Will you make it? If not, last week we talked about how to buy more time. See previous TaxWatch.

Now, here are some tips on some not-to-miss deductions, plus help on getting your return done right.

About four million taxpayers electronically paid their taxes last year, according to the IRS. Since the IRS is barred by law from paying merchant fees, you paid them. Your "convenience fees" averaged about 2.5%. In an announcement last week, IRS reversed their position on the deductibility of these fees.

Unless you're already itemizing and your miscellaneous deductions already exceed 2% of your adjusted gross income, this won't help you much. Folks who have lots of employee business expenses, investment management fees, or legal expenses will get the benefit of this.

Since not everyone has the credit to qualify for a home loan, or even to pay for it, many families or friends help each other. One person qualifies for the loan and is on the title; but the real owner lives in the house and makes the payments.

In cases like this no one is entitled to the deduction, because it's not the named owner living in the house. And the real owner isn't on the title or on the loan. Fix this right now so tax deductions don't get lost! By getting agreements in writing, you establish who the real owner is, and the person living in the home and paying the mortgage and property taxes should be able to take the deductions.

You need contracts that spell out the arrangement and who really owns the house. You need loan documents between the friends or family members, spelling out that the payments will be made to a third party -- the financial institution. Don't back-date the documents. See an attorney who has experience with documents that memorialize understandings and put them writing.

Perhaps you have arrangements to use someone else's license to do contracting work or some other type of work. Or you have an agreement to split income on a project, when the contract is actually only in the name of one person -- the one who gets the 1099-MISC.

Spell out all the details in writing. Get all your paperwork in order on residences and any other arrangements you have.

Small-business owners, especially those in the service industry, tend to forget to send 1099s to folks who provided services. For instance, one real-estate agent has an assistant running a distant office. On April 6, he remembered she needs a 1099-MISC. The electronic filing deadline was March 31.

Sure, filing late means you'll be hit with a penalty. Not filing the 1099s at all means you are apt to lose the deduction entirely during the audit.

Remember, your business must file 1099-MISC forms to all unincorporated people who provided a service or rental space, plus all attorneys and medical services.

Recently, a tax pro came across a bizarre 1098-T tuition statement. There were two amounts in Box 5, scholarships or grants. One was a fellowship of $6,667. The other was tuition remission of about $8,800. However, the total tuition billed in Box 2 was only about $8,200.

How can a school reduce or waive $8,800 worth of tuition if the total bill was only $8,200? Barbara Allen, an enrolled agent in Topanga Canyon, Calif., said she often runs into problems with 1098-Ts. Allen claims that the universities often make errors. She has spent many hours pestering university offices to get the correct information. In this case, it's most likely the Box 2 is too low and doesn't include the tuition that was waived.

If your 1098-T seems odd to you, call your college and get better details before you end up with scholarship income that is in error.

Everyone's excited about the $8,000 first-time home-buyer credit this year. Practically every third question coming to TaxMama is about this credit. But a tax pro recently told me about an interesting twist. A client had a balance due on his 2008 tax return of $4,000. But he was in escrow to buy a house, with escrow closing next month. He was already approved for the loan, and there was no reason for the escrow not to close.

What to do in that situation? Rather than filing a 2008 tax return with a $4,000 balance due, put it on extension. Pay the $4,000 if you're really pessimistic and believe that some wild thing might come along to prevent the escrow from closing. Or you can be optimistic and put a zero balance due on the extension form, Form 4868.

Once escrow closes, file the tax return, claiming your $8,000 credit. The credit will more than absorb your balance due.

Remember, refunds come very quickly when you originally file your tax return, whether electronically or on paper, but they can take up to 12 weeks when you file an amended return.

There are three commonly overlooked state tax deductions or reductions.

Did you send money to your state last April, when you filed your extension (if you did)?

Did you make an additional payment to the state when you filed your actual return? That's deductible this year.

Did you pay your fourth quarter estimated tax payment in January 2009? You can't deduct that in 2008, but remember to enter the payment on your state return.

