I tried investing in CDs, then DVDs came along, then Blu-Ray, and I was pretty much toast.

kentlee7

Berkshire Hathaway? It's hard to for most people to diversify with a fund costing $130250 (03.24.08).

Call me an optimist but I believe in the US economy. I've been buying funds like Vanguard's 500 Index (VFINX) along with low-medium risk bonds. In bad times, I move more toward bonds and cash, but continue to buy mutual funds.

As I get older my mix becomes more conservative. I've always thought the rule of thumb that your percentage of bonds should equal your age sounded like a good idea (i.e at 40 years of age you should have 40% in bonds, 60% in stocks, etc.)

So far, I've done OK. With any luck I won't have to use my fallback retirement plan: "Welcome to Wal-Mart". ;)

devnull

I don't plan to make any changes. We have a highly diversified portfolio of stocks (US and foreign), municipal bonds, treasuries, and cash/ cash equivalents. We are long-term investors so pretty much plan to hold onto our convictions and ride it out.

I do hope it doesn't get too ugly.

vered

The aphorism is: buy low, sell high, but don't try to time the peaks and valleys, you'll fail.

With that in mind, now is not a bad time to invest in the stock market if you've got a fair tolerance to risk. Risky investments are not short term deals- you only throw in when you'll be in long enough to average out the peaks and valleys.

People's minds are usually backwards. They buy into the stock market when it's rising, and sell off when it's falling- the exact opposite of what they should be doing.

If you're planning on retiring in five years, this is a horrible plan- you shouldn't be in the market at all at that point. But if you're in your twenties, now is a good time for stocks. You'll lose money in the short term, but you'll make it back up later.

t3knomanser

I have most of my cash in various CDs and (formerly) high rate accounts, all FDIC insured and spread around so there isn't more than the FDIC limit at any one institution. I figure thats pretty safe from anything but inflation.

I have some money in I-bonds, which are supposed to be protected against inflation. The rates on I-bonds were not very competitive 6 months ago, but these days they are looking pretty good, so maybe I will put more there. The bummer with I-bonds is that they hold back some portion of the interest until you have held them for a certain minimum period, so they are no good for money you might need in the near term.

AndyFromTucson

Berkshire Hathaway, either Class A or Class B shares for long-term. If Warren can't figure it out, we are all totally screwed.

Another place for long-term positive return? The real estate market in Marin, San Francisco, San Mateo, and Santa Clara Counties.

Note that inflation averages about 4% a year, so even if you go ultra-conservative, you still are better off looking for something that beats 4%.

Deprong Mori

Pay off your house?

TommySez

@devnull:

Class B shares of Berkshire Hathaway closed at $4,341 today. If you can't afford that, keep your money in your index fund and stay away from this thread. Technically it's a stock. The company itself is so diversified that it ends up a lot like a mutual fund (with Warren as the fund manager), but I won't call it a fund.

You can invest in a blended mutual fund that balances risk based on your retirement date (e.g., Fidelity Freedom 2040 is designed for people who will retire in 2040). These funds mix equities, bonds, and cash/short-term instruments; as you get closer to the retirement age, the investment mix gets more conservative.

That said, reading blogs for financial advice is highly suspect.

I suggest that readers here ignore everything here and find a proper financial planner, one who understands your age, location, income, assets, cashflow needs, family situation, comfort with risk, tax situation, et cetera ad nauseum, and can recommend something relevant.

Asking for financial advice in an anonymous Internet forum is utterly crazy.

Deprong Mori

well investing your money is fine and good but the main problem in the future is not going to be money. its going to be how well have you prepared for the change of weather in your are if the ice caps melt into the oceans the jet stream will change and all the northern states are going to be very cold not to mention ny & fl being underwater. I am not a dooms day person but if you don't take abit of your money and prepare abit you mutal funds are not going to keep you dry or warm.

Kilak

oh and let me add one more thing. I wouldn't worry too much about the US economy guys. Everyone is stressing hard core about it.
Relax, it's not going to tank. In fact from what I've seen it's not even going to be a 'full blown recession' if there is one at all.
Most of it is tied to how oil prices are and people's feelings of political on goings. It's going to change and the market is going to turn around quicker than you could imagine.
just relax.

liquidglass

here's my two cents as a financial adviser in (trust & wealth management as well as insurance).

1) As strange as it may seem. Buy insurance. By insurance I mean Whole Life (permanent) Insurance.
My personal recommendation is Northwestern Mutual. They've been paying dividends and the cash value on stocks has been rising constantly over the last 150 years. Even during the great depression. It's one of the last mutual insurance companies left and one of, if not THE best.

