Best investing moves to make in 2008

Thinking about investing in the new year?  Bankrate.com lists the following to try and make the best of what could be a scary investing year.

 

• High yield -- don't settle for less.
• Offset the falling dollar's effect on your retirement.
• Don't be afraid of foreign investments.
• Diversification and a long-term approach -- ho hum, but smart.
• See a financial adviser.
• Stuff your retirement plan.

 

More at Bankrate.

9 Great Reasons to Own Funds

Mutual funds are the best way to diversify, buy stock in small and large firms, and also get the knowledge of the fund manager for a price.

1. Cash in on big returns: Over time, stocks of big companies have made about 10% per year, on average, and stocks of smaller companies, about 13% a year. Compare that with the sub-5% return from a bank account or even short-term Treasury bills, and funds that invest in stocks and bonds blow away the competition. …


2. Hire top-notch help: When you invest in a mutual fund, you hire professionals. These pros don't dabble in stock picking on evenings and weekends; they do it full-time. …


3. Diversify for cheap: Managing a big portfolio of individual stocks and bonds is expensive, and trading costs can quickly eat up your profits. By comparison, funds are cheap. …


4. Spread your wealth: Dividing your money among different types of investments is called asset allocation. Studies have shown that investing in different types of assets is even more important to your wealth than the specific investments you own. …


5. Start small: Don't have a lot of cash to start your nest egg? Several fund families, including Ariel Funds and T. Rowe Price, let you begin investing in their funds for only 50 bucks a month, if you contribute monthly. …


6. Expand your horizons: With mutual funds, you can venture outside your realm of expertise to make money. …


7. Ease yourself in: A technique known as "dollar-cost averaging" means that you invest small amounts periodically -- say, once a month or once a quarter -- instead of investing a lump sum. …


8. Make a quick getaway: When you need your money, you can sell mutual fund shares for free any day the market is open. …


9. Delegate your portfolio: Even a good fund portfolio needs to be tweaked from time to time. If you don't want to bother, target retirement funds will do the tweaking for you. …

Read complete article at Kiplinger.com: 9 Great Reasons to Own Funds

25 Rules to Grow Rich By

Money.com lists 25 basic things you should and shouldn’t do, if you want to be ‘rich’. How many of these are you following?

1. For return on investment, the best home renovation is to upgrade an old bathroom. Kitchens come in second.


2. It's worth refinancing your mortgage when you can cut your interest rate by at least one point.


3. Spend no more than 2 1/2 times your income on a home. For a down payment, it's best to come up with at least 20%.


4. Your total housing payments should not exceed 28% of your gross income. Total debt payments should come in under 36%.


5. Never hire a roofer, driveway paver or chimney sweep who is going door to door.


6. All else being equal, the best place to invest is a 401(k). Once you've earned the full company match, max out a Roth IRA. Still have money to invest? Put more in your 401(k) or a traditional IRA.


7. To figure out what percentage of your money should be in stocks, subtract your age from 120.


8. Invest no more than 10% of your portfolio in your company stock - or any single company's stock, for that matter.


9. The most you should pay in annual fees for a mutual fund is 1% for a large-company stock fund, 1.3% for any other type of stock fund and 0.6% for a U.S. bond fund.


10. Aim to build a retirement nest egg that is 25 times the annual investment income you need.


11. If you don't understand how an investment works, don't buy it.


12. If you're not saving 10% of your salary, you aren't saving enough.


13. Keep three months' worth of living expenses in a bank savings account or a high-yield money-market fund for emergencies. If you have kids or rely on one income, make it six months'.


14. Aim to accumulate enough money to pay for a third of your kids' college costs. You can borrow the rest or use some of your income to help out when your child is in college.


15. You need enough life insurance to replace at least five years of your salary – as much as 10 years if you have several young children or significant debts.


16. When you buy insurance, choose the highest deductible you can afford. It's the easiest way to lower your premium.


17. The best credit card is a no-fee rewards card that you pay in full every month. But if you carry a balance, high-interest rates will wipe out the benefits.


18. The best way to improve your credit score is to pay bills on time and to borrow no more than 30% of your available credit.


19. Anyone who calls or e-mails you asking for your Social Security number or information about your bank or credit card account is a scam artist.


20. The best way to save money on a car is to buy a late-model used car and drive it until it's junk. A car loses 30% of its value in the first year.


21. Lease a new car or truck only if you plan to replace it within two or three years.


22. Resist the urge to buy the latest computer or other gadget as soon as it comes out. Wait three months and the price will be lower.


