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The #1 Money Fear today is—Will I be broke . . .will I
be able to retire? The stock market roller coaster over the past two years
made your mutual fund returns look like an endless downhill slide, coupled
with the Enron/Arthur Anderson mess, the WorldCom mess, and now what looks
like the Qwest mess. Is there any escape to the onslaught of negative
financial news and business practices? Should you invest again or just pluck
your money into savings, money market funds, bonds or annuities? What’s a
savvy investor to do?
Government stats show that for every one hundred women and men who reach
sixty-five, only two are financially independent. How do the remainder make
it? By relying on relatives, the government, friends, or working until they
die. What a yucky prospect—two years ago, most of us thought (and acted) as
though we were in a society of overall prosperity.
Women live longer than men do. Which means in simple words, women are more
likely to spend far more years just barely getting by than men are if they
don’t get involved in the money maze. Forget about the White Knight rescuing
you.
The reality is that
whether you are rich, poor, or in-between, the person that you are
going to have to rely the most on to keep you from the poorhouse is
yourself. . .your creativity, your imagination, your intuition, your
smarts.
Could you have avoided being snared by the
stock market tumble? Could you have eliminated your losses, or at least
reduced them? Whatever you do with your money, there’s risk—just leaving it
in the bank has risk—not so much closing its doors. Rather, the risk that
the measly interest you get today is often below what inflation is—your
money faces some form of erosion, no matter what you do.
For investors—be it the mutual fund route or individual stocks, there are
simple strategies to put into play NOW—forget about rewinding the clock. Do
this—
When you buy a stock or mutual fund—determine your growth goal. Is it an
increase of 25 percent—50—100—what, and within what period of time? Do this
when you make your purchase. And, at the same time, determine just how low
you can/will tolerate a decline in price. This is not the time you stick
your investment list in the drawer and forget about it. You have to pay
attention.
On the upside, let’s
say your investment is doing OK—increasing in value and it hits your goal.
Ask yourself—if I had more money, would I buy more? If the answer is yes,
readjust your upside; if the answer is, I’m not sure—sell half and reinvest
in something else and let the balance ride with a new goal; if the answer is
no—sell, find something else.
On the downside, your
investments have dropped in value to your decline tolerance (I use 25
percent—once it passes that, I’m out). Sell—it’s over. Now, do stocks and
mutual funds turn around? Yes, but they also continue to erode. Your
objective is to create a sane investment strategy that you can live
with—sticking your investments in the “I hope it comes back” drawer is not
going to get you to your financial independence goal.
In early 2000, Qwest was selling for $64 a share. In July 2002, it was
selling for $1.50 a share. Wouldn’t it have been better to bail out at $48 a
share (after a 25 percent decline from $64) than to be stuck with it at
$1.50? The savvy investor does the math.
# # #
Dr. Judith Briles is the author of 24books. Her latest books is Money
Smarts: Personal Financial Success in 30 Days! Her book, 10
Smart Money Moves for Women won the Colorado Book of the Year –
Non-fiction in 2001 and Money Smarts for Kids was a Parent’s
Choice Honoree. She can be reached at
Judith@Briles.com.
© 2005 Dr. Judith Briles. All Rights Reserved.
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