Also, are your mortgage insurance premiums qualified for a deduction? This is a relatively new deduction, said Roni Deutch, attorney and author of "The Tax Lady's Guide to Beating the IRS."

Your lender reports the total insurance premium paid in Box 4 of Form 1098. You may deduct premiums for mortgage insurance policies taken out starting January 1, 2007. Often, your lender requires you to prepay the premiums. You can't deduct the whole prepayment. You may only deduct 12 months' worth each year, and then you can write off the rest of the prepayment either over the life of the loan or 84 months. For more, read IRS Publication 936.

Also, Deutch said, there are many deductions buried in investment statements from your brokerages. One oft-overlooked deduction: The fees you pay. That information might not be on your Form 1099 package. If you know you pay fees, call your financial institution to ask, or look it up.

Maybe you also paid foreign taxes through your mutual funds or other investments. You may either use the taxes as a credit, directly reducing your taxes due, or take them as itemized deductions on Schedule A.

The form for the foreign tax credit, Form 1116, doesn't have to be attached to the return if the foreign taxes paid are from interest and dividends reported on 1099 statements and the total is under $300 for single filers ($600 for married couples filing jointly).

You may be surprised when you try to use all the foreign taxes you paid. There's an odd calculation on Form 1116 that picks up the proportion of foreign income to your total income. That may limit your total foreign tax credit. If you can't use all the taxes this year, don't worry. They will be carried over to the next year, or the following year when you have more foreign income.

The other surprising error is overlooking federal or state withholding on 1099-INTs or 1099-DIVs. Sometimes, when the institutions didn't get your W-9, or got hit by a notice from IRS or state, they take withholding from your investment income. Remember to give yourself credit for those taxes paid.

In general, you should review every line in your return and attachments. Better yet, once you've finished, set it all aside for two days to clear your mind. Look everything over with fresh eyes. Make sure each income and withholding entry is correct. All good?

Now go back to your Form 1040. Look at every line. If it's an empty line, see if you have something to put on it. Alimony? Self-employed health insurance? Educator's expenses? Student loan interest?

One last thing: This is your last chance to fund an IRA or Roth IRA for last year. If you qualify, that is. Don't forget to fund it before April 15. Remember to include the deduction on your tax return. And if you qualify, remember to take the retirement savings tax credit, too!

Eva Rosenberg is the founder of TaxMama.com and an enrolled agent licensed to represent taxpayers before the IRS. She is the author of the new e-book, "The 100% Home-Based Business Tax Solution." Reach her at taxwatch@gmail.com.

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Last-minute tax tips

Five tips to stretch the value of your refund

 Can't pay tax bill? You've got options

Charities adopt new strategies to cope

Follow this fund manager out the door

Did you file your taxes? If so, good for you.

If you're like most taxpayers, you're expecting to get a tax refund. You know what they say about not spending it all in one place.

Still, in some cases throwing the whole stash of cash at precisely one thing is a good plan. For instance, you could use it to pay off credit-card debt or to take care of a long-delayed home maintenance project. Check out Jennifer Openshaw's 15-Minute Tip today for some ideas on how to make that money go further in these tight economic times.

For those who haven't yet filed, like me, welcome to the crunch-time club. Now's the time to focus on ways to get the biggest tax payback possible -- or, more precisely, how to lower your tax bill. Check our story today on last-minute tax tips. It includes a few strategies on making sure you don't miss deductions and credits; plus, see our video report on what to do if you're worried about being able to foot the bill.

But if you're not going to finish your return by April 15, then by all means file an extension. You're still on the hook for paying your entire bill that same day. If you can't figure out what you owe by the due date, then make your very best guess and send something. If it's not enough, you'll likely owe penalties and taxes on the balance, but sending something is a whole lot better than sending nothing.

For my part, I'm slated for a small refund this year, so Form 4868 -- affectionately known as the "automatic extension of time to file" -- watch out 'cause here I come ...