This year you can expect to see a 7.25% return on your 'investment' of life insurance with them. And don't expect it to drop any time soon.

If you want any more information, just comment and I'll give you an email address.

2)If you're going to hit stocks then hit China, silver, bridge (re)building companies, and while you're at it give Google a glance, while it's low ;)

3) IRA! get one if you don't have it, if you do, make sure you're contributing to it. The younger you are the better time it is to start. You'll thank yourself later.

4) one last one before I hit the hay because it's been a long day. If you are looking at different banks for simple savings accounts, etc etc. I'd recommend a look at ING. Simple and safe.

Good luck!

liquidglass

A lot of food and a lot of guns to protect it with.

sam1am

As the stock market continues to go down, my only wish is that I had more free cash to buy stocks. Buying will be good for a while.

onesix18

@onesix18: Right on! The stock market is on sale right now, so everybody buy up!

bobbo33

I am not a financial adviser, but here are my comments:

- This guy is too scared. Afraid the FDIC is going to fail? There would be many more problems than just your savings if that were to happen.

- High-interest savings accounts or CDs from financially healthy banks would probably be best for the question-asker.

- I am also buying Berkshire B stocks. No, I don't spend $4500 to do it; I buy partial shares through Sharebuilder.com.

- IRAs are a good suggestion, but the actual investment vehicle still has to be picked, which brings the question-asker back to the same question.

- Buying gold is probably not a bad idea. It's about $1k an ounce right now, and according to a friend of mine who has been watching/playing the gold market for 35 years, he thinks it won't go much lower in our lifetimes.

- Foreign markets are a good place to invest now, but I personally prefer India over China. Their population is not too far behind, but their economy is ripe for bigger growth because they are a democracy.

- The stock market IS on sale. For a conservative approach, but some index funds.

- Definitely invest in yourself. Pay off any debt, loans, etc; Put your kid through college? Upgrade your house to reap the return in 5 years when the market starts to swing back?

heavylee-again

As we've already seen, gold does well under market uncertainty. Of course, it's already reached record highs, so whether you still want to buy this late in the game is a bigger question, I'd guess not, but that of course depends on where you think things are headed, and how close we are to bottoming out.

trygve

A few strategies:
1- The Allan Sloane Strategy: Watchword "Stocks go up, stocks go down, who cares?" Buy stock. Trust that economy will sort itself and continue to average 7% return between now and your retirement. It always has in the past, given a long enough horizon. When stocks are down, you can buy more of them. It's a miracle.

2- The Woody Allen Strategy: Watchword "I'm worried." Buy government bonds. They guarantee a return. It's not a great return, but this is the AAA type stuff. And there might be some tax advantage. Also, they come in all kinds of time lengths. From Overnight to 20 years. If you don't like risk, bet on the government.

3- The no catchy title strategy: Watchword "In a down market, the interest I'm paying is going to be higher than the gains I can earn." Retire debt. Pay mins on your smallest cost loans, pay big on the high interest loans. Assuming they don't have early pay penalties. Consider that your CC is probably getting 9.9% - 16%. You can risk free get rid of that. Nice.

4- The Thurston Howell strategy: Watchword "Buy Quality." By quality, we mean gold. This is time honored. When the market is nuts, Gold goes up. It's already pretty up, but there's probably some room there. And, it's good when the economy completely melts. Hell, you can buy stuff with gold in Vietnam.

PotKettleBlack

Invest in a bar. In good times, people drink to celebrate. In bad times, people drink to drown their sorrows. You can't lose -- unless maybe you open it in Tehran. Even then though . . . . ;->

davearonson

If you believe that the dollar will continue to decline against foreign currencies (a reasonably safe bet as we have cut taxes while increasing spending on the war...the currency must fall to compensate) then any $US-denominated investment is a poor choice.

That_Bastid

If you have kids and haven't invested in a 529 plan, you are missing out on the best tax-efficient investing vehicle available.

Check out:
[www.savingforcollege.com]

yagameister

@Prolific Programmer: Who was the dictator that got America's industrialization started?

slyston3

I thought it was good to have debt right now cause it's cheap?

slyston3

@heavylee-again: India will grow faster because its a Democracy? History says otherwise, in damn near every case in the region:

South Korea was a basket case until General Park's iron-fist industrialised the country by force.

Singapore industrialised under the single-party rule of Lee Kuan Yew, and his successor Goh.

Japan's post-war miracle was set on single-party rule by the LDP.

Industrialisation needs a dictator to be started. Future development is faster under a democracy, but initially, I believe it requires dictatorial rule. Seeking consensus on whether a country ought to industrialise, build schools, etc. or cut taxes is a losing proposition every time.

