The rap on women as investors is that as a group, we tend to be too cautious.

Caution certainly seems warranted these days as the stock market swoons and the financial news all seems bad.

But as Jim Jubak explains in his recent column “When to start investing? Now,” those who dive in when others are fleeing tend to do very well over time.

If you’re in or near retirement, you’ll want to consult with a fee-only financial planner before making any big moves either into or out of this market. You can get referrals from the Garrett Planning Network. (You also might want to schedule a session even if all you need now is a little hand-holding.)

But if you’ve still got a few decades before you’re going to quit work, this could be a prime opportunity. You may have to strap in for a bumpy ride, but history has shown us that those who stay in the market prosper in the long run.

TAGS: financial crisis, financial planning, Investing, women and investing

My buddy Chuck Jaffe had a lovely turn of phrase in his recent MarketWatch column. Chuck wrote:

While investors understood that bad times were possible — that the huge spikes of good years could become the awful daggers of a downturn — they never really expected to have it happen to their own portfolio.

The thing is, we’ve been through this before–a few times. Those past experiences have informed the rules that aspiring planners are taught in the Certified Financial Planner training courses. Those rules include:

1. Don’t put money in the market if you can’t leave it alone for at least 10 years. I notice that some planners over the years have shortened that time horizon to five years. The bear market we’re wrestling with today may change their minds.

2. Diversify. I’m hearing complaints that “diversification doesn’t work,” and it’s true that in crisis situations, like this one, all types of stocks drop together. Which is why you diversify into bonds (including government bonds) and cash, as well. Those of us who have some Treasuries and cash in our portfolio are still getting our butts whupped, but not as much as those who thought fixed-income investments were for weenies.

3. Stay invested. This is the hardest part. We feel bad when we lose money–even though these losses are just on paper, and they’re no more real than our former gains were. Losses or gains only become real when we “realize” them, or sell.

But we want to feel better, and avoiding further losses can feel like the right thing to do.

It may be the right thing, if you have money in the market that should never have been at risk, or if you’re recently retired or about to retire. That’s something to take up with a fee-only financial planner.

For the rest of us, though, the problem is that we won’t know when to get back in, any more than we knew when to get out. By the time we feel comfortable enough to invest our money again, we’ll have missed most of the gains.

And there will be gains again, some day. When that day comes, we’ll hopefully be a little wiser about risk.

TAGS: financial crisis, Investing, risk, Risk-taking

As I write, the Dow is down about 500 points. Lehman Brothers is toast, Bank of America is buying Merrill Lynch and everyone’s worried about AIG, the insurance giant. The fallout from the mortgage mess and the credit crisis continues to spread; the pundits are in a frenzy of pontificating about what may happen next.

And you know what? Nobody really knows.

I have no idea if the worst is over or yet to be. Neither does anyone else. But that’s no reason to stuff our money in our mattresses and wait for the end of the world.

Unless you’re planning to retire in the next few years, all of this is just noise. What matters is what will happen in the decades to come, and historically stocks have performed better than any other investment.

So I’m staying the course. My own retirement accounts (and those of my husband) are well-diversified, so we’re continuing to invest just as we always have.

If you are planning to retire soon, or you really feel like you have to do something rather than wait it out, then get yourself to a fee-only financial planner for customized advice. You can get referrals from the National Association of Personal Financial Advisors or the Garrett Planning Network. You’re far better off getting objective, personalized advice than you are going off half-cocked and messing up your future.

TAGS: financial planning, Investing, stocks

College students are usually (and understandably) more concerned about debt than about investing, but every once in awhile we hear from one who wants to get a head start. And we cheer.

That’s because investments made when you’re young–in your teens, 20s and 30s–have decades to grow and compound (that’s when your returns earn returns). There’s nothing like time to transfer even small sums into sizeable fortunes.

Simply put, starting to invest while you’re young is one of the easiest ways to get rich.

For example: Leah, a college sophomore, recently wrote to ask advice on how to invest. She has $5,000 saved up.

If she invested that $5,000 mostly in stocks or stock mutual funds, chances are excellent that she could earn an average annual return of 8% or better over the coming decades. That means her $5,000 nest egg would be worth more than $100,000 by the time she retired.

Where to put the money? The answer: somewhere cheap. No investor wants to pay unnecessary fees and expenses, but the damage multiplies the longer your money is invested. If Leah chose investments with expenses that trimmed just 1% of her returns each year, that $5,000 would grow to $71,000–or about 30% less.

So: look for low-cost investments like index mutual funds. And to make your financial life even easier, consider a target date maturity fund such as Vanguard Retirement 2050 or T. Rowe Price Retirement 2050.

Target date funds do all the heavy lifting for you. Not only do they pick the investments and the asset allocation (how your money is divided among stocks, bonds and cash), but they gradually adjust the portfolios’ investment risk as you age. (The numbers refer to the year or decade in which you plan to retire…Leah’s got about 40 years in the workforce ahead of her, so 2050 would be around the time she will probably quit work. If she were 10 years older, she might pick a 2040 fund).

Just about every mutual fund company and brokerage offers target date maturity funds. So do most 401(k)s. They’re a great way to get started with investing and to simplify your finances.