-- Andrea Coombes, assistant Personal Finance editor

We're getting down to the wire, and millions of people are scrambling to put the finishing touches on their tax return. Will you make it? If not, last week we talked about how to buy more time. This week: Tips to help you finish your return. See TaxWatch.

So you're hopefully about to get a tax refund and you're probably thinking, "What's a couple thousand bucks going to get me?" And that's if you get the typical tax refund. The good news is that Joe (and Jane) the Plumber will get back an average $2,800 tax refund, a $400 increase from $2,400 last year. But when you see that so many of your friends and family are losing jobs, you start to think, "Geez, can this even help me much?" See Jennifer Openshaw's The 15-Minute Tip.

If you're not able to pay your tax bill, there are plenty of ways to work with the IRS, says Michael Schaffer, senior tax manager with accounting firm CBIZ MHM. MarketWatch's Andrea Coombes reports. Watch Video Report.

If you think that the recession is clobbering for-profit enterprises, just consider the tough times that some not-for-profit enterprises are encountering. If they hope to top last year's records, America's philanthropies don't stand a prayer. See Marshall Loeb.

Question: I have a two-year-old, 15-year cash-out refi in Texas. It's now considered a home equity loan, at 6.5%. I am thinking that it does not make sense for me to refinance again at 5% to save $170 per month because I would have to pay two additional years on the back end. The savings is net of borrowing 100% of the $5,000 in closing costs, so there will be no up-front cash out of pocket. See Realty Q&A.

When an investment company fires a fund manager, the typical pitch to shareholders is that they should stick around because better days must be ahead. But if management gave up on a manager it trusted -- and who lost the job presumably due to lagging performance -- it may well be time for shareholders to head for the exits, too, particularly if they can find another fund that appears to be better suited for the job. See Chuck Jaffe's Stupid Investment of the Week.

His Holiness probably won't mention it from the balcony on Sunday, so I will: Sin has been a remarkably poor investment over the past year. And Catholic values, by at least one financial measure, have done well. See Brett Arends.

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More people likely to get health-cost tax break

Plan for your first-time home-buyer credit

Last-minute tax tips

Five ways to stretch your refund

 Can't pay your tax bill?

The thing about taxes is, the rules change. They change early and often (and they even change late sometimes, thanks to Congress).

Then, too, taxpayers' situations change. People buy houses or have children, or less happily, they face tough times -- maybe losing a job or getting sick.

All of these changes make it all the more important to take time to fill out your tax return carefully. For instance, if your income in 2008 was less than the previous year, there's a good chance your health-care costs constitute a bigger portion of your adjusted gross income. That makes it more likely that you'll qualify for the medical-expense deduction. And have you checked the list of health-care costs that qualify for the deduction? It's long and getting longer as the IRS continues to add to it.

Or maybe you're in the market to buy your first home. Even if you haven't bought one yet, but make the purchase between now and Dec. 1, you may qualify for an $8,000 refundable tax credit on your 2008 return. There's a lot of different ways to spend $8,000.

It pays to slow down when doing your return, and to check it twice. Even if you already filed earlier this year, consider pulling out your return now and assessing whether it makes sense to amend it. After all, it could mean a little more cash in the bank, and we could all use some more of that these days.

-- Andrea Coombes, assistant Personal Finance editor

Most people skip the tax deduction for medical expenses because the threshold to qualify for it is so steep, but if you or your spouse lost a job or otherwise saw your income reduced in 2008, it might be worth digging out those health-care bills. See TaxWatch.

We're getting down to the wire, and millions of people are scrambling to put the finishing touches on their tax return. Will you make it? If not, last week we talked about how to buy more time. This week: Tips to help you finish your return. See TaxWatch.

So you're hopefully about to get a tax refund and you're probably thinking, "What's a couple thousand bucks going to get me?" And that's if you get the typical tax refund. The good news is that Joe (and Jane) the Plumber will get back an average $2,800 tax refund, a $400 increase from $2,400 last year. See Jennifer Openshaw's The 15-Minute Tip.

