For some of us, the crash did more than just put a dent in our money confidence; it stomped on our investing hearts. If you want to play it safe for a while or forever, you have a few options. If you are saving for a down payment to buy a home within a few years or less, then you need easy access to your money without penalty or the risk of a capital loss. In this case, you might consider a highly liquid investment, like a money market fund or short-term bonds.

As your time frame gets longer, you can include investments that offer higher returns, but are less liquid. You might also want to consider a segregated fund, which guarantees a minimum of 75% of your original investment if you stay invested for a specified length of time (usually 10 years). Your best choice? Speak to a financial professional about the choices that are best for you.

A knee-jerk reaction is rarely a good one. (Have you ever ended a relationship only to demand your hairdresser give you the Halle Berry crop? We’ve been there.) It’s the same when markets get a little flaky. There are some hard-and-fast rules, though, that will help get you through market uncertainty. First, don’t abandon your long-term-hold strategies. The best way to realize substantial gains is to hold equities (a.k.a. stock) for the long term. Review your portfolio and fine-tune your holdings and remember that diversification is the key to protecting the value of your investments and achieving a reasonable rate of growth. That means holding investments from different asset classes that represent a variety of geographic regions and a range of industry sectors.

Remember the advice your guidance counselor gave you in high school? It went something like, “Don’t drop English because you’re an ace at math. You need a well-rounded education that will give you options later.” Well, that advice applies to investments. Sure, Canadian stocks are doing great, but Canadian equities account for less than 3% of the total world stock market value. Investing in foreign stocks and bonds through mutual funds or segregated funds lets you invest in diverse markets around the world. It also reduces the risk of investing solely in Canada. Think of global diversification as a way of getting the best of many worlds.

If you could set a perfect career path or build your ideal mate, your blueprint would be quite different from anyone else’s. Your investment plan is the same in that it’s adjusted to meet your unique requirements — and asset allocation helps ensure your plan is a good fit for you.

Strategic asset allocation is an approach wherein you build an asset mix to suit your risk tolerance, time frame and goals. For instance, if you have a high risk tolerance and are pursuing long-term growth, you should have a high percentage of equities in your portfolio. If your time frame is shorter or you want to protect your capital, you should have more fixed income and cash-type investments. Strategic asset allocation helps you maintain your optimum asset mix through changing market conditions, though the asset allocation may periodically need rebalancing.

With tactical asset allocation, a portfolio’s asset mix is adjusted regularly, based on the outlooks for the different asset classes. For the individual investor, trying to time the market is challenging and often unsuccessful. However, tactical asset allocation has been practiced more successfully by certain professionally managed asset allocation funds that remain open to individual investors.

A dividend is a distribution of a company’s profits made to shareholders, usually every three months. The company’s directors decide whether to distribute earnings to shareholders or reinvest them in the company. And the news keeps getting better. Dividends are generally considered a sign of a company’s strength. For investments held outside of registered accounts, dividends received from Canadian corporations qualify for the dividend tax credit. As a result, dividend income is taxed less heavily than interest income.

We’re going to have to answer this one with “that depends.” For good reason, mind you. The strategy of borrowing to invest is called “leveraging.” It’s an aggressive investment strategy that magnifies both gains and losses. To earn a net profit, your investment must generate an after-tax return that exceeds the net borrowing costs. If you choose to borrow to invest, you’re responsible for repaying what you owe, plus interest, even if the investment declines in value.

The efficient frontier is one of those terms that tries to make investing sexy. And we think it absolutely works! The efficient frontier is simply the optimal mix of investments in your portfolio to give you the best trade-off between risk and return. (Now if we can just get the picture of the old William Shatner in the fibre commercial out of our head… not so sexy.)

Somewhere, somehow, the term “derivative” has become the bogeyman of the investing world and can scare many investors. Actually, derivatives are widely used in the financial industry. A derivative is an agreement for the future purchase or sale of an item at a preset price. The agreement might be to buy or sell, or an option to buy or sell the item. The contract “derives” its value from the underlying item, which might be a currency, a single stock, a broad index or a commodity such as corn. Derivatives give you exposure to the underlying asset for a fraction of its cost. This leverage is what makes them potentially dangerous, but they can also be used for hedging and substitution.

