to 20% higher, there was a 60% chance of success. But once projections exceeded 70% of the current price got above that, the success rate plummeted to 25%.

“What this means if you want to use these target estimates to find stocks with big return potential you’re not likely to be successful,” Schneider adds.

Now, this isn’t to say you should turn a blind eye to these estimates altogether. “If you are interested in stock, I think it makes sense to get a sense of how the experts feel about it,” he says, noting that individual investors often focus on the “story” and make numbers an afterthought.

He adds: “If you are really bullish about something and the experts aren’t, you want to examine your views and see if you can still defend them.”

MONEY Ask the Expert

How to Get a Double Dose of Tax-Deferred Savings

Investing illustration
Robert A. Di Ieso, Jr.

Q: When I turn 70½ I’m required to start withdrawing funds from my 401(k) and pay taxes on it. I don’t need this money to live on. Is it too risky for me to invest it? – Dolores

A: What you’re referring to are required minimum distributions (RMD), which generally begin in the calendar year after you turn 70½.

Even if you can afford to keep your money parked in your retirement plans, the Internal Revenue Service insists that you start withdrawing money annually from your retirement accounts once you reach a certain age.

“It typically starts at 3% to 4% of the value of your account and goes up from there,” says Gretchen Cliburn, a certified financial planner with BKD Wealth Advisors headquartered in Springfield, Mo. You can estimate your RMD using a worksheet from the IRS.

Fail to withdraw the minimum and you’ll face a hefty penalty – 50% on the amount that should have been withdrawn, plus regular income taxes.

“Where things can get confusing is if you have multiple accounts,” says Cliburn. “I recommend consolidating accounts so you avoid missing an RMD.”

To add to the confusion, you can take your first distribution the year you turn 70½, or postpone it until April 1 the following calendar year – though you’ll need to take double the distributions that year. Likewise, if you’re still working, you’ll need to take RMDs on your IRAs, but you can delay taking distributions on your 401(k) or other employer-sponsored plan until the year after you retire.

Now, what should you do with that distribution?

“The answer really depends on your situation and your goals for that money,” says Cliburn. “Will you use it to support your lifestyle over the next 10 or 20 years, or do you want it to go to future generations?”

“If you want to hang onto those funds, your best bet is to open a taxable investment account and divide the distributions into three buckets,” she says. One bucket can be cash; another bucket might go into a balanced mutual fund, which owns stocks and bonds; the final bucket might go to a tax-efficient exchange-traded stock fund, such as one that tracks the S&P 500.

Just how much goes into each bucket depends on your other sources of income. “If you have a guaranteed source of income, you may feel more comfortable taking on a little more risk,” says Cliburn.

If you’re absolutely certain that you won’t need these required minimum distributions to live on — and that you have other funds to cover your retirement living expenses — then you could use the distributions to help others, and possibly get some tax savings.

You need earned income to contribute to a Roth IRA. But you could, for example, help your children fund a Roth IRA (assuming they qualify). You can gift any individual up to $14,000 a year before you have to file a gift tax return. They’ll make after-tax contributions to the Roth, but the money will grow tax-deferred. Withdrawals of principal are tax-free — provided the account has been open at least five years — and all withdrawals are tax free after the account holder turns 59½.

Another option is to open or contribute to a 529 college savings plan. The money grows tax-deferred and withdrawals for qualified education expenses are exempt from federal and state tax. Depending on where you or your children live, there may be a state tax deduction to boot.

A tax-free charitable transfer is another possibility, though you’ll need to wait to see if so-called qualified charitable contributions, or QCDs, are renewed for the 2015 tax year. Taxpayers didn’t hear about last year’s renewal until December.

Assuming it’s a go, it’s a sweet deal. Last year, IRA owners age 70½ or over were able to directly transfer up to $100,000 per year from their accounts to eligible charities, sans tax.

MONEY Ask the Expert

The Best Investment Gift for a Grandchild

Investing illustration
Robert A. Di Ieso, Jr.

Q: What is the best investment gift that I can give to my 19-month-old granddaughter? – L. Gutierrez

A: Whether you have $100 to give or $10,000, the best investment gift for a young grandchild is to open or contribute to a tax-advantaged 529 college savings plan.

“For grandparents who want to help their kids pay for college, these make the most sense,” says John Gajkowski, a certified financial planner and co-founder of Money Managers Financial Group, in Oak Brook, Ill. “You have a broad range of choices of where and how you invest, and you can maintain control if you wish.”