If you're not able to pay your tax bill, there are plenty of ways to work with the IRS, says Michael Schaffer, senior tax manager with accounting firm CBIZ MHM. MarketWatch's Andrea Coombes reports. Watch Video Report.

Many of this year's first-time home buyers will get an extra perk: a tax credit of up to $8,000 that can be claimed on their 2008 taxes. The option to claim the credit now instead of next year puts cash in the hands of eligible buyers soon after they've committed to one of the biggest purchases they'll ever make. See TaxWatch.

Is there a new baby in the house? That's good news in many ways, especially at tax time when the chip off the old block will help you chip away at your tax bill. See story on Bankrate.com.

San Francisco residents top the list when it comes to procrastinating on taxes. The City by the Bay is No. 1 on TurboTax's eighth annual list of Top 10 procrastinating cities, based on how many people used TurboTax's online service to file on the last two days of the filing season in April 2008. See TaxWatch.

More than half of taxpayers -- 66% -- are afraid they may overlook tax breaks or make mistakes that could bring fines or penalties, according to CCH, a Riverwoods, Ill., tax publisher and unit of Wolters Kluwer. See TaxWatch.

Bob Meighan, CPA and vice president of TurboTax, discusses last-minute tax tips and the most-asked question this year: What about last year's tax rebate? Kelsey Hubbard reports. Watch Video Report.

The U.S. Justice Department and the Internal Revenue Service are intensifying efforts to nab more Americans concealing assets and taxable income in secret offshore bank accounts. But interviews with more than a dozen lawyers representing clients with accounts in Switzerland, Liechtenstein and other well-known tax havens indicate that many wealthy people may be reluctant to cooperate. See Tom Herman's Tax Report.

President Barack Obama's plans to keep the estate tax in place are running into some resistance in Congress, where lawmakers may prefer a plan less burdensome on wealthy families. See full story.

After people endure a disaster, taxes are probably the last thing on their minds. But tax laws do offer some help for loss victims. And victims of a presidentially declared disaster could use their tax filing to obtain much-needed cash. See story on Bankrate.com.

A reader writes: My brother-in-law started a business with backing from a large corporation. He offered his siblings the chance to invest in the company. He promised that whatever was invested would generate profits if the company did well. Two years later, it failed. My wife and I gave him $15,000 knowing that it was like any other investment. Is there any way to claim this loss? See story on Bankrate.com.

When it comes to individual retirement accounts, you have several choices. All offer some tax savings. The big difference is when, exactly, you get those savings. See story on Bankrate.com.

Retirement accounts get added attention during tax-filing season. That's because you must put money in an individual retirement account no later than the April return-filing deadline to get credit for the prior year. It doesn't matter whether your contribution is to a traditional IRA or a Roth IRA. See story on Bankrate.com.

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Many financial advisers and do-it-yourself investors feel like they have taken a double whammy: Not only have they been hit by the sliding market, but also the stock pickers who run many of their mutual funds woefully underperformed the broader market. See Jonathan Burton's Life Savings.

As rules go, it's a simple one: There's risk and there's return. Unfortunately, human nature being what it is, people tend to focus on one side of the equation to the exclusion of the other. Prior to October, many retirees and would-be retirees -- despite warnings from countless pundits, academicians and the like -- focused mostly, if not solely, on return. See Robert Powell.

Jumbo mortgages became more expensive and harder to come by as the nation's credit crisis deepened. That might be starting to change. See full story.

With the end of the recession nowhere in sight, starting out at an inexpensive community college or state school and transferring to a more prestigious but costlier institution after a year or two takes on new appeal as a way to save thousands of dollars. See full story.

Nobody gets nervous when the stock market makes a major gain. You don't hear experts and talking heads complaining about a 400-point jump and calling the market excessively volatile. No, that only happens when a big move goes to the downside. See Chuck Jaffe.

We're getting down to the wire, and millions of people are scrambling to put the finishing touches on their tax return. Will you make it? If not, last week we talked about how to buy more time. This week: Tips to help you finish your return. See TaxWatch.

