5 Investing Myths Busted

One can barely listen to a news or talk radio station without hearing commercials for investing in gold. "A lot of them are selling to peoples' fears and selling to their greed by overstating without necessarily telling the whole story," says Michael Masiello, owner of Masiello and Associates, a financial planning firm in Rochester, N.Y. "There is no question that physical tangible assets have some value in most clients' portfolios." Many advisers do recommend that investors hold gold and other commodities in their portfolios because they typically tend to have a low correlation with other asset classes. For example, when the stock market is going up, the value of gold may be going down or doing nothing -- or vice versa. "There is nothing wrong with having a portion of your portfolio in hard assets, but if the world really ends or the dollar crashes, you're not going to want gold. You're going to want a gun," says Laura.

Bonds can sometimes be thought of as the frumpier side of an investing portfolio, "steady-Eddies" that won't deliver much return or pose much risk to principal.

Of course, the term does include products that span the gamut from U.S. Treasury securities to below-investment-grade corporate debt instruments, otherwise known as junk bonds.

"There is a difference between Vanguard high-yield corporate bond fund, where their average rating is double-B, and buying TIPS (Treasury Inflation-Protected Securities)," says Laura.

Bankrate's Investing Basics offers information about some different types of bonds.

Beyond credit rating, the maturity can be a risk as well. Long-term bonds are particularly vulnerable in a rising-rate environment, which drives prices of existing bonds down. If you're invested in a bond fund, you could lose principal if interest rates go up.

"One-year CDs are averaging yields of 1 percent or less. So people are going into bond funds not realizing that inverse relationship between price and yield in a potentially rising interest rate environment. Next couple years out, it's going to cost them principal," says Laura.

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