More importantly, your investment grows sans tax, and qualified withdrawals—for things like tuition, fees, and room and board for higher education—aren’t subject to state or federal tax. Some states offer a tax deduction to boot if you go with your home-state plan.

Meanwhile, saving money in a 529 plan will have a minimal impact on financial aid. By contrast, if you were to put money in a traditional investment account in your granddaughter’s name, those sums would be factored into the family’s expected contribution.

Should your granddaughter get a full scholarship to college, no worries. You can just name another person as the beneficiary—they can be any age and needn’t be related.

If you must cash out, you will have to pay a 10% penalty, plus federal and state tax, on any earnings. This shouldn’t be a deal breaker, says Gajkowski. The advantages of socking away money in a 529 plan outweigh the risk that you won’t use the funds for higher education.

There are a couple of ways to go about making a contribution to a 529 account. The first is to open a 529 account in your name—you would serve as the custodian—and designate your granddaughter as the beneficiary. The advantage of going this route, says Gajkowski, is control. You can control how the money is invested, and you can change the name of the beneficiary at any time.

Option 2 is to help your granddaughter’s parents open their own 529, and make contributions to their plan. While you’ll give up control, this is a great way to get buy-in from your adult children—and get other relatives on board.

“We’ve had a lot of clients offer matching benefits to their [adult] children to incentivize them to save,” Gajkowski adds. “You can spread the word and let people know there is a general pool for college savings.”

While 529s are sponsored by individual states, you can invest in any state’s plan. In other words, if you don’t like the options or fees of your home-state plan, you can go with any state’s plan—and the money can be used for higher education in any state.

Start by seeing how your state plan sizes up against other states.

If your state allows for an income tax deduction (it’s typically capped at a few thousand dollars) and has a solid plan, that’s a good starting point. “But I would be far more concerned about the performance of the portfolio than any state tax benefit,” says Gajkowski, who recommends looking at the overall fees, investment options and track record.

If your state’s plan gets poor reviews, shop around for the best direct-sold non-resident plans at SavingForCollege.com. Most advisers recommend going with an age-based investment option, which will invest fairly aggressively when your child is young and gradually get more conservative as college approaches.

Your contributions are subject to the gift tax, though you can gift an individual up to $14,000 ($28,000 for couples) a year without running into that limit. You can also contribute up to $70,000 ($140,000 for couples) in one year and claim it over a five-year period.

The lifetime maximum contribution limits on most plans range from $200,000 to $350,000 per beneficiary. As college tuition trends higher, so are these saving ceilings.

MONEY Ask the Expert

Have Mutual Funds Lost a Key Advantage Over ETFs?

Investing illustration
Robert A. Di Ieso, Jr.

Q: ETFs seem to be taking the place of mutual funds, but my understanding is that mutual funds are still your best option if you want to reinvest dividends. Is that true? — Bill from Florence, S.C.

A: Once upon a time, there was some truth to this. But the popularity of dividend-focused exchange-traded funds has prompted most brokerages to tweak their policies to accommodate dividend reinvestors.

“From an investor standpoint the experience should be similar, though the process behind the scenes is different,” says Heather Pelant, a personal investor strategist with BlackRock, which manages mutual funds as well as ETFs via the firm’s iShares division.

Before ETFs became widely adopted, some brokerages charged ETF investors a transaction cost for dividend reinvestments, says Pelant. Hence the notion that mutual funds are a better vehicle for reinvesting dividends. “These platforms have since come up with procedures and features that are parallel to mutual funds,” she says.

Today, most large brokerages give investors the option of depositing dividend payouts into their cash accounts or automatically reinvesting dividends back into the security – be it an individual stock, mutual fund, or ETF. You should be able to make this choice on a fund by fund basis, change your preference at any time, and reinvest your dividends for free.

Still, it’s always a good idea to double check your broker’s own policy, lest you get dinged with additional fees.

One way ETFs are different (slightly) from mutual funds is the timing of reinvestments. Mutual fund dividend payouts are reinvested at a fund’s net asset value on the ex-dividend date, which is essentially the cutoff date for new shareholders to collect that dividend.

ETF investors, on the other hand, have to wait for all transactions to settle, typically a few days, to repurchase shares. If share prices swing widely during that short window of time, it could make a difference — for better or for worse.