Hedging simply means reducing risk, and it often involves the use of derivatives. Take oil prices, which are volatile and priced in U.S. dollars. To protect itself, an oil company could offer a derivatives contract to deliver a set amount of oil on a future date at a set price. The buyer might be a manufacturer that needs the oil. The derivatives contract allows the manufacturer to lock in its future cost and the producer to lock in a predefined profit. The buyer might also be a trader who hopes to sell the contract at a profit before the delivery date.

What if you thought five-inch white platform sneakers were going to make a huge comeback? If you were an entrepreneur, you’d start looking for a large supply (the whiter and higher the better!) so you could sell them and make a pretty profit. That’s the essence of value investing.

Here’s how it works: Value investors and value fund managers look for stocks trading below what the business is worth, based on its earnings and book value. The idea is to find sound companies that are out of fashion, and hold them until the market recognizes their true value. Based on principles formulated in the 1930’s, value investing can be a great money-making strategy over the mid- to long term. But in the short term, you may need patience.

Suppose you thought white platform sneakers were going to make a huge comeback. Right now, they’re expensive, but you think their retail value will go even higher. Welcome to the world of growth-style investing! Growth managers focus on how quickly a company seems to be growing and will buy a seemingly expensive stock, regardless of current price, if they believe its corporate profits will continue to rise at rates that are above average. The late 1990s saw growth funds benefiting handsomely from a booming economy and high-flying technology stocks that didn’t conform to traditional measures.

No. Merge value and growth-style investing and you’ve got GARP — “growth at a reasonable price.” Like their growth-oriented colleagues, GARP managers look for companies that are increasing earnings, cash flow and return on equity at above-average rates. But, like value-oriented managers, they carry out fundamental analysis to assess the likelihood of those trends continuing and, based on that, won’t pay more than a “reasonable” price for those expectations.

Standard deviation is a measure of volatility. It indicates how much an investment’s price has tended to vary from its average price over a certain number of years. The usual calculation takes 36 months of data and, for each month, determines how much the fund varied from its average performance. For example, consider a fund with a 10% compound annual return and a 5.0 standard deviation. This means the returns generally ranged between 5% and 15%. Some publications convert numeric standard deviations to ratings, such as high, medium or low.

In order to have the standard of living you want in the years to come (and who doesn’t want that), you must consider purchasing power risk — that is, the risk that inflation will erode the value of your investments. For example, inflation of just 2% annually will cut your purchasing power by one-third over 20 years. To protect yourself from purchasing power risk, you need to hold some investments that are likely to increase in value more than the rate of inflation. Historically, those investments have been equities (i.e. stock).

Want an instant snapshot of the economy? Then check out a yield curve. When economists predict where the economy is headed or what may happen to bond markets, they often refer to the yield curve. The yield curve is a graphic representation of the difference in rates on short-term and long-term bonds. In a positive market, the cost of money rises as the term lengthens, so the graph goes up. When there’s little difference between short-term and long-term bond rates, the curve is flat. When longer-term rates are lower than short-term rates, the curve is said to be negative or inverted.

Under normal circumstances, the yield curve is positive — that is, long-term bonds pay more than short-term bonds. When it flattens, or inverts, it’s an indication that something out of the ordinary is happening. It might be that inflation is heating up or Canadian bonds have fallen out of favour with foreign investors. When that happens, it’s time to talk to a professional about whether your portfolio could use a little fine-tuning.

We all know a couple that’s all about drama. They’re up, they’re down, they’re hot, they’re not. Since investments have their ups and downs, volatility is a popular area of discussion. (Just like that couple when they’re not around.) In more technical terms, volatility is the tendency for the price of investments to rise and fall over time. Volatility measurements indicate how much the value of an asset will fluctuate. In the case of a mutual fund, for instance, it indicates how likely the fund’s performance is to deviate from its average performance.

If you go to a charity casino night, blowing all of your chips on red 21 with one spin of the roulette wheel is not a good start to a fun evening. (We’re speaking from experience here.) That’s what putting all of your eggs in one basket can do. If the basket falls, you lose all your eggs. To prevent that from happening when investing, you need to diversify. That means that you spread your available investment capital among the five main asset classes: equities (stock), fixed income (bonds), cash (money markets), real estate (hard assets) and alternative assets (hedge funds, art, vintage cars – yes! - and other appreciating assets).

In the world of investments, some things are connected — like interest rates and bond prices. When interest rates fall, bond prices rise, and vice versa. The longer the term of the bond, the more pronounced is this “teeter-totter” effect.