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As ordinary non-expert investors, we seem to have been convinced that playing prevent defense is a wise strategy to “limit our down-side” risk exposure.  In other words, since we don’t have the slightest idea or clue about what we’re doing and “it’s only our entire financial life at stake”, we best hit singles, bunt, or punt. Right?Wrong!  Let’s first establish some terminology.  Diversifying (for investments) means that you should spread around your dollars; you know put your eggs in many baskets to limit your losses (and by definition, limit your gains!).  DCA is dollar cost averaging, the system whereby the investor places a specific amount, say $500 into a specific stock, and say IBM common shares at a specific time frame; say over a 10 month period; $500 per month or $5,000 total capital.Okay, let’s first look at the multiplier power of DCA.  If you’re worried about finding the highs, lows or mid-points for a certain market or stock, DCA completely removes the guess-work.  What you’re doing is literally blindly shelling out $500 on the 15^th (pick any day you like) of every month come hell or high water; no matter what you stock or the market is doing.Think of yourself as a pre-wired robot because that’s exactly what you need to be for the DCA platform to work.  So then, what does that math look like?  Well if the price of IBM starts at $100 per share on deposit 1, but drops to $90/share (10%) on deposit 2, you automatically acquire 10% more shares for the same $500.  If the price goes up to $110, you get 10% less and so on.With DCA and a good, solid upwardly long-term growth stock like IBM, you make down-ticks in price a buying opportunity, not a reason to sell or even fret about your values going south.  Bottom line, if IBM’s a stock love for at least one year, there is no better way to buy it.  While you’re at it utilize the next best thing too; MARGIN.  Leverage your winnings by broker loans and cover any potential margin call with a limit down sell order which the broker will likely require anyway.Diversification; long thought to make a portfolio safer is, we believe a technique which is far overrated.  So much so that the “Intelligent Investor” segment of the Sat/Sun WSJ wrote the latest in modern theory questioning the veracity of “more is better”.  Jason Zweig, the writer hedged his bet somewhat but still did a good job of bringing theory to common reality.  His headline “More Stocks May Not Make a Portfolio Safer” tells only half the story.“As many studies have shown, at least 40% of the variability in return can be reduced by moving from a single company to 20.  “…something entirely different happens when flesh and blood humans try to pile up stocks one at a time”.  In fact, for any given average investor, the averages or diversification safety really doesn’t apply.We take it a step further.  Since humans can’t think randomly, where is it written that a basket of “great” is worth the trade off of losers?  Are we making our point? What if Aunt Trudy used 25% of her $10,000 to buy Microsoft back in 1982 instead of only 5%?  Gur Huberman, a finance director at Columbia University points out that “investors tilt toward stocks that match their own beliefs about risk”.  If Microsoft’s your pick in the early 80s, you’re a certification genius.  But if you picked Motorola in the 90s you’re a bum; get our drift?Why not try this.  Take your $10,000; buy 2 stocks that you love for $5,000 total.  Then buy 5 more stocks for $500 each and with the last $2,500 buy a stock market index fund.  Want a little more risk/reward?  Use margin.  Then this way you are getting the best of all worlds.Your Credit Company 

The secret coded vernacular, the private, guarded language of Wall Street and Chicago are being de-coded on an accelerated basis.  The financial services industries pride themselves on their “special, clubby knowledge” about investment instruments which appear mysterious and highly selective.  The insurance industry is an even worse offender.The exciting news then is that once the wrappers of mystique are peeled away and the intentional mumbo jumbo is exposed, the underlying technique, the actual device itself is a beautiful thing to behold.  Options and futures are bets used to mitigate/manage/reduce investment risks while enhancing total returns on a systematic basis.Now, please; whatever you do; read on.  This is meaningful, easy to grasp stuff; we promise!  The days of “buy and hold” for conservative investors are long gone.  Of course with guilt-edged blue-chip stocks losing 30% or more of their value, the common man’s interest in hedging his bet, or more accurately his loss, is understandable.  This market recession is different the experts tell us, unlike the 1987 crash or the bear of 1989 where bull stampedes came quickly on the heels of disaster; these cuts went deep and lasting back then, along with 20%+ setbacks, so many folks swore they would never “go long unprotected” again.These same folks had awfully short memories in that rapid up-ticks just months later sucked them back with no protection whatsoever; no insurance hedge for dips or bigger disasters.  