Investors and savers, reeling from the market meltdown, bank closures and rapidly shrinking nest eggs, all have the same question: what should I do with my money?
The Orange County Register talked to four money managers —Linda Barlow, a certified financial planner in Santa Ana,; Victoria Collins, a certified financial planner at The Keller Group Investment Management in Irvine; Tom Lydon, an exchange-traded funds expert and editor of ETF Trends in Newport Beach, and Mark Wilson, a certified financial planner at The Tarbox Group in Newport Beach — to get their advice on some of the most common questions consumers area asking:
Q: I invest regularly in my employer’s 401(k) plan and put the bulk of my money into stock funds. Should I stick with the program?
Linda Barlow
Linda Barlow: Absolutely keep contributing because (with the down market) you are buying shares cheaper. It’s especially important to contribute at least up to your company match. Then, if you owe a lot on credit cards that are at high interest rates, you may want to pay down some debt. And make sure not all your 401(k) is in your company’s stock. Just think — your paycheck comes from your employer, your health insurance is with your employer, your pension is with your employer. You’d don’t want to put too much in your company’s control. Remember Enron. Diversify.
Mark Wilson
Mark Wilson: Absolutely, but revisit your asset allocation (among stocks, fixed income) and make sure it’s appropriate. You want to be buying low. This is what cost price averaging is all about. My grandfather used to say, “You make all your money during a bad market — you just don’t know it at the time.”
Victoria Collins: This is probably more like a 301(k) now! Answer depends on your
Victoria Collins
age, stage. If you will withdraw from it within 7-8 years, 60% stocks and 40% bonds is about right. If it’s longer until you use your 401(k) then stay the course in stock funds.
Tom Lydon: Don’t stop contributing to your 401(k), even in volatile markets, it never hurts to contribute what you can. The same strategy for stocks and mutual funds can
Tom Lydon
be applied to your 401(k) account too. Also, check to see if your 401(k) provider offers ETFs in the plan. They’re much lower-cost on average and more transparent than mutual funds. The more people push for them to be included in retirement plans, the sooner they will become a standard feature.
Q. Should I take out some cash from my bank and put it in a safety deposit box like my folks who lived through the Depression do?
Mark Wilson: Let’s look at what happened to (now-defunct) IndyMac and WaMu. We had clients in IndyMac. The FDIC came in Friday and on Monday you could make any transaction that needed to be done. Just make sure your money is in an institution protected by FDIC and within FDIC limits (currently $100,000 or less for your savings, money market and checking accounts combined, $200,000 for joint accounts and $250,000 for an IRA. Editor’s note: the bailout legislation proposes raising the basic coverage to $250,000 for an individual). If it’s not in an FDIC institution, I wouldn’t be sleeping.
Tom Lydon: We don’t recommend (putting money in a safety deposit box) — if your bank is FDIC-insured, your accounts are insured up to $100,000 per depositor ($250,000 for retirement accounts). If you have less than that, you are considered “safe.” If you have more than that, a common thing to do is to spread your money over several FDIC-insured banks.
Victoria Collins: (Keeping cash in a safety deposit box) is an OK idea from a psychological perspective but poor from a financial one. The “safety’ — read “liquidity” — of cash actually gives you negative returns (after inflation). If compounded over time you’ll have worse returns than money markets and other short-term investments which are better for the cash cushion you need. Even 6-month Treasuries with a yield of 1.58% (as of 9/29/08) actually have negative returns (after inflation). Consider a short-term, triple-rated muni bond portfolio. It’s almost as safe, is liquid, and has a higher after tax yields for that cash cushion.
Linda Barlow: As long as it’s in a FDIC-insured institution, it’s safe in your account — maybe even safer than a safety deposit box because you have records to prove your money was in a bank account. I had six people in IndyMac and they got every penny of their money back with interest. Now I’m getting calls from people concerned about money market accounts with brokers (not banks). Those are insured by SIPC (government insurance for securities accounts), which is just as good (as FDIC insurance).
Get advice on whether you should be buying or selling stocks now and what you should do with if your facing retirement in “Wall Street meltdown: What should I do with my money? Part I.“
Bailout news …
- O.C. reacts to House passage of bailout
- Final bailout vote 263-171
- Bailout jitters reaching into state and county coffers
- Wells Fargo buying Wachovia
- Sales of O.C. businesses hits 2-year low
- Yikes! What should I do with my money?
- With the market mess, is my money safe at the bank?
- O.C. reaction to Senate bailout vote
- Chapman’s Adibi sees bailout as necessary evil
- Congress leaders optimistic on revived bailout
- Tight credit, financial chaos slam auto sales
- Gov’t launches mortgage aid program
- Senate votes tonight on revised bailout. Agree with changes?
- Did political donations swing bailout vote?
- Are four big lenders enough?
