Invest? Are You Serious?

While some people have decided to sit the market out altogether, there are others who are ready to dip their toes in the water and cautiously invest again or for the first time. Even in light of the current economic ____ (input the latest buzzword for tragedy here), I’ve been a proponent of investing wisely. The market goes through cycles and it will rebound again. That said… we have to be realistic, we have to do more research than ever on the companies we invest our money in. Long gone are the days of blindly following your investment advisor.

Start with a Mutual Fund

A mutual fund with a solid track record….yes… I hear you snickering… hey… I’m snickering too! Look for a mutual with returns in the 8-12% range over the long term meaning 10 – 12 years.  Make sure the fund manager didn’t just get there either, you want them to have at least 5 – 10+ years with the fund.

It is also wise to pick a mutual fund that is comprised of industries that are not dependent on one another.  For example, a real estate company and a home building company both suffer when there are hits to the industry. If both are in your mutual fund you will take a bigger loss.

Do Your Homework

Where to start your research? Google It!  Learn about the fund and the companies it holds. Search for each company in the mutual fund portfolio.  Find out what kind of media attention they are receiving, good or bad. What are other investors saying about them? Have they had a recent change in leadership? Go to their websites and download their annual reports, read their notes, look at the financials.

Of course, you want to know how the fund is performing.There are a ton of sites that allow you to do financial research. Morningstar.com is a leader in the industry, and you can view some of the content for free. Google, Yahoo, AOL, along with many others, all have finance sites where you can input stock/mutual fund symbols and it will kick out company information.  What are the experts saying about this fund and the companies it holds?

Below is a screenshot from CNNMoney.com for:  CAAPX – Ariel Appreciation Fund

If you scroll down, you will see more information on the performance, industries represented in the fund, names of top 10 companies and so on…

p.s. - No affiliation with Ariel, just used it as an example people.... happy investing!

Your Financial Coach,

Dorethia
www.connercoaching.com

Are You REALLY Ready To Invest?

Many people think they are ready to invest but in all actuality they aren’t.  Guess what? That's okay! There are a few things it is important to line up financially before you jump into buying stocks and mutual funds. 

You don't want to jump in blindly, be able to say YES! to the following before you begin investing:

• You have a handle on your budget (..er… a written budget), meaning you know where your money is going each month.

• You have an emergency fund saved

• You have paid off your debt (except mortgage)

• You are investing in your retirement via an employer fund or an IRA

• You have done your research on investing terms, you have begun to follow the market and you learned how to read the financial papers to track your investments

• You’ve gauged your tolerance for risk, and accept that investing is a long term project

Begin reading the financial newspapers, listening to the financial news... not obsessively, but just so you are aware of what is going on in the investing world. That's not to say you won't ever lose money, we all know that's not true, but it will allow you to be a better educated investor.

Your Financial Coach!
-Dorethia
www.connercoaching.com

Answers to Your Money Questions

Here are a few questions that I've received from my email bag. Do you have questions you'd like answered? Send them to info@connercoaching.com!

1. Are U.S. Savings Bonds still a good way to save money for the future?

I would suggest mutual funds as a better investment. Savings bonds are thought to be safer, but in actuality the variable rate they have can fluctuate quite a bit causing a great deal in losses.

2. How much money is considered an Emergency Fund?

Your initial emergency fund is $1,000. Once you have saved this amount, you stop adding to this account and begin to get out of debt. Pay off everything except your mortgage. Once you are out of debt, you go back to your emergency fund and add 3 – 6 mos. expenses, not income. This gives you a cushion in case of job loss, illness, or other unforeseen event.

Sidebar -- I’m hearing a lot of advisors say in this economy you need 9 – 12 months of expenses saved. While I don’t argue with this fact, I suggest 3 – 6 mos as a starting point.

3. What is the most effective way to handle cash?

When you receive cash, you should allocate it for a purpose. If there’s no bill to pay – add it to your emergency savings or other savings goal. If you have your $1,000 emergency fund and there is outstanding debt, additional cash should be put toward paying debt down from the smallest to largest amount.

4. When I reach one financial goal, how do I plan for bigger goals?

You would simply budget for your bigger goals. For example: If you want to start a business or currently have a business in addition to your ‘day job’- write out how much it will cost you start/run the business. Begin to set aside money each pay toward it. It would be the same for any financial goal, (retirement, vacation, mission trip, etc.). First calculate how it fits in your budget and designate a dollar amount each pay for it.

5.  My car is paid off, should I now remove the full coverage policy for a no-fault policy which is cheaper?   This would give me extra money to pay down debt.

If you have enough money saved to replace the car (for cash) without tapping into your emergency fund, you can remove the full coverage. Otherwise, it is better to be safe than sorry - keep your full coverage policy!


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