In this week’s edition of Money Talks, City Weekend’s finance blogger Owen Caterer shares his top money tips for 2012. So if you're looking to take care of cash in the year of the dragon, check out this week's first six tips.

1. Diversify

Financial Advisers get blue in the face about diversification because it’s probably the most common mistake amateur investors make. Having three investment houses in Melbourne or London isn’t diversified. It’s concentrated. Hold some shares, hold some property and mix up your currencies too. The future is always tricky to predict but if you have a wide range of bets you will pick some winners.

2. Buy On Sale

The hardest time to get average investors to buy is when it’s the cheapest. It's when Europe has another scare and the headlines scream Armageddon that most investors run and hide. Yet, life goes on. If you look at things from a 15 year perspective, it will likely be a buying opportunity. We’ve been through two world wars, numerous scares and recessions but the market always recovers, often without the small investor.

3. Be Cautious with the Euro

Unless you have been living in a media blackout with an Amazon tribe, you’ll have noticed Europe’s got problems. There was a bailout last week for Greece which has calmed nerves but it was no end fix – indeed the final fix is not even in sight. One investment bank recently estimated a 25% chance the Euro would no longer exist within two years. That’s not small! We could (and have) written a lot on this topic, but the best way is to reduce exposure is to have other currencies – ie diversify. If you are European consider how much you will make when the ongoing crisis pushes the Euro further down. All the more money to bring home when you return.

4. There is No Rush

When you started and funded an investment account, don’t rush the next step – buying. Simply because you have money ready to go and you have noticed a stock or index fund, doesn’t mean that it is a good price to buy. Timing is very hard, so simply stage your investment over a couple of months. If it falls, then you can buy some more cheaply. If it rises, then at least you made some gains. I’ve seen this mistake far too often. Your strategy for when the share falls 25% is far more important than when your share rises 25%.

5. Be Careful of Gates and Costs

Shanghai is a friendly place. Strangers frequently call out of the blue to have a chat. Often about finance. Not many are worth meeting, but you can draw your own conclusions. If someone does strike your interest, the questions to ask are:

a) Can I get access to all my money at any time without cost?
b) What are the total costs if I stop investing?
c) How much exactly do you make out of this?

Don’t be shy; ask directly and firmly. Full transparency including the exact percentage of commissions is now demanded in the US, Australia and soon the UK. You should too.

6. Be Careful with US Treasuries

US Treasuries have had a great run, particularly in 2011 which was otherwise a pretty average year. Right now yields and prices are priced to perfection. There isn’t much upside left to make and present yields of 1.9 percent per annum on 10 year bonds are puny. That’s less than the three percent inflation rate. If inflation ticks up with economic growth further, the best you can hope is that you won’t lose too much because of Chinese and Middle East government buying.

See also:
Should You Invest in the Chinese Stock Market?
How to Invest in Chinese Shares
How to Avoid Fake Shares

About the writer:
City Weekend’s finance guru who tells it like it is. Owen Caterer is a long time Shanghai based financial adviser first arriving in China in 1997 and bucks convention by being trained, unbiased to property or shares. He is abusive to those who unnecessarily lock up investor’s money and has a full collection of Warren Buffet’s “notes to shareholders” which he hopes one day to translate into Chinese. In his spare time, Owen is the founding partner of CatererGoodman Partners.