- WaMu’s odd subprime timing
- Poll respondents tell Congress hands off on bailout
- O.C. Realtors say bailout key to restoring housing market
Business news you may have missed…
Nightmares on Wall Street. Save your money for raining days as American way of life. If it is not necessary, do not buy it. If your car is not broken, do not buy a new one. Your computers are working just fine, no need to spend money on new gadgets. You will save our Earth and not to fill up landfill with toxic.
It is going to be a very tough years ahead. Nightmare before Christmas 2008. Save your cashes. Cut your credit to minimum. If you can not handle the heat, get out now.
I never get why people are asking the same “experts” that got us into this mess. It is really simple why our economy is such a big mess and it is the PRIVATE bank called the Federal Reserve that has NO oversight from the US Government, can raise or lower interest rates at will and print as much money as they want to which causes the value of the dollars in you bank account or pocket to lose some value. Gas is not getting more expensive, your money is not worth as much. We are going to enter a period of hyper-deflation soon.
Do some research on your own, we did not have a Federal Reserve or income tax until 1913 and ironically they passed the same year? The Grace Commission report that President Reagan had done states:
Resistance to additional income taxes would be even more widespread if people were aware that:
One-third of all their taxes are consumed by waste and inefficiency in the Federal Government as we identified in our survey.
Another one-third of all their taxes escapes collection from others as the underground economy blossoms in direct proportion to tax increases and places even more pressure on law abiding taxpayers, promoting still more underground economy-a vicious cycle that must be broken.
With two-thirds of everyone’s personal income taxes wasted or not collected, 100 percent of what is collected is absorbed solely by interest on the Federal debt and by Federal Government contributions to transfer payments. In other words, all individual income tax revenues are gone before one nickel is spent on the services which taxpayers expect from their Government.
We (United States) as per our Constitution used to make our own money and if you look at any bill from before 1971, it will state “Redeemable in Silver”, now not so much. It is backed by DEBT. It is nothing more than a ponzi scheme that we have used to take down 3rd world and up and coming nations, go read about Argentina’s collapse and tell me if you see any similarities. You paper money is not going to be worth too much within the next year, buy things that are worth something like Gold, silver, food , water, etc. What good is the money going to do you when it does not buy anything or feed your family? It is time we woke up and realized what our founder’s tried to warn us of. This was not about the money but the control that was given to Secretary Paulson and the Fed.
“If the American people ever allow private banks to control the issue of their money, first by inflation and then by
deflation, the banks and corporations that will grow up around them (around the banks), will deprive the people of
their property until their children will wake up homeless on the continent their fathers conquered.” - Thomas
Jefferson
I dumped a couple grand when the market tanked 777 points. And again, I dumped another grand as the bailout didn’t expect to do much to the stock market. I suspect next week there might a positive reaction after having the weekend to mull over it. But if you’re young like me, this was a HUGE opportunity to invest.
yank every dime at of the bank and keep it at home in a safe.
I never get why people are asking the same “experts” that got us into this mess. It is really simple why our economy is such a big mess and it is the PRIVATE bank called the Federal Reserve that has NO oversight from the US Government, can raise or lower interest rates at will and print as much money as they want to which causes the value of the dollars in you bank account or pocket to lose some value. Gas is not getting more expensive, your money is not worth as much. We are going to enter a period of hyper-deflation soon.
Do some research on your own, we did not have a Federal Reserve or income tax until 1913 and ironically they passed the same year? The Grace Commission report that President Reagan had done states:
Resistance to additional income taxes would be even more widespread if people were aware that:
One-third of all their taxes are consumed by waste and inefficiency in the Federal Government as we identified in our survey.
Another one-third of all their taxes escapes collection from others as the underground economy blossoms in direct proportion to tax increases and places even more pressure on law abiding taxpayers, promoting still more underground economy-a vicious cycle that must be broken.
With two-thirds of everyone’s personal income taxes wasted or not collected, 100 percent of what is collected is absorbed solely by interest on the Federal debt and by Federal Government contributions to transfer payments. In other words, all individual income tax revenues are gone before one nickel is spent on the services which taxpayers expect from their Government.
We (United States) as per our Constitution used to make our own money and if you look at any bill from before 1971, it will state “Redeemable in Silver”, now not so much. It is backed by DEBT. It is nothing more than a ponzi scheme that we have used to take down 3rd world and up and coming nations, go read about Argentina’s collapse and tell me if you see any similarities. You paper money is not going to be worth too much within the next year, buy things that are worth something like Gold, silver, food , water, etc. What good is the money going to do you when it does not buy anything or feed your family? It is time we woke up and realized what our founder’s tried to warn us of. This was not about the money but the control that was given to Secretary Paulson and the Fed.
“If the American people ever allow private banks to control the issue of their money, first by inflation and then by
deflation, the banks and corporations that will grow up around them (around the banks), will deprive the people of
their property until their children will wake up homeless on the continent their fathers conquered.” - Thomas
Jefferson