Money Savers

While the stock market hit its highest level in four months this week, individual stock prices are still low. More people are becoming first-time investors, and that has some financial experts warning them to play the market carefully. In this Survive in '09 report, learn what market mistakes to avoid, and how to maximize your returns.

Frisco resident Jim Janicki has money in the stock market, but he admits he never has learned a lot about it.

"I wouldn't put myself int he sophisticated investor category," he said. "I'm not checking the financial pages every day."

When he first started in the market, he worked with a financial advisor who told him what to do.

"I had another investment advisor at the time that put me in five or six different mutual funds," Janicki said.

But, after several years, he wasn't happy with the returns.

"Mutual funds were really not paying what we thought they should be for the fees," he said.

Ed Butowsky, founder of Chapwood Investment Capital Group in Dallas, helps investors correct mistakes and re-works their portfolios to make more money. He helped fix Janicki's portfolio.

"He said he was going to do a portfolio forensics, and what he came back with was pretty astonishing," Janicki said.

To cut back on the portfolio fees, Butowsky moved Janicki out of mutual funds and into Exchange Traded Funds, or E.T.F.

"An E.T.F is a group of stocks that represent an index or a sector, and they're not managed," Butowsky said. "Therefore, the fees are drastically lower."

Butowsky says that move shaved about 80% off the fees, leaving more money in Janicki's portfolio to grow. Janicki says the change has made a big difference in the returns he's seeing on his portfolio.

"When you compare an E.T.F to a mutual fund, a mutual fund has a manager and you have to pay for that manager," Butowsky said.

Butowsky says another common mistake he sees is people who shorten their investment time. He says if you're needing money within six months to a year, you shouldn't be investing.

"Anybody who is an investor and they have more than three years before they need to have this money, it should be invested in a well-balanced portfolio," he said.

Another problem Butowsky says people make is that they over-allocate their money in a specific sector of the market. He says young investors tend to put all their money into one place. He recommends spreading money over several different sectors to maximize your return. Butowsky also warns against buying individual stocks.

"Instead of having single stock risk, you want to reduce your risk by owning the sector," he said.

To those who aren't involved in the market, Butowsky says that is the biggest mistake of all.

"Start putting money into this market," he said. "It might go a little bit lower, but over time, this market will rise substantially from here, and you will be richly rewarded."

Jim Janicki says Butowsky reorganized his portfolio months before the market dropped. He believes the changes helped lessen the blow.

"We took a hit, no question," he said. "It would be impossible not to take a hit, but I think it wasn't as bad a hit."

Butowsky hosts a free investment bootcamp every couple weeks where he goes more in depth on how to fix your portfolio. Click here to find out when you can attend the next class.

Check out the strength of your portfolio by using Ed Butowsky's CHIP scoring program.  Click here to get started.

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