Smart Saving and Investing

Yikes folks!!

We’ve given up another 200 points on Friday, 7/27/07. Jeepers Wally!!

The DOW is down over 500 points this past week. I’m going to jump…, well, I’m going to jump to my back porch and grill me a steak!!

What a week!!

Well, remember we’re in this for the long term so hang tough. This is what happens. Be emotionally strong. There will be plenty of headlines to scare you off.

This is not the time to make the mistake of selling a mutual fund that has been doing good for you over time.

Now, we’re in the last week (or part) of July 2007. So here are some of those monthly reminders:

Savings

• Squeeze out that extra $x (where x is $10, $25, $50, $100, etc.) that you can transfer to your online savings account as described in action one.

Retirement Plan

• DON’T check your retirement portfolios whether it’s your employer’s retirement plan or your Roth IRA. I know this might sound crazy but it could possibly keep you from making a bad decision of selling a good or great fund.

Roth IRA

• Squeeze out an extra $50 to send to Roth IRA at Excelsior Funds if you’ve done what was talked about in action three. If you have a Roth IRA already that might be at a brokerage firm, then try and send some extra $$ to it or up your monthly automatic payment to your Roth IRA by $5.00 or more.

Motivational Monday

“Have a project going all the time. Something you can work on in the evening after you get home from work.”

The above quote is from a working man who was married with two kids and who built his own airplane in his off time. After working all day, he’d come home and spend some time on the plane. After years of doing this, he successfully flew the plane.

Now, I don’t know about you but if someone has the sustained motivation to build a plane over many years to a successful conclusion then I’m sure I can find effective projects in my life that will enhance mine and maybe some other lives.

Not to mention that this could lead to a very practical action like shutting off your TV and maybe even canceling Cable TV. Which in the long run will save you money.

written by Bill Stevens

On Wednesday, I wrote about the ups and downs of the market and how that affects the way you invest, sleep and keep your sanity. Well, everyone is being tested after today with the DOW closing down -311.50. WOW!!

Well, this is what happens sometimes. The markets have been going crazy all year long and everyone kind of knew something like this would happen and more could be coming, we’ll see.

But not to worry. If you’re a new saver and mutual fund investor, then this is part of the show. This is where you start looking at what mutual funds lose the least in times like this but make the most in the up times.

If your a trader or someone who buys and sells stocks for the long haul or short term, there will most likely be some stocks you’ll be able to get into cheap that you’ve been waiting for.

If you’re an options trader and you watch the volatility jump all over the place because of all this and the swings that are most likely to follow, then there will be nice opportunities to grab some profits from both Calls and Puts.

Talking about Puts, wouldn’t it have been great to be in some of those today? Puts allow you to make money as stocks go down. You heard me right. Again, I need to put an Options definition page up soon.

No matter how you look at it, things are sure exciting to watch.

I hope you can stomach all this and stand strong for the long-haul.

Here are some quotes on perseverance to keep you going:

“Our greatest weakness lies in giving up. The most certain way to succeed is always to try just one more time.“ - Thomas A. Edison

“Perseverance is a great element of success. If you only knock long enough and loud enough at the gate, you’re bound to wake up somebody!” - Henry Wadsworth Longfellow

“A diamond is a lump of coal that stuck with it.” - Unknown

“Take time to deliberate, but when the time for action has arrived, stop thinking and go in.” - Napoleon Bonaparte

“The wise man bridges the gap by laying out the path by means of which he can get from where he is to where he wants to go.” - John Pierpont Morgan

“Buy when everyone else is selling and hold until everyone else is buying. That’snot just a catchy slogan. It’s the very essence of successful investing.” - J. Paul Getty

And on a lighter note…

“Getting on a plane, I told the ticket lady, “Send one of my bags to New York, send one to Los Angeles, and send one to Miami.” She said, “We can’t do that!” I told her, “You did it last week!” - Henny Youngman

“I told the doctor I broke my leg in two places. He told me to quit going to those places.” - Henny Youngman

“What’s the use of happiness? It can’t buy you money.” - Henny Youngman

“For my birthday I got a humidifier and a de-humidifier… I put them in the same room and let them fight it out.” - Steven Wright

“I went to a general store but they wouldn’t let me buy anything specific.” - Steven Wright

“What happens if you put a slinky on an escalator?” - Steve Wright

written by Bill Stevens

Can you stomach this market? The DOW took a dive today to the tune of -226 points. How does that make you feel?

Will you sleep okay tonight or be miserable about what investments you’re in and how they dropped along with the market?

Does this remind you of earlier this decade when the likes of Enron and Level Three were near or at triple digits and ultimately ended up, well you heard about Enron and Level Three (LVLT) closed at $5.82 a share today. I guess it’s time to jump into LVLT. Just kidding.

Well if you’re a smart saver and investor, you don’t care what happened today. That’s right. Today is one day in many that you’ll experience a big down turn in the market.

You don’t need to track the markets on a day-to-day basis. That will make you sick. Of course, it’s hard to ignore when it’s plastered everyone in the media. But I’d rather view it as a time to do my normal, every day routine or don’t even bother watching market news.

However, if you’re an investor, you might be thinking about getting in something that’s now cheap enough to get into. If you play the Options market and you were “guessing” the markets and/or your favorite stocks were heading south, you could have bought Puts to make some money. Yes, you can make money on stocks when they go down. But that’s for another Funny Money Friday post about Options and this site promotes owning mutual funds for us smart savers and investors.

Long-Term

You want to focus on the long-term. The 10, 20, 30 years out that we’re investing for our retirement and more. You have to ride the roller coaster called the markets.

The Standard & Poor’s 500 or more affectionately known as the S&P 500, which is the world-renowned index that includes 500 leading companies in leading industries of the U.S. and is the best single gauge of the U.S. equities market, has returned over 10% in the last 20 years and there’s been some tough times in the last 20 years.

You have to remind yourself of the financial goals you’ve set. You have set some financial goals, right? Well, we’ll discuss it in another post.

Risk Level

How about your risk level. Your tolerance for the markets ups and downs. Assessing your risk level will determine what type of investments you’ll select. For example, we know stocks are more aggressive and riskier than bonds which also means stocks could include higher returns than bonds. Bonds are more safe investment choices and should be looked at closely as being part of your investment portfolio as life goes forward. That was a politically correct statement that really means, as you get older.

In other words, you’ll experience wilder swings in your stock mutual funds (mutual funds that include stocks in them) than in bonds. For some it will create wilder swings in your stomach as well.

Diversification & Asset Allocation

Diversification and Asset Allocation means investing in a variety of investments in different asset classes or categories. The “don’t put your eggs in one basket” thinking. That way, when one investment does poorly, the other might be doing just fine and another might be screeching higher and higher. Here at www.smartsavinginvesting.com, that means an allocation of mutual funds that include the following:

Large Growth - 35%

Large Value - 20%

Small Growth - 20%

Small Value - 15%

International - 10%

In another post we’ll discuss a good mix of index funds as well as throwing in some bond funds for safety sake and those older folks like me that I was talking about earlier, so they can protect their assets they’ve accumulated over the years.

Using dollar cost averaging to systematically invest a fixed amount of money at regular time intervals, say monthly, you won’t have to worry about timing the market. This will help even out the effects of market volatility.

So if you want a taste of doom and gloom read the following. But read it for education purposes and being able to stomach some of the bad news. It’s okay. Really.

• Tough day on Wall Street
• Dow Takes A Nosedive
• Dow Slides More Than 200 Points
• Stocks tumble amid mortgage, earnings worries
• Housing worries clobber stocks

written by Bill Stevens