Prolific Programmer

@yagameister: 529 plans are tax efficient but in many cases give you very limited investment choices. I wouldn't call it "best".

vered

The only real wealth is land, specifically land that will produce a product or meet a definite need. (Not lots in a Florida swamp). With the rapidly rising global demand for higher quality food and fuel, farmland will be the true measure of wealth.

As for the Insurance salesman promoting whole life insurance, do the math. The same amount of term insurance will cost just a fraction for the same coverage, and you can take the difference and invest in long tract record mutual funds that have averaged 12%+ for the past 30 years. In fact there has never been a ten year period that they did not make money. OR, take the difference and buy LAND.

deanes

I am totally voting for Benevolent Dictatorship, all the way. That's really what this (USA) country needs. A Benevolent Dictator.

And a non-oil based economy. Yes, Benevolent Dictator and non oil-based economy.

And a revised set of priorities.

OK, to recap, we need a Benevolent Dictator, a non-oil based economy and a drastically revised set of priorities.

Is everybody with me?!?

jaxun

Safe, to me, is tempered by time.

Show me any well balanced investment approach that has had negative returns over a 10+ year time frame.

I will continue to buy into my balanced approach now...it suited my 12 mos ago when prices were higher so why would it not suit me now?

If you have less than 10 years...you are the ones that need to seek 'shelter'.

kspraydad4

@Kilak: You still believe that stuff? Global Warming is soooo 2006.

failurate

Mostly good advice so far. The person asking the question must have some long and short term financial goals.

Short term strategies
- Pay off all debts. Start with the highest rate loans and work down to lowest.
- Stay liquid by putting cash into FDIC insured savings accounts at sound banks.
- Have a 4-6 month emergency fund established in case of disaster, job loss, layoff. This is enough money to pay all the bills and buy food. Do this before starting long term strategies.

Long term strategies
- Max out your 401k or other retirement plan contributions, or at least enough to get 100% of your employer's matching funds (if applicable). Most plans grade investments according to risk. This person should move money into the ultra-safe segment.
- Invest in bond funds, then stock index funds
- Buy stocks in multinational, blue chip companies, preferably ones paying decent dividends.

If you think economic and social collapse is on the horizon, hoard precious metals, weapons, tobacco, and liquor. These things never go out of style.

gotstachill

Investing in whole life insurance is a joke. That's about the last piece of advice I'd take in the entire thread.

rscotta

@liquidglass -

Sorry pal, but that's bad advice. Whole life or cash value life insurance only makes money for the insurance salesman. You don't buy life insurance as an investment. If you need insurance, you buy insurance and get term life. Same insurance coverage for a LOT less, and you can invest the money you saved from buying whole life.

The best advice in this time or in any time is to stick to your plan. If you do not have a plan, then it's dead easy to create one.

I recommend the approach advocated in this book.

The Bogleheads: [www.amazon.com]

John Bogle was the founder and former CEO of Vanguard. The principles espoused in this book are straightforward.

1) You will never always beat the house, so don't try. You can, however, hedge your bets and win in the long run by finding the level of risk you feel comfortable with and creating a simple, low-cost plan.

2) You can do this YOURSELF. And there's a community of people who can help you too.

Don't believe me. Go read the reviews on Amazon. Google the book. Visit the diehards site at www.diehards.org.

I am 38 years old and have not worried one iota about my retirement during this period. I have a very simple plan that I'm comfortable with.

- JD

jddphd

@jddphd:

Sorry bud, you're wrong. Nothing personal but don't talk about something you're not that educated about.

For example: I won't talk medicine because I'm not a Dr.
But I will talk Law and Finances.

It's easy to 'think' that term insurance costs less but actually it costs more.

Term seems like it costs less because it starts off at a lower premium.

For example in a term policy let's say you pay $50 a month the first year.

For the same amount in whole life you'd pay let's just say $100 a month (to make the number easy to work with) again, for the first year.

The next year in the term policy you're paying $55 a month.
Whole life: still $100 a month.

Let's jump 10 years down the road

term: you're paying $200 a month
whole life: Nothing, the dividends are taking care of it as well as adding to your cash value

which is a better deal?

Term costs more because:
a) there's no cash value
b) you lose your investment at the 'end date'
c) the premium goes up at a steep angle
d) there are no dividends to help you out

When it comes down to it you end up paying tons less with a whole life policy.

However, if you're not all for a whole life policy then it's not a bad idea to get a whole life policy with a term rider that you can later convert over to whole life.