Options, for example are great for their protective qualities and they will generate good income even within prudent, traditional strategies.Remember that an option is simply the right (not obligation) to buy or sell “something” (a stock for instance); 1. at a certain price, and 2. at a specified period of time.  Jim Bittman, senior instructor at the Options Institute (the educational division of CBOE) loves to explain put options as a homeowners insurance policy.  “…the house burns down; the homeowner gets back the full price of the house, minus the deductable.  Likewise, say the stock you like (currently own) is priced at $100.If you buy a put option at $90 strike price, and that stock goes down to zero, you get the strike price back; limiting you loss to only $10.  Mr. Bittman also effectively uses auto leases as another good example, this time for a call option (a put is an option to sell and call is an option to buy, either can be bought or sold), where by the lessee can buy out the lease/exercise his/her OPTION for specified price at a specified period of time.Futures are an even easier concept to grasp.  When a homeowner purchases heating oil for example in spring for the upcoming winter months, he is simply locking in a fixed price ahead of the winter season; unknowing as to the price swings.Take a look at commodities, precious metals, gold for instance, even stock indexes, currencies and treasury bonds.  Not only can you make a bet on a certain item going up or down in price in the FUTURE, you can also efficiently hedge or amplify an existing investment position, even an entire portfolio by employing futures contracts and the leverage of 10:1 is unbeatableYour Credit Company 

This must be another example of Wall Street successfully courting Main Street financial planners, mortgage lenders, local banks and “loan counselors”.  When you really think about it, a reverse mortgage (RM) is little more than simply the reverse of a standard mortgage.  With more homeowners turning to RMs to get cash and income guarantees in the wake of the poor economy, it makes sense to closely inspect this scheme especially in light of greatly depressed housing values.A reverse mortgage is a loan against a home’s value (in lump-sum and/or regular payments) which is repaid upon the homeowner’s death or sale prior to death.  The pure math-economics or RMs is intriguing for some seniors if it weren’t for the high fees equating to unfair annuity streams of income.Federally insured RMs have exploded to over 335,000 in the last three years alone which, to add perspective, is more than the CUMULATIVE total for 1990-2006; a 16 year period.  Not only are RMs almost always inequitably priced for the consumer but the industry has attracted a disproportionate share of scam artists and outright thieves (equity skimmers, etc.) even unethical banks, counselors, appraisers, and brokers; so beware!Basically, far too many of these unscrupulous helpers are defrauding desperate seniors, so even the most astute RM prospects are wise to garner assistance from trusted family members or friends.  And this point leads us to the underlying issue- problem for us.If the homeowner or senior couple has literally no heirs or loved ones to leave their home to when they die; OK the RM concept has some merit. In essence the homeowner can enjoy a life-time of income and capital distributions to assure a comfortable financial security.  However, we still, even in the best scenarios prefer more traditional solutions for the owner’s need of immediate cash; be it income and/or capital.AARPs analysis’s and researchers agree.  With homes values depreciating, the timing for an RM couldn’t be worse.  Couple this with the fact of historically low investment returns (this is the No.1 factor used by lenders to determine their cash and income pay-outs to “you”), and we can only believe that slick marketing and sales tactics have trumped sound financial planning and prudent thinking.For example, if a senior couple owns a home free and clear worth $250k in today’s prices, they should consider as legitimate alternatives: 1. Sell and conservatively investing the proceeds while renting or moving to a smaller less expensive property.  2. Take a look at home equity lines of credit (HELOC) whereby you only pay interest on what you actually borrow.  3. Take out a traditional 30 year fixed rate mortgage at 5% or lower, but only for 50% LTV; thereby holding onto plenty of equity for another rainy day, and minimizing your monthly outgo.Summary: If you will please take the time to compare any form of reverse mortgage to your other cash-out/income options, and accept some objective expert advice (CPA, financial planner, etc.), we are certain that you will almost always reject the RM option.Your Credit Company