For most investors, however, this nuance matters far less than all the other factors that go into deciding whether to invest via an ETF or fund.

Meanwhile, dividend reinvesting is a great tool to stay fully invested and systematically buy additional shares over time, says Pelant. Over the long term, these payouts really can add up.

Of course, because different funds will have different payouts, automatically reinvesting dividends could eventually throw off your allocations — even more reason to make sure you periodically rebalance your portfolio.

MONEY home improvement

How to Squeeze the Most Value From Your Home

woman in kitchen
Getty Images

Buyers and sellers are getting busy, but if you're planning to stay put, low rates on home equity loans and lines of credit make this a good time to remodel.

In part one of our Spring Real Estate Guide, we told you what to do if you’re in the market for a home this year. In part two, we offered tips for sellers. Today we’ve got advice for those who want to say put and add value with smart home improvements.

It’s always nice to remember that the value of your house should climb while you’re enjoying it—and at a great mortgage rate (assuming you take the advice below about refinancing!). If you’re at the love-it rather than list-it stage of your life, remodeling may be a good option. Nationwide, 57% of home-owners surveyed recently by SunTrust said they planned to spend money on home-improvement projects this year. But be warned: The competition for contractors in many markets is fierce. You may have to wait your turn in line.

If you’re staying where you are, here are three ways to get the most out of the home you’re in.

Hit the refi table. According to CoreLogic, roughly 30% of all primary mortgages still carry an interest rate of 5% or higher—even though the average fixed rate today is 1.3 points lower. If you took out a $300,000 loan in mid-2009, say, and refinanced the roughly $270,000 balance at today’s rates, you’d cut your payments by about $370 a month.

You might consider making a few other changes. First, don’t assume that your current lender will offer you the best deal this time around—different lenders are marketing different kinds of loans.

You might also want to switch to a 15-year fixed-rate mortgage, especially if you are a decade or so from retirement and looking ahead to reducing your debt. You’ll pay more each month: about $170 more than the current payment on the $300,000 30-year mortgage at 5% cited previously. But you’d retire the loan nearly a decade sooner and save tens of thousands in interest.

There’s a good reason some homeowners haven’t refinanced at all: They couldn’t. In 2012 about a quarter of homeowners owed more on their homes than the houses were worth. Thanks to rising property values, that’s changing. Today only 11% of owners have negative equity, according to CoreLogic.

If you’re one of them, you may still be able to refinance, perhaps without having to bring cash to the table. Borrowers with FHA and Veterans Administration loans are eligible for “streamlined” refinancing, which looks at payment history rather than equity. For borrowers with conventional mortgages, the Home Affordable Refinance Program (HARP) is still available and has undergone some improvements since it was introduced in 2009. If you were turned down before, it’s worth another shot, says Keith Gumbinger, vice president of HSH.com, a mortgage information provider.

Get the right renovation financing. For a project that requires a one-time loan and at a fairly predictable cost—say, a bathroom—you may want to consider a home-equity loan, says Gumbinger. The 5.9% rate isn’t all that favorable, but you have the security of its being fixed. For a larger project in which you’ll need ongoing access to funds, a home-equity line of credit can be a better option since it operates like a credit card. HELOCs are now ringing in at 4.8%. The downside is that the rate is variable, so if you won’t be able to pay the debt off in two years, it might not be your smartest choice.

Think about the next owner. According to a 2014 survey by Houzz, 53% of homeowners who are remodeling say they are hoping to increase their home’s value. Yet most upgrades won’t help your resale. The most common remodeling projects are kitchens and bathrooms—9.5% and 7.7% of all upgrades, according to Harvard’s Joint Center for Housing Studies. But according to Remodeling magazine’s 2015 Cost vs. Value report, you’ll recoup only 70% of costs on a bathroom remodel, 59% on a bathroom addition, 68% on a major kitchen remodel, and 79% on a minor kitchen. (The only project that recoups more than its cost: installing a steel front door, which runs from $500 to $750.) That doesn’t mean you shouldn’t renovate; just know that you’re not going to get back all of what you put in.

No matter what project you choose, consider adding improvements to appeal to aging baby boomers. According to the Joint Center for Housing Studies, just over half of existing homes have more than one of five key features for aging in place. Notably, only 8% have wide doorways and hallways or levered door and faucet handles. Those could become huge selling points. Just think: Those renovated doors could provide the perfect entrée to your next great home.

