At the time I’m writing this (Monday afternoon around 5pm), the Dow Jones Industrial Average closed just under 12,000; my phone is ringing more than normal with people wanting to invest; the blog post regarding municipal bonds from a couple of weeks ago is continuing to raise questions; we are in earnings season with tomorrow evening being President Obama’s State of the Union Address. So . . . what are the things we know?

The Things We Know

Your investment decisions should be made on a factual/analytical basis free of emotion and grounded by mathematical principles.

1) Active management and diversification reduce risk.

2) Municipal bond default rate in this country is presently under 1%. ~Source: JP Morgan Asset Management

3) In theory, the municipal bond yield should equal the Treasury yield x (1 – tax rate). As of 12/31/2010, it was at 111% meaning investors are fairly compensated for perceived risk. ~Source: Barclay’s Capital, U.S. Treasury, JP Morgan Asset Management

4) Many of the top global companies are reporting earnings in line or above projections while maintaining extraordinary high levels of cash on their books enabling them to execute their plans.

5) Your investment portfolio must be tailored to your goals and your risk tolerance. Each dollar invested is like an employee working for you. It must be held accountable.

6) When it comes to attaining your goals, don’t be afraid to be contrarian. It has served me well for years.

Have a great week!

Susan R. Linkous

Important disclosure: There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not ensure against market risk.