Adviser Can Put Retirement on Right Track

Personal finance advice is everywhere. Turn on the TV, and talking heads will offer advice about the hottest places for you to invest your life savings. The world is littered with stock tips and retirement planning insight, much of it contradictory in nature.

Investors can find pearls of wisdom in this information overload, says Jeff Davis, business program chair of the Globe Education Network. However, most people have a tough time separating the good advice from the bad.

For that reason, many investors can benefit from hiring an expert to help with retirement planning decisions, Davis says. He outlines his thoughts in the interview below.

Are there key things that retired investors should do? Are there steps they should follow?

One of the most important facts to remember is that a person who is 65 years old today will live another 20 years on average. About a third will live another 25 years or more. If you are planning as part of a couple, odds are that at least one of you will live to be 90 or older.

This means a portion of a 65-year-old's portfolio won't be needed for 10, 15, 20 years or more. That portion can remain in medium- to high-risk investments, as there is still plenty of time to ride out downturns. Popular asset allocation funds have about 40% in stocks for those who have just entered retirement.

Many people see retirement as the point at which the entire portfolio should be moved to low-risk investments. However, "low-risk" portfolios actually have plenty of risk; specifically, inflation risk. The return on a portfolio that is too conservative could be less than inflation, meaning that your purchasing power erodes away as you grow older. This in turn increases the risk that your savings will run out during your lifetime.

What sectors of the market are poised to outperform now?

Everyone has a different guess about what the winning sectors will be over the next month, quarter or year. The fact of the matter is that there is no way to consistently predict which sectors will outperform next.

Some financial professionals suggest that you should shift toward the sectors currently on an uptrend, as these have the momentum to rise further. Other financial professionals suggest that you look at sectors that are currently out of favor, buy while they are cheap and wait for them to cycle back into favor.

These are opposite strategies! The vast majority of individual investors should be focused on low-cost, broad-based funds that represent the total market. Strive to have a piece of every sector.

Emerging markets have lost some steam recently. Are they a good buy, or are they still too expensive? Which markets in particular represent good buys, if any?

By historical standards, emerging markets are cheap relative to earnings, with a lot of pessimism already priced in. Whether that makes them a good buy right now is another story. They could certainly become much cheaper before turning around.

Individual investors should not attempt to time the market by looking at what seems cheap or expensive at a particular moment in time. Nor should they attempt to guess which foreign markets are the best. Instead, a percentage of one's portfolio should be dedicated to international investments in a percentage determined by personal risk factors.

The investment can be achieved most easily through a low-cost international fund that includes emerging markets. Or, if an investor really wants to fine-tune their risk profile, they can purchase a developing-market fund and an emerging-market fund in the appropriate proportions.

Should average Americans hire investment help? Or, can they do well on their own if they do their due diligence?

The typical American with a standard investment goal such as saving for retirement could do well on their own by following a relatively short set of rules. Unfortunately, most people are never taught what those rules are.

Good investment advice is certainly available on the Web, but it stands alongside terrible investment advice, with most people unable to differentiate between the good and the bad.

Investors are therefore justified in seeking professional help. I recommend an independent, fee-only planner. Fee-only planners work in your best interest because they do not receive commissions, incentives or any other form of compensation based on the financial products that are recommended to you.

Barbara Whelehan, assistant managing editor at Bankrate.com, contributed the questions for this interview.