Read next: If You Want to Buy a Home Here’s What You Need to Do Now

MONEY Ask the Expert

The Best Way to Own Gold and Silver

Investing illustration
Robert A. Di Ieso, Jr.

Q: I’m looking for information on adding gold and silver to my investments. What are the advantages and disadvantages of buying coins? What about gold and silver stocks or mutual funds?

A: “We think gold and other precious metals can play a part in a well-diversified portfolio, but our preference is to own the stocks or the mutual funds that would give you that exposure,” says Joe Franklin, a certified financial planner and president of Franklin Wealth Management in Hixson, Tenn.

The trouble with coins, he says, is that dealers charge a premium. And the price you pay isn’t based purely on the value of the underlying gold, silver or platinum. There are other factors at play, such as historical value or the costs associated with minting commemorative pieces.

If do buy coins, you can start by searching the U.S. Mint’s site for an authorized purchaser in your region, then do additional research to make sure that the outfit is reputable. This is an area rife with scams.

Another consideration with owning the actual metal is storage: If you pay a third-party to hold the coins for you, there are additional fees. If you store it in a safe at home, there are additional risks. A bank safe deposit box may be your best bet, but annual fees range from about $20 to more than $200 depending on the size.

The fees and logistics of owning coins are only part of the problem, says Franklin. “Gold in and of itself doesn’t have a lot of utility,” he adds. “It doesn’t pay interest or dividends, and while it can go up in value it tends to be a fear trade.”

If you’re interested in pure exposure to gold, a better bet is an exchange-traded fund, such as the SPDR Gold Trust (ticker: GLD), which aims to track the spot price of gold bullion. “There’s more liquidity and transparency with a fund,” he says. “But you’re still going to see dramatic swings.”

For that reason, Franklin’s preferred strategy is a diversified natural resource mutual fund, which has the flexibility to invest in precious metals — namely via shares of mining companies, some of which pay dividends — energy concerns, and other commodities.

“Managers of these funds have a lot more latitude to pick their spots,” he explains. While he isn’t a proponent of market timing, Franklin warns that commodities tend to go through long periods of over- and under performance. “They’re either really in favor,” he says, “or really out of favor.”

MONEY selling a home

If You Want to Sell Your House This Year, Start Doing These Things Now

Living room
Michael Grimm—Gallery Stock

With home prices recovering and interest rates still low, now may be the time to act. Here are 8 things successful sellers need to know.

In part one of our Spring Real Estate Guide, we told you what to do if you want to buy a home this year. In today’s part two we’ve got tips for sellers. Stay tuned for part three, with advice for those who want to say put and add value with home improvements.

If you haven’t sold a house in the past decade, brace yourself. Today’s buyers are demanding. They’re savvier about market dynamics and data and want to see houses on their own schedule, says Redfin’s chief economist, Nela Richardson. “We’re finding that buyers want access to your house when it works for them,” she says. “They don’t want to wait for the open house.” Baking cookies won’t cut it anymore.

Some things in your favor: Low interest rates are your friend too. Buyers know that rock-bottom mortgages can’t last forever. If interest rates start to tick up, there could well be a rush to buy. On the other hand, if rates go up too far, that will almost certainly dampen prices. “As a buyer’s monthly payment goes up with rising rates, something’s got to give—and that’s likely your home price,” says Keith Gumbinger, vice president of HSH, a mortgage information provider. In other words, sellers: If you snooze, you may well lose.

Your Action Plan

Sell first, then buy. The dilemma most sellers face is whether to buy a new place at the same time. In general, it’s smarter to sell before you buy—there’s nothing worse than having to carry two mortgages at once. You may be able to rent your house from the buyer for a few months, or at least find a short-term rental elsewhere. The one thing you don’t want to do is try to buy a new place with the contingency that you have to sell your old place first. Nothing kills a deal faster, especially if you’re up against other bidders.

Don’t just list your home—market it. Gorgeous photographs, video walk-throughs, perfect floor plans—buyers want it all. You need an agent who can develop a full-blown marketing plan, including social media. “People are doing so much more research ahead of time, going through listings online, and weeding out properties before they see them,” says Benjamin Beaver, an agent with Coldwell Banker in San Angelo, Texas. That’s especially true of millennial first-time buyers, who have grown up with information on demand.