23. Buy airline tickets early because the cheapest fares are snapped up first. Most seats go on sale 11 months in advance.


24. Don't redeem frequent flier miles unless you can get more than a dollar's worth of air fare or other stuff for every 100 miles you spend.


25. When you shop for electronics, don't pay for an extended warranty. One exception: It's a laptop and the warranty is from the manufacturer.

25 Rules to Grow Rich By

Spring-Clean Your 401(k)

Are you one of those people who set their 401(k) on auto-pilot and forget about it? When was the last time you checked up on your investments or changed your fund selections? Fool.com has the steps you need to take to get your 401(k) in order.

Contributions. If you've been hoping to nudge up your 401(k)
contributions a little bit, why not start now? After paying off your holiday
bills, you may have a little more breathing room left in your paycheck.
…

Investments. While you're looking at your 401(k), review
your investment choices. If you've had some losing investments, you might not
have noticed them before. Now's the time to look. …

Rebalancing. If you're a young worker bee, you may be
stuffing all of your savings into stocks with nary a care in the world. Some
people may prefer splitting their contributions between stocks and bonds.
Whatever your plan, now's the time to make sure that plan is still in place.
…

Spring-Clean Your 401(k) via Fool.com

10 Reasons You Aren't a millionaire

I am guessing that if you are reading this post, you are not rich. Most people think they are not rich because they don’t make enough money, but in reality, it is our habits and how you treat money.

Thestreet.com’s Jeffrey Strain lists out 10 reasons that hold people back in their quest to becoming financially independent.

1. You Care What Your Neighbors Think: If you're competing
against them and their material possessions, you're wasting your hard-earned
money on toys to impress them instead of building your wealth.

2. You Aren't Patient: Until the era of credit cards, it was
difficult to spend more than you had. …

3. You Have Bad Habits: Whether it's smoking, drinking,
gambling or some other bad habit, the habit is using up a lot of money that
could go toward building wealth. …

4. You Have No Goals: It's difficult to build wealth if you
haven't taken the time to know what you want. …

5. You Haven't Prepared: Bad things happen to the best of
people from time to time, and if you haven't prepared for such a thing to happen
to you through insurance, any wealth that you might have built can be gone in an
instant.

6. You Try to Make a Quick Buck: For the vast majority of
us, wealth doesn't come instantly. You may believe that people winning the
lottery are a dime a dozen, but the truth is you're far more likely to get
struck by lightning than win the lottery. …

7. You Rely on Others to Take Care of Your Money: You
believe that others have more knowledge about money matters, and you rely
exclusively on their judgment when deciding where you should invest your money.
…

8. You Invest in Things You Don't Understand: Your hear that
Bob has made a lot of money doing it, and you want to get in on the gravy train.
If Bob really did make money, he did so because he understood how the investment
worked. …

9. You're Financially Afraid: You are so scared of risk that
you keep all your money in a savings account that is actually losing money when
inflation is put into the equation, yet you refuse to move it to a place where
higher rates of return are possible because you're afraid that you will lose
money.

10. You Ignore Your Finances: You take the attitude that if
you make enough, the finances will take care of themselves. If you currently
have debt, it will somehow resolve itself in the future. Unfortunately, it takes
planning to become wealthy. It doesn't magically happen to the vast majority of
people.

More at TheStreet.com.

10 bad money habits to kick

We are all guilty of having one or more of these. I am still living without a budget, and have not investigated disability insurance. Which ones are you guilty of?

MSN money lists 10 habits that we should get rid of, to improve our financial situation.

• Spending without a budget.
• Carrying a balance on credit cards.
• Ignoring interest rates.
• Not investigating disability insurance.
• Failing to see how little purchases add up.
• Not matching employer's contribution to retirement.
• Waiting until the last minute to fund IRA.
• Paying everyone else, saving "what's left."
• Not managing your investments.
• Getting emotional about your investments.

Continue reading here.

Why Your Home Is Not the Investment You Think It Is

A lot of people, including me, put most, if not all of their eggs in the house basket. Usually it is our biggest asset, and each month, we are investing more and more money in that asset. David Crook from the Wall Street Journal online has written a great article about why you should not bet your life's savings in your house. Here are some scary numbers from the article:

Food for thought:

• If you bought a house in Los Angeles in 1990, just as the real-estate market turned downward, you would have had to wait a decade for your home's value to return to what you paid.

• If you bought in Rochester, N.Y., in 1980, you would have seen only a mediocre 4% annual growth for the next 25 years.

