Be Financially Secure Before Investing
March 13th, 2009 — Investing
Finance Questions The Experts Won’t Answer
March 7th, 2009 — Bonds, Cash, Economic crisis, Investing, Money market, Retirement
Here are just a few questions you won’t see asked or answered on the so-called money shows on television:
1. What if this is a depression? What if it’s not a short term bear market? What happens to my retirement money? Where should I put my money in a depression? Do you have any idea? (Remember – It took them a year to call a recession – only 12 months late… but we knew it, common sense told us.)
2. If 12-15% of Americans are out of a job (both those on unemploymnet and those who have run out of unemployment benefits and have just stopped looking), an unspecified percentage have part-time work that need full time work, and those of us with a job have no idea whether we might lose or keep the one we have, and none of us want to spend our money and we can’t get any credit, and even if we did, we probably won’t get our hand caught in that tiger trap again, tell me where will the profits come from so that big companies will make money, and start a new “bull” market? Or even an “up” market?
3. If you can move your money right now into an investment vehicle that will at least earn 2%, 3% or 4%, why shouldn’t I do that while I wait for the market to get better? (Don’t just tell me not to do it, tell me WHY. And then tell me why it’s OK to lose another 20% while I wait for the market to turn. And if you tell me again about what the market has earned “historically”, I will kick your ass. I am not stupid, I have a calculator…)
4. If you lose 20% YTD in your investment account, your new lower balance wil have to return 25% to get back to square 1. (For example: a loss of 20% off of $5,000 leaves yo with $4,000. But to make back $1000 on $4,000 is a jump of 25%.) So when they tell you to wait for the market to “come back” – how far will it have to increase to just get back to where you started?
5. What if the markets stay depressed for another ten years? And there is no climb like we’ve seen the past 30 years? We have already lost enough in the market to erase teh last 12 years of gains. So, should you believe them when they tell you to take a 20 year time horizon?
6. If you take your money out of the market, put your money in CDs or inflation adjusted bonds, or government bonds, or other more reliable vehicles, the huge Wall Street behemoth – financial advisors, mutual fund companies, television talk show hosts – they don’t make any money. Need I say more.
What’s The Best Way To Invest Money Now?
March 4th, 2009 — 401k rollover, Cash, Economic crisis, ETFs, Investing, Money market, Mutual Funds, Retirement, Savings, Self Directed IRA, stocks
I can’t believe I’m still hearing it: Someone on CNBC just this morning said, Oh, don’t take your money out now, you’ve lost too much!! Yeah, great, wait for Dow 5000. There are still plenty of financial experts saying that’s possible before it’s all over.
Guess what? The tee vee “experts” were saying that in November ’08 too, so if you listened - to CNN or CNBC or FOX or XYZ - tell me, where are you now?
I’ll say it again: in a volatile market, why not get out of mutual funds, at least with part of your money, and put it somewhere you can make a little, and wait for things to turn? I would rather make 2% in a savings account for a year than lose another 10% in a stock fund.
Some ideas:
- For investment accounts: Get out of the dang index funds – they include too many companies that are at risk. If you aren’t willing to learn to invest stock so that you can confidently buy individual stocks or ETFs, then put your money in a CD. If your financial adviser is still losing you money, don’t be afraid to move your account. Anyone advising you to stay put is going to lose you more money. IMHO.
- For a retirement account: If you get a company match, meet it with your 401(K) contributions, but NO MORE. Then take that money and invest in insured money market funds or “inflation fighter” funds – avoid the index funds! They are for later, probably not this year, but maybe next, not until you are confident the market is again moving in the right direction.
- If you have a 401(K) right now, you are likely down 30-40%. But don’t take it all out of your retirement account – you’ll get slammed yet again with fees and penalties. Reallocate within your 401k to whatever funds are closest to cash, Treasuries or A rated bonds – ask your plan administrator. (NOTE: This is not 100% safe either however in a credit freeze.)
- If you lose or leave your job, immediatly switch your retirement account to a 401k rollover – as well as funds you haven’t rolled over from previous jobs – roll them into self directed IRA accounts, using a discount brokerage. DO NOT ROLL OVER TO YOUR NEW COMPANY – or your investment options will be severely limited to mostly stock index funds! In a self-directed fund, you can invest in ETFs for commodities, metals, shorts, and a wide variety of other funds. We like Scottrade as well as TradeKing for to discount brokers. (Not affiliate links! We just like them!)
- For non investment money, get your hands on as much cash as you can, and put it into an insured money market fund. Hold off doing anything until you (1) spend time to learn to invest stock so that “what to do” is not a crap shoot, (2) understand why your 401K was so risky to begin with, and (3) find good ideas about where to look for solid returns, including experts who have a track record you can believe.
Now you’ll have to start to learn to invest money. There are places to make money, maybe not in a 401k but if you also open a Roth IRA or other account, you can make up for that outside your job. And if you get laid off, you can roll the money into your self-directed account.
There are places to be making money now, but you have to feel comfortable you know what you’re doing, and be comfortable with a degree of risk that we haven’t been trained to accept. But the rewards in this market, and for the next few years, will only come with more risks. If you aren’t comfortable with that, then you need to stay safe in cash or similar vehicles.
From mutual funds into money markets
October 14th, 2008 — Cash, Economic crisis, Investing, Retirement, Savings
What to make of short term market swings? Don’t let them fool you:
US To Face Poor Economy for 10-15 Years: Robertson
Companies can only prosper when there are customers, and if customers have no cash and their credit is taken away, they can’t buy. Where do corporate profits and growth come from if there are no buyers? (Other than the illusory “productivity increases” – which does not equal “profitability”.)
A friend asked me yesterday what to do: In her retirement account, she’s lost all of her gains over the past 5 years plus lost 15% of her principal (not including fees). She asked, should she sell all her funds and invest only in money market funds?
My question to her: Do you really think the market will perform well enough in the next 2-3 years to not only “win” your 15% back but earn more for you? Do you want to learn enough about stocks and investing to take control of your own money to make that happen, and not to just take your broker’s word about “asset allocation” and what to do with your investment? (It didn’t help that her accounts are with a big-name brokerage making ridiculous fees for buying 6 funds that essentially trade all the same stocks…)
Both of her answers were no. Given that, she decided.
She is selling her funds, and putting them into money market accounts for now, until she can learn more about buying bonds and CDs inside her retirement account, or, until it looks like the market is actually rebounding somehow. She HATES the market, HATES stocks. Not everyone should be in mutual funds in their 401(K). The myths of defined benefit plans is hurting a lot of people. She got in because people told her that “historically the stock market returns 11%” or pick your favorite number. That historical number has NOTHING to do with what anyone can or will earn. It was never a sure thing, as so many are finding out right now.
Remember: I know nothing about investing, I’m not a professional, and have no idea what anyone should do with their money. Ever.
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