And a top-flight agent can help pay for himself. Redfin found that listings with photos taken by a professional got 61% more views, and homes listed between $200,000 and $1 million sold for $3,400 to $11,200 more than similarly priced homes. A video tour including views of the neighborhood (parks, restaurants, main street) is another great tool. “If your photos capture an interested buyer, the video can help boost their interest,” says Rae Wayne, a real estate agent in Los Angeles. Plus, a video can help drive additional traffic to your listing.

Negotiate with your agent. Bernice Ross, the CEO of RealEstateCoach.com, has a brilliant method for testing a potential agent’s bargaining skills: Ask her for a reduction in her commission—and then think twice about hiring her if she agrees. “If they can’t negotiate a full commission on their own behalf, how are they going to negotiate the best price for you?” she says.

Don’t “test” the market. Pricing right is an art these days. The last thing you want to do is accidentally list too high out of the gate. Not only does it require cutting the price—in many cases to less than the estimated value—but it also means more time on the market. “It’s not like the old days where you put in a 10% buffer,” says Jacquie Sebulsky, a broker with Cascade Sotheby’s International in Bend, Ore. “People are savvier, and many agents won’t even show a house if it’s overpriced.” According to Zillow Talk: The New Rules of Real Estate, a house that is priced right will sell in about half the time of one that is overpriced.

Another reason to price right: traffic. In the first week a listing goes on the market, it gets four times as many visits as a month later, Redfin found. Moreover, if you do end up dropping your price, says Richardson, it sends a signal to buyers that you’ll come down more. “One agent described it to me as ‘blood in the water,’ ” she says.

To help you arrive at a price, your agent should show you up to 10 comparable active, pending, and recently sold (in the past three months) listings and sales. The most recently sold and the ones that are pending are the best; six or even four months ago may not reflect today’s market, says Brendon DeSimone, a broker in New York City and the author of Next Generation Real Estate. Automatic valuation tools, such as from Zillow and Trulia, are definitely great sources of intelligence. They’ll show you how quickly houses are selling in your market, how close they are going to asking price, and more. But data can tell buyers only so much. “The computer can’t see the inside of the house,” says Ross, “and it can’t see if your house has a view.”

Go green. With homes selling at a healthy pace, you probably don’t need to make any major pre-sale upgrades. One that does pay off: the front lawn. A 2012 Texas A&M survey found that curb appeal increases sales prices by up to 17%. “Green grass is huge, whether that means new sod or just fertilizer and lots of water,” says Wayne. Sustainability and low maintenance are the top trends for residential landscape projects, according to the 2015 Residential Landscape Architecture Trends Survey, so you might add simple native plants. You don’t have to spend a lot. See what’s on sale at Home Depot. It only has to be green, not gorgeous.

Fix what’s broken. Paul Reid, a Redfin agent in Southern California, recommends getting a home inspection and fixing any problems before you list the house, despite the out-of-pocket costs. “First-time homebuyers in particular don’t want to come in and do a ton of work,” he says. “They’re making a huge financial commitment and don’t want a money pit. I’ve seen it time and again where a buyer will get in escrow, have the inspection, and back out because the list is overwhelming.”

Go clean. Ten years ago it was mostly upper-end sellers (and maybe desperate ones) who went to the trouble to “stage” their home. Now, the idea that you need to clean out your closets, clear off the counters, take down your photos, and pare down the furniture and accessories is Real Estate 101. That said, you don’t need to hire anyone (though you may need to find someplace to store all your junk). Two areas not to forget: the entrance (that expression about not getting a second chance to make a good first impression is true) and the bathrooms. “I like to say that big, fluffy, white towels can add $10,000 to the price of a house,” says Sebulsky.

Give yourself a deadline. It’s true that houses tend to sell faster in spring and summer (in large part because families want to be settled before the new school year begins). And if your home is still sitting come Labor Day, think twice about keeping it on the market into the fall. “By then a lot of people have made their choices, and if your house has been on the market for six months, people automatically assume something is wrong,” says Sebulsky. Every market is different, of course, but winter may actually be a better option. There’s less competition from other sellers, as well as some pent-up demand after the holidays. Bonus: Anyone trudging through open houses during the winter “tends to be pretty serious about finding a house,” Sebulsky says.

Get more answers to your questions about home buying and selling:
How do I make my home attractive to buyers?
What renovations will pay off when I sell?
Will I pay income taxes on the sale of my home?

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