Yes, we continue to live in volatile times. Just check the recent performance of the stock market. In October, we witnessed an unprecedented surge of stocks of every size and sector over a three-week period. And that performance came on the heels of the three major indices–the Dow Jones industrial average, the Nasdaq composite index, and the Standard & Poor’s 500 index–hitting all-time lows. So did we see the beginnings of a market turnaround or another sucker’s rally?

Quite frankly, it’s hard to tell. One thing’s for sure, though. The investment climate will continue to resemble that of a roller coaster. And the best way to brace yourself for the ride is through diversification.

It’s also a good time to pay down your debts. Among the best places to put your money this year–or any year–are your credit card balances. If your finances are stretched by plastic debt, pay it off. “Interest rates on credit card debt tend to be high, and that interest is not deductible,” says Damon Dyas, a certified financial planner with American Express Financial Advisors in Southfield, Michigan. “Reducing your balances will make those monthly payments less painful.”

According to Bankrate Monitor (, the average interest rate on standard credit cards was more than 13% in late 2002. Thus, paying off your debt is the equivalent of earning more than 13%, after-tax, with no risk. Why put your money anywhere else?

On the following pages, we will show you other places to stash your cash. We offer the best strategies to keep your finances on track for 2003–and beyond.

Stocks will come back.” That’s the view of Robert and Roxanne Chatman of Farmington Hills, Michigan. “We have 10 to 15 years before we retire,” says Robert, a 51-year-old sales manager. “In that time period, we expect stocks to recover and outperform other types of investments, so we’re putting our money into stock funds now.”

There’s a difference, though. “Before, we were emphasizing funds that bought large-company growth stocks,” says Roxanne, 49, who works as a manager with an auto parts company. “Now, we’re putting more money into value funds, small-company funds, and foreign funds.”

In Roxanne’s 401(k), for example, large-capitalization growth funds such as Janus Mercury–a ’90s dynamo–isn’t receiving a new influx of money these days. Instead, she’s steering her contributions to Fidelity VIP Contrafund (large blend), T. Rowe Price Small-cap Stock (OTCFX; small blend), Templeton Foreign (TEMFX), and Van Kampen Equity and Income (ACEIX; a balanced fund holding large value stocks and bonds). Blend funds are those that aren’t purists in either the growth or value style of stock picking.

“We’re not aggressive investors,” says Robert, “and with two kids in college we’re reluctant to take risks. So this type of balanced approach is likely to produce better returns than we’d get in bonds, before and after our retirement, without the volatility a portfolio of growth funds might produce.”

According to the Chatman’s advisor, Dyas, large-cap growth funds led the way during the 1990s. “As a result,” he says,