I'm not recommending anything specifically to anyone because everyone's situation is unique. So don't think I am. I'm just telling you the smart way to go about insurance. No matter what company you go with. Just make sure you trust them, check their ratings, and shop around a little bit. Some places are just after your money, it's up to you to figure out who they are.

liquidglass

@jddphd: @deanes:

I understand where you're coming from on your point. It's true term insurance is cheaper and if someone doesn't like whole life, then term is a perfectly acceptable thing. However, I wasn't promoting whole life insurance for when you die (although it is a good idea to grab some) I'm promoting it as a different type of investment vehicle, through a mutual company and it's 100% safe.

The reason whole is better than term math wise is this: (all examples are with Northwestern Mutual)
You get term for let's say $80k, (let's say you get it until you're 80) By the time you turn 80, you've paid $80k into the policy. Which might be what you personally want to do but I don't like it.

Whole life: same example. You buy 80k to pay it off by the time you're 80 years old. On average within the first 10-20 years (10-15 is more like it, but i'm being conservative) your dividends will Pay for the policy plus extra to add to the cash value which will rise dramatically. So by the time you're 80 you have insurance worth hundreds of thousands in face value and equal value in cash. So you can either wait until then....or you can turn it into an annuity at any time.
Plus life insurance policies have other advantages
-one of the most secure loan collaterals you can find
-you can remove cash value at any time
-you can receive the dividends in cash as a supplemental salary. (I've seen people get 30k to 60k a year in excess dividends)

liquidglass

WHOA!
We must have a lot of insurance salesmen on here, AND a lot of misinformation. Whole life cash value insurance is probably the worst investment vehicle on the planet... If you need life insurance (and not everyone does, especially if your family does not still require your support after a certain age) Term Life is a small fraction of whole life, not 1/2 like the examples here. With term life the rate does not go up every year. It is fixed for the term... With term there are no fees...
I once had a whole life policy that grew some cash value, then the annual fees started eating that away faster than it could grow.
With whole life, growing cash value sounds great, but deduct the annual fees and see what the return is. AND consider what happens to your cash value when you die. It all disappears and you only get the face value! The insurance company keeps it! Like I said, the worst investment vehicle on the planet.

deanes

in case you missed it earlier, however, I will repeat it:
Don't get life insurance as "just" an investment. It's good for multiple things.

If you only need insurance for 10-20 years, get term. But if you're 30 and you want insurance until you're 80. Whole life is a better idea to look at.

Speaking of something from earlier: land is a bad investment, unless you plan on improving it, renting it, or you know something big is headed that way. Generally it won't increase in value just sitting there.

liquidglass

So you "once had a whole life policy......and annual fees.." What kind of policy, what company?

I could say I had a 2007 bently and it was awful. It depends on where I got it from, the price, if I was smart about shopping around, and the contract on if I have a right to complain or not.

Using Northwestern Mutual again because I've enjoyed the way they've worked since I've been watching them. A whole life policy's "annual fees" are taken care of by the return on how they invest the money. Aka, after the first year or two, all the money you put in goes straight to cash value pretty much.
This happens
-while the premium decreases
-while the dividends increase

Again on the cash value, you're really talking about something you're not that educated in.

Cash value is TIED to the face value. So if you take out cash value at any time, the face value drops accordingly. AS long as you don't take 100% of the cash value out, the policy stays in force.

*deduct annual fees and the return is still 7.25% to the policy, I wouldn't give you a number that could be eaten away with fees* (If I said 12.5% then yes, deduct the annual fees etc etc and you have 7.25%)

Let's see if I can explain this in simpler terms. If you die your family/estate gets the Face value correct?
But what if you want some of the insurance policy Now (while you're alive) what can you do? Take out cash value or turn it into an annuity.

Alive side (cash value/annuity)
dead side (face value)

Do some research before you spout off.

liquidglass

@deanes:

I agree that not everyone needs Life insurance (long term care I feel a little different about).

Well I hate that you got a bad policy probably from a bad company. There are 5 independent ratings companies you should ALWAYS check out before you go with a company. If you didn't do it, sorry for you. But I can't say I'm surprised I've seen tons of bad life insurance policies which is what gives life insurance a bad stereotype.

*just for the record: I'm only giving advice I'm not trying to sell anything and I the only thing I would recommend is talking to a few companies and checking out their ratings if it's something that you've never done before*

The term life insurance you're talking about is "flat premium" life insurance which means that for about 10-20 years you get insurance for a flat rate every year. So when those years are up what happens to the money you put in? I think you can figure that one out.

*the numbers given were to make it easier to work with, lower the numbers and you still have the same thing with increasing and decreasing premium*

liquidglass