Today I am pleased to answer a reader question about investing. Here it is:
I’ve heard a lot lately about the advisability of investing in index funds. What is an index fund?
If you’ve been reading advice about investing lately, you might have the same question. After all, many financial planning experts and investing analysts recommend index funds for long-term investing, as well as a good choice when it comes to riding out a down stock market.
An index fund is a mutual fund that follows a specific index. The S&P 500 Index is one of the more popular for this purpose. You …read more

Jennifer Hoffman over at My Organized Biz is once again prodding me. This time with a question about the 401(k). When it comes to retirement plans, even in times of economic downturn, the main advice it “don’t panic.”
Many people, in times like this, violate the main rule of investing: “buy low, sell high.” Instead, they freak out and sell low. A measured and calm approach to your 401(k) — and other retirement plans — is what is needed.
First, look at your allocation and compare it to your goals. You may need to do some shifting around, but in general if …read more

Today’s breaking financial news is an emergency Fed rate cut of 75 basis points, bringing the overnight lending rate to 3.5 percent and the fed funds rate to 4.0 percent. This is the biggest cut since 1982. Apparently, while the Fed still won’t say “recession,” it is starting to take the economic situation seriously. MarketWatch reports on the emergency Fed rate cut:
With the move coming just eight days before the next scheduled meeting, “there can be no doubt that the timing of this morning’s move is aimed at supporting global financial markets after yesterday’s global equity meltdown,” wrote Joshua Shapiro, …read more

One of the keys that Paul Farrell mentions in his MarketWatch article on beating the bear market is the importance of allocations:
Once you determine exactly what asset allocations fit your particular needs, stick to them. Remember, the mix of specific indexes is crucial, not the specific funds. Rebalance when necessary to bring your portfolio in line, ignoring brokers’ relentless buy/sell pressure.
Everyone has different needs, and if you are planning on putting together a long-term portfolio that can whether the current downturn, it is important to consider your own. And look at how your portfolio is allocated. Instead of looking at …read more

There are investments to be made, even in a bear market. As we continue to look at the Paul Farrell MarketWatch article about beating the bear market, we find some good investment advice:
You don’t need a broker nor funds run by active managers with high expense ratios. Protect your nest egg by investing in low-cost, no-load index funds. Research proves low expenses are the only reliable predictor of future performance.
This is good investment advice even in a bull market. Administrative fees and loads can eat into your earnings on index funds. This also applies to other types of investments. If …read more

I continue to faithfully glean the nuggets out of Paul Farrell’s MarketWatch article on beating the bear market. And remember: just because the stock market is up right now doesn’t mean the economy will let it stay that way. It’s always better to be prepared. The wisdom I’ve chosen for today deals with early retirement:
Yes, the rules of the retirement game have changed. Nobody “retires” in the traditional sense. Nothing’s safe. Not pensions, jobs, Social Security. You better plan on retiring earlier than expected; you may be retired prematurely, against your will. Increase your savings. Start that back-up second-career now …read more

Contrary to popular belief, most millionaires, and those who enjoy a comfy retirement, have to do some measure of work. I mean, before most people like Bill Gates and Sam Walton hit it big, they had to pay their dues and put in some good, hard work. (I think Warren Buffett has it right, though — don’t leave even most of it to the kids.)
This concept is even more true during a bear market. Paul Farrell at MarketWatch offers some great insights into beating the coming (well, I think it’s basically here already) bear market. And in the coming days …read more

Earlier today in my quest to find ways of beating the bear market, we looked at going contrarian. This post is related to that concept, with Paul Farrell at MarketWatch recommending a do-it-yourself approach to investing:
Remember Buddha’s advice: “Believe nothing, no matter where you read it or who has said it, not even if I have said it, unless it agrees with your own reason and your own common sense.” You are the only “expert” you can trust: All brokers and money managers, newspapers, magazines, online and newsletter pundits, all television anchors, and every other special-interest guru is “selling” you …read more

Yesterday I mentioned that I will be devoting some time to an article written by Paul Farrell for MarketWatch. This article gives 10 things you can do to beat the bear market that has already begun. Today’s first advice is this: Go Contrarian.
Don’t trust Wall Street to make your investing decisions
Farrell points out that Wall Street is very biased:
The vast majority of business, economic and stock-market forecasters are not looking out for your interests. They’re biased, favoring their employers on Wall Street, Corporate America and Washington. The past few years they made huge bucks hyping the credit/subprime bubble. Witness their …read more

Everyone knows that the stock market is risky, and that you could lose money, no matter how “good” your information may be. However, things are getting a little bit dicey. MarketWatch’s Paul Farrell points this out about where our stock market is headed:
Now the biggest of all insults: Our capitalist system is so dysfunctional that lately the market has taken to cheering as Wall Street’s incompetent bankers hide their mistakes by selling huge chunks of America’s equity to China, Singapore, Abu Dhabi and other sovereign funds — with more sell-offs coming. …
Unfortunately, our leaders just don’t get it: America’s high-on-the-hog, …read more