San Francisco residents top the list when it comes to procrastinating on taxes. The City by the Bay is No. 1 on TurboTax's eighth annual list of Top 10 procrastinating cities, based on how many people used TurboTax's online service to file on the last two days of the filing season in April 2008. See TaxWatch.

Emerging markets are on fire, posting double-digit gains in March and attracting huge amounts of new investment to these volatile regions as they lead the global rally in stocks this spring. But investors in emerging-markets mutual funds and exchange-traded funds may soon face a shakeup just as they're recovering from one of the roughest periods ever: major changes to the benchmark index that is gospel for many fund managers and ETFs. See Weekend Investor.

While everyone has their eyes on the bailout and what the Obama administration can do to kick-start the economy, there's been a lot of behind-the-scenes legislative action that may have long-term benefits for taxpayers and investors. Here are some of the current legislative scraps that have gotten little media attention, but which ordinary folks might want to be aware of. See Chuck Jaffe.

If you think that the recession is clobbering for-profit enterprises, just consider the tough times that some not-for-profit enterprises are encountering. If they hope to top last year's records, America's philanthropies don't stand a prayer. See Marshall Loeb.

See the week's Top 10 news and analysis stories.

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Take heart -- your chances of hearing from the IRS aren't all that high. In fiscal year 2008, the IRS audited 1% of the more than 137 million returns filed the year before. For taxpayers making less than $200,000, the rate drops to 0.95%.

Many audits are "correspondence" audits. Nobody likes to get a letter from the IRS, but it's probably less nerve-wracking than opening your door to a tax agent. More than 1 million of the almost 1.4 million audits last year were correspondence audits, while about 310,000 were field audits. See the IRS enforcement statistics (PDF).

The IRS has a few different audit methods. First, every return filed is scored by its "discriminant function" system, or DIF, said Robert P. Brennan, a former IRS agent, now an accounting instructor at Holy Family University in Philadelphia and a consultant with accounting firm CBIZ MHM.

The score is based on the IRS's study of a sample set of thousands of returns. From that study, the IRS determines what is an average and valid range for, say, the amount of charitable-contribution deductions claimed by a person earning $100,000 a year. Then, a taxpayer with that income who claims a much higher deduction will get a high DIF score, and is thus likelier to get audited.

That system only captures unusually high deductions; it can't find someone who is underreporting income. So the IRS also organizes projects, Brennan said, to examine certain types of businesses.

The IRS "is very concerned about the underground economy," he said, adding that the IRS estimates about $290 billion in income goes unreported each year. As a result, in addition to high DIF scores, the tax agency focuses a keen eye on cash-based businesses, such as restaurants, gas stations and hair salons, Brennan said.

For small-business owners who receive Forms 1099, this is less of an issue, as the IRS can check what the taxpayer reports against the Form 1099 filed by the business that paid the money. In that situation, "the IRS has a record of all of your income earnings," Brennan said.

The project-based audits are focused "on the cash guy," he said. "The cleaner who does your clothing, the guy who comes in to hang your lamp or do a back porch."

Keep in mind that just because a deduction, or your business income, may garner the IRS's attention doesn't mean it's wrong.

"If they're legitimate deductions, why not take them?" said Francois Hechinger, a San Francisco-based tax partner with BDO Seidman. "The deal is to be able to substantiate them if you're audited, so keep your receipts."

For instance, given that millions of taxpayers lost their jobs in 2008 -- many toward the end of the year and months after they made their usual charitable donations -- more returns are likely to show low income yet high amounts of charitable-contribution deductions.

"It may be a trigger," Hechinger said. "If they see these big deductions, they say how can you afford deductions with the income you're making?" (It's possible the IRS may take special care when auditing unemployed taxpayers. See TaxWatch on IRS promises to help struggling taxpayers during financial crisis.)

But even if it increases your chances of hearing from the IRS, Hechinger said, take the deductions for which you're eligible.

