If you have an extra $10,000, options abound for you to boost the value of your home, give to charity or take off on a cheap European vacation.
Take advantage of Europe’s worst-off economies: Portugal, Italy, Ireland, Greece, and Spain — the “PIIGS.”
Lodging costs are down 20% in Athens this summer vs. last year. In Barcelona, five-star hotels are $120 a night in November — a third of Paris’ rate. Says Alex Pasquariello of Jetsetter.com: “The economies are down, but the destinations are as beautiful as ever.”
A 16-day trip through Italy, with stops in Venice and Rome, starts at $3,839 a person for lodging and air from N.Y.C. (virgin-vacations.com) — 23% less than a similar 17-day Western European trip with stops in better-off cities like London and Paris.
Or hop aboard the luxury Seabourn Quest for its Nov. 3 sailing from Athens to Rome for 14 nights for $3,999 plus airfare (less than $900 from N.Y.C.). That’s 28% less than a shorter 10-night Brazilian cruise that takes you through Uruguay and Argentina.
Investing these days is like watching a horror flick where you’re on the edge of your seat anticipating that next fright. Could it be inflation? Maybe.
The Agriculture Department thinks food costs could climb as high as 4% next year. What about a spike in interest rates? Unlikely, the experts say.
But who knows when investors will finally lose their appetite for Uncle Sam’s IOUs? Is another recession in the cards? Cue the ominous music. Use a tiny bit of your portfolio—say, 5% to 10%—to address your biggest worries.
Fight inflation with … PIMCO Real Return . This fund beat 87% of its inflation-battling peers over the past 15 years by holding not just inflation-protected Treasuries but corporates and even foreign debt. “Management has delivered strong performance,” says S&P Capital IQ analyst Todd Rosenbluth.
Guard against rising rates with … Loomis Sayles bond . Because lead manager Daniel Fuss eschews rate-sensitive Treasuries in favor of high-yield convertible bonds and even foreign bonds, this fund is positioned to make money even if rates rise.
Prepare for another downturn with … Vanguard Short-term Bond VANGUARD BD IDX FD SHORT TERM PORTFOLIO VBISX 0.1905% . When the sky is falling, the place to make big money is in long-dated, high-grade bond funds. The place to seek shelter, though, is in short-term ones.
Not only did this high-quality fund gain 5.4% in 2008’s crash, it rose 4.3% in 2009, when the rebound began in the spring. That year, long-term Treasuries sank 15%.
Making money in stock funds isn’t just about leading in good times. How well a fund minimizes losses in downturns plays a huge role in its — and your — long-term success.
“Having less to recover to get back to breakeven makes a big difference,” says David Hallman, vice president of investment management for United Capital.
Hallman looks at a fund’s Morningstar “capture ratio,” which gauges how well portfolios stack up against the market in up and down months. A handful have stood out in the past five years for playing good defense while also snaring most of the gains in good times.
U.S. stock funds
Reynolds Blue Chip Growth REYNOLDS BLUE FUND BLUE CHIP GROWTH FUND RBCGX -0.2548% fell 40% less than the S&P in months when the broad market sank, in part by holding high levels of cash starting in 2007, just before the panic. Yet as it redeployed that money in subsequent years, it matched the S&P’s returns in up months.
Five-year rank: Top 1%
Yacktman Focus AMG FUNDS YACKTMAN FOCUSED SVC YAFFX -0.0386% , co-managed by value-minded investor Donald Yacktman, lost a third less than the market in 2008. It actually made money when stocks sank in 2002 thanks to its concentrated contrarian bets.
Five-year rank: Top 1%
Foreign stock funds
Tweedy Browne Global Value TWEEDY BROWNE FUND GLOBAL VALUE FUND TBGVX -0.4007% is a value-minded fund that made money over the past five years — when foreign stocks sank — by focusing on the healthy parts of Europe.
Five-year rank: Top 1%
Tocqueville International Value TOCQUEVILLE TRUST EUROPE FUND CL'A' TIVFX -0.7047% absorbed just 87% of the losses in down months for the MSCI EAFE foreign index by betting more on Asia than its peers.
Five-year rank: Top 3%
High-yielding stocks can be oversold as a safe bet in turbulent times. A better bet is stocks whose dividends are modest but rising.
S&P 500 dividend growers returned 9.4% over the past 40 years — more than two points better annually than stocks that paid dividends but didn’t consistently boost them, according to Ned Davis Research. Here are some promising picks.
GENERAL MILLS GIS 1.5553%
Morningstar strategist Josh Peters recommends this food giant, which has paid a dividend for 113 consecutive years. The maker of Cheerios has also raised its payouts at an annual clip of 11% over the past five. That’s nearly three times the market’s historical rate of dividend growth.
T. Rowe Price Dividend Growth
ROWE T PRICE DIVID DIVIDEND GROWTH FUND PRDGX -0.2029%
Unlike many of its peers, this dividend fund doesn’t simply focus on high yielders. (Hence its lower-than-average payout.) Dividend Growth prefers companies with strong, stable earnings growth that will lead them to keep issuing dividends for years to come.
SPDR S&P Dividend ETF
SPDR SERIES TRUST DIVIDEND ETF SDY -0.0542%
This MONEY 70 fund tracks an index that consists of the 60 highest yielders among companies in the S&P 1500 that have boosted their payouts every year for at least the past quarter-century.
When getting Junior a set of pre-owned wheels, you can keep costs down and the safety quotient up with these two dependable choices.
’05 Toyota Prius
$9,500 (48 mpg)
Among small used cars, the Prius earns top crash-test ratings for injuries, according to the Insurance Institute for Highway Safety. And at this price, the hybrid is among your best used-car bets, says Edmunds.com.
You won’t have to hike the kid’s allowance for gas either: The Prius gets 45 miles per gallon in the city and 48 mpg on highways. And don’t forget the cool factor. These cars appeal to echo boomers who are environmentally conscious, says Ivan Drury, a senior analyst at Edmunds.
’07 Hyundai Elantra
$9,400 (33 mpg)
When the Elantra was redesigned in 2007, Car and Driver said, “Hyundai’s small sedan is big on comfort and content.”
It’s also big on safety. The Elantra gets top ratings in front-impact crash tests and comes standard with side airbags.
Car and Driver also rated that year’s Elantra higher than the Toyota Corolla.