So, what can you do to prevent being taken advantage of? For one thing, do what your mutual fund company does — not what they tell you to do. Adopt a strategy for following trends, such as I do, and use mutual fund manger’s superior stock picking ability to your advantage by buying and holding only as long as fund is performing well.

Remember, fund manager has one big disadvantage over you: He always “has to” be invested so that public can purchase shares in his fund. You don’t!

If market conditions dictate that you are better off in safety of a money market account because we are in a severe downtrend, then you can take your money and run for cover. He can’t. He is constantly trying to adjust his portfolio to ever-changing economic conditions so that his potential losses are minimized. At same time you are being told that his fund is investment for all seasons. Don’t fall for it!

You as an individual investor are really in driver’s seat. Unfortunately, you have probably been conditioned to think that Buy & Hope is a good investment strategy, when in fact it is a losing proposition.

Bottom line is, use a well performing mutual fund during strong up trends and get over to sidelines during trend reversals. (That's exactly what I did for my clients in October, 2001, and we retained lion's share of their profits while Buy & Holders kept insisting emperor was wearing new clothes.) Pretty soon you will feel that you are in charge of your financial destiny and any chosen mutual fund is merely a tool to bring you closer to your goals of maximizing your gain and minimizing your losses.

The partnership agreement could further state that limited partnership shall have right to buy out general partner for his share of partnership and appoint a new general partner to replace her (the "you" in this example is husband; we are making wife general partner because we assume that husband's risk of getting sued is higher; if opposite were true, then we would arrange partnership accordingly).

Let's say that you are sued and a creditor obtains a $50,000 judgment against your name. The creditor can attach your limited partnership interest but only to extent of your income as a limited partner (called a "charging order"). The creditor who attaches a limited partnership interest cannot participate in management of partnership, and thus cannot force general partner, your spouse, to distribute income. As general partner, your spouse stops paying limited partners' distributions, because in her discretion limited partnership would be better served to reinvest capital.

One year later, creditor still has a $50,000 unsatisfied judgment. Just to top it off, partnership sends creditor a form "K-1" for creditor's share of your "phantom" income (In our example, partnership assets are worth $300,000. At a 10% annual return, your share of income would be approximately $30,000 - creditor would have to pay income taxes in ballpark of $10,000! If creditor does not pay tax due on your undistributed share of income, IRS may come after creditor!). You will be in a strong position to force your creditor to settle his claim for a fraction of its value.

Let's say a creditor sues your spouse and tries to attack your spouse's general partnership interest. At that point, partnership exercises its power under partnership agreement to buy out her general partnership interest in amount of $2,000 or 2%. The partnership then finds a new general partner. With proper planning, this may not be considered a "fraudulent" conveyance because general partner received full compensation for her partnership share.

"Family" LLC's - To Good to be True?

Another similar tool for protecting your wealth is LLC or "Limited Liability Company." An LLC is like a cross between a corporation and a limited partnership. All of its partners (called "members") have limited liability and all of its members can participate in management of LLC without suffering any liability.

Any assets you hold in an LLC are protected from creditors in same way your assets are protecting in a limited partnership (i.e., creditor's remedy is limited to a "charging order"). In addition, since all members are shielded from liability, an LLC may be an excellent device for holding investment real estate - members are protected from tenant lawsuits and equity of members is protected from other creditors.