Here are some more audit red flags:

"That's always a popular form to audit," Brennan said. "For a lot of people, that's your classic bumping up of your expenses that you really don't have," he said. Hechinger agreed. "When things are tough, people try to find as many deductions as they can," he said. "I don't tell my clients not to report this, I tell my clients be sure you can substantiate this."

The IRS "is always interested in your office in the home," Brennan said. "Not many people qualify for an office in the home, but many people claim it."

The tax agency is "very interested this year in foreign bank accounts," Brennan said. "They are trying to get foreign banks to disclose information of account holders. They will then take account-holder information, pull up that return and see if they disclosed it." See story on IRS easing penalties to entice foreign-account owners to come clean.

"If a person is working full time and then [the IRS] sees a Schedule C with a loss" that may attract attention, Hechinger said. "Some people have a vineyard or horse racing activity, they will seriously question that," he said. "The IRS might say that's a hobby."

Business owners who carry-back a net operating loss may well find increased IRS scrutiny, Hechinger said. It's likely, he said, the IRS may think "that because of the economy the way it is, people may be more aggressive. They want people to substantiate that loss carry-back," he said. But "if it's legitimate you've got to claim it."

In California, Hechinger said, the Franchise Tax Board looks closely at whether taxpayers who sold a home are correctly taking the capital-gains exclusion. Even with the downturn in the housing market, people who bought many years ago in pricey California may find they still had a substantial gain when selling their home in 2008. Any home improvements over the years would increase their basis in the home, and make it likelier that their gain falls within the capital-gains exclusion. But "make sure you can substantiate the basis," Hechinger said. "You know you spent the money on improving that house," he said, "but unfortunately people toss records over time. You have to find ways to substantiate it."

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Indeed, fares are so cut-rate right now that it could cost more to fly two bags from Chicago to Minneapolis than to transport one person.

At $88, that fare calculates roughly to a dirt-cheap 3.3 cents per air mile between Chicago O'Hare and Minneapolis-St. Paul International. Driving -- on land miles, of which there are more -- would cost about 10 cents a mile if gasoline averaged about $2 a gallon.

"These are really wild and crazy prices," said Tom Parsons, chief executive of Bestfares.com, a discount travel site. "When you think that airfares can't get any cheaper, even for no-advance-purchase fares, they do."

Earlier this month, JetBlue offered a one-day-only sale on flights to New York from San Francisco or Los Angeles for a jaw-dropping $14 one way, before taxes. That's far less than cab fare from JFK airport into Manhattan.

A last-minute trip to New York from the West Coast for what amounted to a $49 round-trip price including taxes was unheard of only a few months ago, much less a couple of years ago.

"The deals that we're seeing are pretty incredible right now," said Joel Grus, a "fareologist" with Live Search Farecast, a travel search site. "Some of them that I see make me want to say I'm going on vacation next week."

Unfortunately, a growing number of consumers don't have that option. About 5.1 million jobs have been lost since the start of the recession and last month alone some 663,000 people found themselves jobless as the unemployment rate soared to 8.5%. The bottom line, for the airlines: Not enough people are flying for business or pleasure.

The Air Transport Association, an industry trade group, said revenues from passenger flights are on a path of sharp decline. In February, the latest numbers available, passenger revenues dropped 19% compared with the same period a year ago. That was the fourth straight month the industry saw a year-over-year drop.

Domestic and international airfares have been decreasing for many months, but the bargain-basement prices available for travel in late April, May and even into summer -- when prices usually are at their highest -- are a sure sign of desperation for air carriers.

"The airlines are pushing people to travel now and the only way they can get a customer to travel is if [the customer] sees excellent deals," said Altan Arsan, owner of Artun Travel in Chicago.

Airfares are down an average of 9% from this time last year on domestic flights and 19% for international flights, according to the travel site Farecast. But the discounts go even deeper on selected flights.

A flight from San Francisco to Miami anytime from April 22 to April 29 was available last week for $155, according to Farecast. A year ago, that would have cost 45% more at $283.

