Turbulent financial times, like those we have had to face over the last year or so, have brought with them a level of financial uneasiness that most of us have never faced before.  With all that has gone on with the recession, the stock market, the fall of Lehmann  and  the  Madoff scheme, we have  become more cautious about our spending and investing …it’s a good thing.

Now that things have leveled off a bit…we are beginning to get some interesting  questions regarding buying, saving and investing along with some “shouldn’t you always” that make no sense with  today’s money and market conditions.

Money Myth #1:  You should always invest some of your savings in securities, stocks and mutual funds. Your savings should be where you feel most comfortable and reflects your risk tolerance …and if that means a 1% money market account, then so be it.  As we all now know so well, you cannot time or predict the stock market, so only gamble what you can afford to lose…or at least what you can afford to live without so that you can easily ride the waves.

Money Myth #2: You should always pay off your credit cards before adding to savings. I am a real

believer in the almighty budget, so that when you live by the rules …you do a little spending, you do a little savings, you pay off a little debt.  Living with no savings can put you in a very difficult situation if an emergency comes up and immediate cash is needed.   Also, as we all know, credit has really tightened so it may not be as available to you when you need it as it once was.

Money Myth #3:  To reduce credit card debt, you should always pay the highest interest card first. In my mind, consolidating your payments is the easiest and most sensible way to pay down your debt…so my rule is to pay off the smallest debt first so you are reducing the number of payments you need to make each month.  As each debt is paid off, use the released cash flow to increase your payment on the next smallest, and continue the process until you are down to one.

Money Myth #4:  You should save for college first, then for retirement. If your savings cannot stretch for both, save for retirement first…absolutely.  You can always borrow for college at very low interest rates, apply for scholarships, or borrow from your retirement savings, if necessary.  Retirement savings can come only from you.

Money Myth #5:  Buying a house while the prices are low, is always better than renting. When things are tough, flexibility is the key, and renting is a great alternative for people you have relocated for a job, or for those who may not job security and may need to move quickly to find work.  Buying a house is an expensive proposition any way you look at it and may not be a good financial move no matter how reasonable the price.

If you have questions or need some financial direction, I am always happy to help …give the office a call.

WOW …the last three weeks have been scary!  Who would believe that in a matter of a few days Lehman would collapse, the government would have to bailout major institutions to the tune of 700 billion, the commodities market would collapse, and the stock market would lose 30% of its value.  Things are not good!

For the conservative investor…you know the one that only invested in solid blue chips and touted a balanced portfolio…you will probably see the 30% loss on your statements, but give it a year or so and things will probably inch up and values should slowly rebound.

For the high risk investor and those heavily invested in the finance/banking sector …it appears that only the strong will survive and the others will continue to lose value and probably be bought cheap by larger institutions…as we have seen this week with a local regional bank.

Although some people are looking at the change in the market as a buying opportunity, the average Joe (or should I say Josephine) should be cautious in converting cash into stock at this time.  Nervous investors often sit on the sidelines during down markets until they are convinced that the market is rebounding.  But by the time they get up enough nerve to buy back in, they have most likely missed much of the rebounding market’s gains, which commonly occur in the early stages of recovery.

If we look to the 12 bear markets that have taken place since World War II, investors who either stayed in the market through the bottom, or were fortunate enough to enter at the bottom, saw the S&P 500 gain an average of 32.5% (not counting dividends) during the first year of recovery.  Investors who missed even just the first week of recovery saw their gain that first year slide to 24.3%.  Those who waited three months before getting back in gained on 14.8%

Timing the market is impossible, so you must be in for the long haul…it going to take time…a long time, so don’t expect to make a quick killing.

Now is the time to take advantage of money market, certificate of deposit, and treasury note/bill buying opportunities since there are some high interest promotions enabling small financial institutions  to raise cash.  Keep in tune with the FDIC insurance requirements and share your wealth with a variety of institutions so that you face no withdrawal issues.

KEEP YOUR COOL, DON’T PANIC, INVEST YOUR CASH CONSERVATIVELY!

Here I am, on the way to California for a friend’s wedding celebration,   picking up the nearest USA Today, and reading that the stock market took a hit of almost 400 points yesterday…boy, what timing for writing an article about investing!  Actually, the timing couldn’t be better because all of us who have some excess dollars are asking the same questions:

Should we sell all of our investments and get out of the market?

And, if we sell, where do we put our investment dollars?

During 2008 the market has seen a dramatic correction and some investment professionals have told me that they are expecting another 5% downward turn between now through 2009…although with the election coming to an end and typical year end spikes…we will probably not feel that pinch until the first or second quarter of next year.

So, let’s tackle the first question …should you sell?  Your answer depends upon what kinds of securities that your dollars are invested in and can you tolerate the risk associated with those investments.  Last October I called my investment broker and told him that I have had enough and sold a significant portion of my portfolio and converted it to cash.   I paid off some credit card debt, bought a CD and invested some dollars in a principal protection product that is tied to the S & P 500 …limiting earnings with no risk of loss.  Today, I’m OK with it.

What you need to do, and now is as good of a time as any, is really analyze your portfolio to determine the winners and the losers.  Because tax time is fast approaching, you may want to sell off the losers, take your losses and as for this winners …sell some of those too, so that Uncle Sam doesn’t get his fair share, as well.  The word on the street is that capital gains rates are on their way up…no matter who wins the election, so selling off long term gains before year end will probably give you a short lived tax advantage.

While looking at your portfolio, don’t forget to look at your retirement dollars…for most people they represent a significant part of their invested funds and often overlook them as a part of the whole investment picture.  Make sure that they work, with the rest of your portfolio dollars, to give you a balanced portfolio without too many dollars in any one sector or investment vehicle.

Although the investment arena is very scary, keep in mind that no one can time the market.  As we see the financial institutions crashing around us, your stock and mutual fund investments outside of those actually invested in the institution itself, are actually not at risk.  For example, if you are an investor with Lehman …and you own no actual Lehman assets or stock…your investments in other companies and bonds are OK, as long as they hold their value in the marketplace.

Using an investment professional during these turbulent times, in my mind, is an absolute must.  If you are trying to handle things yourself, your are probably making a mistake, since most people do not have the understanding necessary to succeed with their investment decisions in this kind of market.  So the best advice I can give you today is GET SOME HELP!