Money & Investing - Banks.com

For many beginning investors, there are two main concerns:

1. The amount of capital needed to open an account.
2. Worrying about when to buy and when to sell.

One of the ways to alleviate these concerns is through an automatic investment plan (AIP). An automatic investment plan is one in which a set amount of money is set aside regularly, automatically put into an investment.

Does this sound familiar? If you have a retirement plan, it should. Many people have their retirement contributions set up on an automatic investment plan. In the case of retirement accounts, the money is often taken out automatically from a paycheck and put into the account. In the case of some retirement accounts, there are tax benefits to contributing. (Watch out: In Washington, they are considering taking away the tax benefits.)

But an automatic investment plan can work beyond retirement accounts. Some mutual and index funds and even some stock investment plans allow you to take advantage of an automatic investment plan. Every month, you can have money withdrawn from your checking account and invested. This can be little as $20 in some cases, although many brokers require you to invest at least $50 a month.

Investopedia explains why an automatic investment plan can be of benefit:

This is one of the best ways to save money. By “paying themselves first” many people find they invest more in the long run. Their investments are treated as another part of their regular budget. It also forces a person to pay for investments automatically, which prevents them from being able to spend all of their disposable income.

If you want to earn some returns, and aren’t concerned that they be extremely large, an automatic investment plan is a good way to go. And, with the stock market in its current state, your automatic investment can buy you more bang for your buck.

Disclaimer: I am not an investment professional. Nothing in this piece or on this Web site should be construed as investment advice. Before making investment decisions, do your own research and/or consult with an investment professional. All investment comes with the risk of loss. You are responsible for your own investment decisions and any loss that may result from your decisions.

Tags: stock market, tax benefits, investing blog, automatic investment plan,
economy, investments, retirement accounts

When Congress passed (and President Bush signed) the $700 billion bailout late last week, they did so promising that soon things would be back on track. In fact, in the run-up to Friday’s signing proponents of the bailout insisted that it was needed in order to prevent a complete Wall Street meltdown. So, how’s that working out so far?

Not well. The market down to below 10,000 and in a complete and utter state of panic, reports Bloomberg:

“It’s a financial panic, total dislocation in the financial industry across the board,” said Ralph Shive, chief investment officer at 1st Source Corp. Investment Advisors in South Bend, Indiana, which manages $3 billion.  …

The Federal Reserve doubled its emergency auctions of loans to commercial banks to as much as $900 billion in an effort to unfreeze short-term lending markets. The central bank also will begin paying interest on bank deposits under authority it gained from last week’s financial-rescue legislation.

In fact, far from preventing the crash of epic proportions, the $700 billion bailout has done nothing — except saddle taxpayers with more debt. Indeed, that’s part of the problem. The fact of the matter is that we were sold a “quick fix” (or at least lobbyists bought one from Congress), and when investors realized that the credit markets were still seizing — and would be for weeks or even months — things started getting panicky.

I, however disgusted I am at the sight of my IRA statement, am refusing to panic. Well, sort of. I’m planning on sitting tight, since I have a long way to go until retirement. But I can understand why my parents are freaking out right now. However, now is the time to think about other options that can shore you up until the stock market recovers. Consider some safer cash investments. The return isn’t sexy, but it’s better than nothing and better than completely liquidating the retirement account.

Deep breaths.

Disclaimer: I am not an investment professional. Nothing in this piece or on this Web site should be construed as investment advice. Before making investment decisions, do your own research and/or consult with an investment professional. All investment comes with the risk of loss. You are responsible for your own investment decisions and any loss that may result from your decisions.

Tags: stock market, stock market news, investing blog, stock market crash,
economy, investments, retirement

As I perused the latest quarterly statement from my Roth IRA account, I had to fight feelings of statement shock. Sure, I knew what was coming (who wouldn’t know, after all the Wall Street drama lately), but that didn’t really prepare me to see the numbers staring me in the face.

Investopedia defines statement shock thus:

The shock associated with opening an investment statement and seeing that the value of your portfolio has dropped more than what was expected. Statement shock is most commonly referring to an unexpected drop in value but can also be used to describe lower than expected returns.

And really, that was my experience (the first part). I had vague expectations of what I would see, but I wasn’t truly prepared. But then my normally long-term outlook asserted itself, and I began thinking about the positives. After all, now is not the time to panic.

Some people have expressed worry, threatening to liquidate retirement accounts and considering all sorts of rash actions. While it is certainly time to cut your losses on some investments, there are those that actually represent a bargain. You can buy at a low prices — getting more for your money — and then when the market recovers, you will be sitting pretty.

The trick, of course, is to make good decisions. You need to choose solid investments that are likely to recover. Another trick is to keep the long term in mind. While statement shock can be initially disconcerting, it is important to take a deep breath and remember that over time the market gains. So, if you plan to retire in more than 10 or 15 years, you are probably going to be okay.

If you plan to retire sooner, it might be a good idea to consider other options before you begin withdrawals. Cash, working past your target retirement age, a reverse mortgage and other options can get you through until the market recovers and you can take retirement plan withdrawals without decimating your principal.