Overall, flights to Miami are lower by 28% since this time last year; fares to Las Vegas have fallen 12% year over year.

"The problem the airlines are having right now is that everyone is booking closer to the date of departure," Parsons said. People "are afraid they won't have a job to pay for a trip and they're being very cautious about booking things too far out."

It used to be that a trip to Europe, for example, would be considerably less if the flights were booked well in advance of the trip, preferably five to six months ahead.

Not anymore. If you bought a trip from Boston to Zurich on Jan. 5, for travel in June, July or August, it would have cost $1,297, according to Parsons. That same ticket purchased on April 7 could be had for $572.

Consumers holding the costlier tickets, Parsons said, should consider rebooking the same flight, eating the $250 change fee and getting a travel voucher ranging from $375 to $473 a ticket, depending on the flights and exact dates. "That's like putting money back in the bank," he says.

What about fall and early winter travel? Should consumers jump on these cheap fares now? "It's certainly possible the deals will get better, but if the economy stays weak the carriers will go ahead and cut capacity and the fares will start moving in the other direction," Farecast's Grus said.

But Parsons doesn't see it that way. "Don't touch fares for November and beyond," he said, adding that it's unlikely capacity cuts could happen that quickly. "I don't see where this economic climate is going to turn around that fast, and those seats need to be sold."

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Replace lagging funds with ETFs

New risks for emerging markets investors

Hold the line on your investment strategy

Now that the stock market is coming back, mutual-fund managers can make a stronger case that they are earning their keep. That doesn't mean you should keep them.

Active management has its place, and many investors prefer a knowledgeable hand at the helm of their investment portfolio. But giving your money to an actively run fund is a choice, not an inside track to outperforming the market.

In fact, most managers don't beat their benchmark index in a given year. And it's a myth that buying an index-tracking mutual fund or exchange-traded fund means settling for average. It's also not true that active managers will move deftly to protect you when stocks slide -- one look at many stock funds' dismal one-year records will put that misguided rule to rest.

Here's the reality: Investing success, or lack of it, comes down to asset allocation -- your mix of stocks, bonds, cash, real estate, pork bellies or whatever you fancy in the pot -- and how much you pay for it.

Index funds are cheaper, and that gives them an edge. Investment costs are crucial, because you only pocket what you keep. Stock-fund managers are disadvantaged out of the gate, since they must cover their portfolio's expenses before earning a positive return. But the truth is that if you like active management, great; if you're fed up with active managers and are convinced that index funds or ETFs are the way to go, that's fine too.

Just keep a core blend of stocks and bonds, and then a bit of everything else, because you never know what's going to work, or when. Last year was a failure for U.S.- and international stock funds -- active or indexed -- but bond-fund holders were rewarded. So were shareholders of bear-market funds, which are always worthwhile hedges.

So don't give up on portfolio diversification, because the only sure thing about investing this year is that it will be different from the rest.

-- Jonathan Burton, assistant personal finance editor

For those small investors who are vowing to give up trying to beat the market, that can mean turning to exchange-traded funds, investment vehicles that track designated benchmark indexes at some of the lowest investing costs around.. See Life Savings.

Emerging markets are on fire, posting double-digit gains in March and attracting huge amounts of new investment to these volatile regions as they lead the global rally in stocks this spring. But investors in emerging-markets mutual funds and exchange-traded funds may soon face a shakeup just as they're recovering from one of the roughest periods ever. See full story.

Among the more painful lessons for investors over the past year is that their mutual funds were riskier than expected. In such an environment, executives at fund-giant American Century Investments believe that their attention to risk control has been paying off. See FundWatch.

As the public fumes over multimillion dollar salaries for corporate executives, attention has turned to the role mutual funds play in approving the big payouts. Often the largest shareholders in a company, a fund's vote can play an important part in determining whether pay plans are passed. See full story.

Nobody gets nervous when the stock market makes a major gain. You don't hear experts and talking heads complaining about a 400-point jump and calling the market excessively volatile. No, that only happens when a big move goes to the downside. See Chuck Jaffe.

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