Here’s to a rich life, Leah!

TAGS: Investing, retirement, target date maturity funds, Women and Money, young investors

If you’re anything like me you’ve got a little jar or bank (in my case a 5 gallon plastic water jug) where you save loose change.  The last time I emptied mine I had over $600 in “found” money.  But Marie C. Franklin, writing in The Boston Globe, has an an even better idea that I just had to share with you.  

Marie saves every five dollar bill that passes through her hands.  For example, if she buys something for $12.99, she takes five dollars from the change and puts that in an envelope.   When the envelope has $50 in it, she puts that into an interest bearing savings account and when the account reaches $2,000 she rolls that over into a CD.

The beauty of Marie’s idea is that it doesn’t require a lot of effort or a major lifestyle change.  In fact, five dollar bills are ideal because there are fewer of them in circulation than ones, tens, or twenties.   An added benefit is that it encourages you to spend mostly cash since you can’t get a five dollar bill back from a credit card purchase.

Now are you ready for this?  In just three years Marie saved a whopping $12,000!  And you can tool  Share the idea with friends and make a contest out of seeing who can have the most five dollar bills saved by the end of the year.  Or encourage your children to save by modifying it to save one dollar bills in change from either their purchases or yours.  Consider adding further incentive to save by matching each one dollar bill that they save.

TAGS: Investing, loose change, Marie C. Franklin, Saving, The Boston Globe

When we lived in Laguna Beach, my husband met a man who had two pre-teen daughters. The dad talked about the girls’ latest adventure: learning to scuba dive. My husband wasn’t a parent yet but wondered aloud if the man worried about the risks involved. The father replied that of course he had concerns, but that he wanted his daughters to learn how to gauge and take calculated risks.

Risk is a key part of anything worthwhile. When we fall in love, we take a risk. When we ask for a promotion or start a business, we take a risk. When we invest, we take risks. A life lived without risk, or one lived in constant search of elusive security, is a life unlived.

These may feel like risky times, with the economy in trouble and housing prices in free fall. You may feel like yanking your money out of the market and stuffing it in your mattress. But in risk lies opportunity, and you can bet the seeds of future fortunes are being sown right now by people who have learned to take calculated risks.

TAGS: Economy, Investing, recession, Risk-taking

Earlier this week I had a conversation with a woman who asked me to review her resume.  I made the assumption she was looking to get an in-house job and gave her suggestions for how to make the resume appealing to employers.  She had a strong background as a writer and editor and I could see her working in the communications department of a large company or advertising firm.  About mid-way through the conversation she stopped me and said, “What I really want to do is be a screenwriter.”  I should have known — half the people in the Los Angeles want to be screenwriters.  But I took a risk and said, “As best I can figure from your resume you’re around 45 years old.  Unless you’re telling me you have several hundred thousand dollars in the bank for retirement you need a job.”  As it turns out, she was living on the edge financially — and she’s not unlike so many other women. 

Listen up, girlfriends (and I don’t care if you’re 25 or 65) — if you’re lucky, you’re going to live be an old lady.  If you don’t want to be living on the financial edge for the rest of your life you need to be thinking about how you’re going to get rich.  It’s not a four-letter word, you know.  In my book Nice Girls Don’t Get Rich I define rich as having all the money you need to live your life the way you want free from concerns about money.  Doing well and doing good are not mutually exclusive.  No one is ever going to take as good care of you as you are going to take care of yourself.  I can tell you horror stories about women who thought they would be married to the same man for the rest of their lives only to find themselves divorced and with no or few financial resources of their own.  So here are some tips:

1. Have a financial goal.  There’s not a woman on the face of the earth who doesn’t know what she wants to scale to read when she steps on it.  But ask a woman how much money she needs to be rich or what she needs for retirement and she’s like a deer in the headlights.  A financial goal helps you prioritize your spending — and saving. 
2. Pay yourself first.  When you get your paycheck and you’ve paid your rent or mortgage, utilities, car payment, etc. you’re not finished.  One other “must pay” is your retirement account.  It’s not optional.  It’s required just like all of your other bills.  Then, after you’ve paid yourself, what’s left over you can spend on “nice to have” items. 
3. Stay involved in your finances.  If you’re married or partnered, don’t turn the finances over to your mate to worry about or handle. Be involved with where that money is going.  If something were to happen to your partner (either through death, divorce, or incapacitation) you need to know where the money is and how to handle it.  If you doubt me, read Barbara Stanny’s book, Prince Charming Isn’t Coming.
4. Learn about finance and investing.  Our own Liz Weston (www.asklizweston.com) and our friend Barbara Stanny (www.barbarastanny.com) have websites with plenty of tips to help you become more financially savvy.
5. Buy a home.  I know, the market right now is in a slump, but this is the perfect time to get into your first home.  Real estate has traditionally been a great way to create equity over time and I have no reason to think that will change for the long-haul.  Just beware of shady financing deals.  If it seems too good to be true, it probably is.  Too many women wait to get married to get into their first home — don’t be one of them.  Your first home doesn’t have to be your last.

TAGS: financial planning, Investing, retirement planning