• If you bought in Dallas in 1986, as the oil boom went bust, your home wouldn't have appreciated at all before 1998.

Not scared yet? Read on here.

Making a million as an employee

Are you happy with what you make? When do you think you will have a net worth of 1 million dollars? I started putting away money in my 401(k) when I was 24, after paying off about 10k in debt (went a little overboard with my spending when I started my job). Kiplinger.com has 12 steps to becoming a millionaire as an employee.

Get a raise
1. Keep your eyes peeled for better ways to do your job.
2. Don't be afraid to negotiate.
3. Get your ducks in a row and your numbers on paper.
4. Plot your strategy when it's time to move on.
Milk your benefits
5. Contribute as much as you can to your 401(k) and other tax-deferred retirement plans.
6. Flex your tax-saving muscle.
7. Review your tax withholding.
8. Stash savings in a Roth IRA, if you're eligible.
Invest like crazy
9. Don't delay.
10. Invest automatically
11. Watch for fund fees
12. Keep it simple.

Read the details here.

20 biggest no load funds

This is a nice list (with reviews) from Kiplinger.com of the biggest mutual funds with the lowest fees, that have sustained performance over the last several years.

Some of the top funds:

Vanguard 500 Index Inv (VFINX)
Vanguard Total Stock Market Index Inv (VTSMX)
Fidelity Contrafund (FCNTX)
Dodge & Cox Stock (DODGX)
Vanguard Windsor II Inv (VWNFX)

To read more click here.

The Best Place for Your Money

So you've been saving money and have put away enough for a 'rainy day fund', and have some left over. The next question usually is what to do with the cash. You could put it in a high-yield savings account like INGDirect or HSBC, put it in bonds, mutual funds, stocks, the options are limitless.
Another thing that factors into the equation is your risk aversion, which is, or at least should be decided by your age and the stage of life you are in.

Fool.com has some ideas on what the best place for YOUR money might be.

More here.

Stock Market Crash

I hope the 400 point dive on Tuesday didn't hurt you too much. Couple of my stocks took a slight beating, but nothing major. CNNMoney's Gerri Willis lists some tips to survive a volatile stock market which I am sure all us amateur investors can use. :

Volatile stock market survival guide
After a 400-point drop in the market Tuesday, Gerri Willis gives you tips on how to cope.
By Gerri Willis, CNN
February 28 2007: 11:31 AM EST

NEW YORK (CNNMoney.com) -- Stocks plunged Tuesday with the Dow Jones Industrials losing more than 400 points. It was the worst day in 5 years. Markets stabilized Wednesday morning, but the drop is still a loud wake-up call to investors. We'll tell you how to protect your investments if the stock market does tank.
Don't panic

Selling in a panic is almost always a mistake. Remember, the stock market has been gaining ground for 8 months. The market is overdue for a significant correction, says David Wyss, an economist with Standard & Poor's.

Let's put this in perspective. A normal market correction is eight to 10 percent. The sell-off that we saw is only about three percent and we haven't seen a significant correction since 2003. If you're invested in a 401(k) for thed long-term, you shouldn't be concerned with the day-to-day gyrations of the market, says Doug Flynn of Flynn Zito Capital Management.
Look past the bottom line

Don't just look at what you may have lost in your portfolio. Take a longer view of the market. This is a good time to really analyze what kind of investments you're in. If you are a 401(k) holder, go to Morningstar.com and find out what companies you have in your portfolio. You want to make sure you have a diversified mix of stocks, bonds, cash and real estate investments. That's the best way to hedge your bets against a falling market.
Consider your time horizon

If you are only a year or two away from retirement, it's a good idea to revisit your investments. It's easy to get swept away by months of positive stock returns.

The bottom line here is that the closer you are to retirement, the more conservative you should be. If you do have a long time before you retire, the more aggressive you should be. To figure out some good allocation mixes, here are somecalculators to help you out.

Professional investors are worried that the economy is slowing down. Just a little while ago the Gross Domestic Product numbers were revised downward. And these GDP numbers measure the nation's economic activity. Add to this fears of a weakening housing market and comments from Alan Greenspan about a possible recession and...there's a lot of worry out there.

Analysts we spoke to said it's very likely that there will be more declines in the stock market before the market regains its footing. So you may just want to steel yourself.

Really simple investing

Interesting article on Kiplinger today for us lazy investors who do not want to get in and out of positions every day. I think I am going to try it out and maybe check back in a few months to gauge performance.
Link