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After a day like Monday – stocks down triple-digits, oil up 15% - it’s easy to want to give up on this market, this economy. But you’ve got to stay focused because if the last 10 days have taught us anything, it’s how important it is to pay attention to your money and to learn what’s going on and how it affects your mortgage, your debt, your retirement and your savings.
On Monday’s show, Carmen and our team of experts took more of your questions ranging from where best to keep your money safe to how to grow it when times are uncertain.
Q: Most of our money is invested in bonds, should we be putting more of it into stocks?
With stocks, proceed carefully. John Gannon of FINRA explained that there is no promise you will get your initial investment back when you’re invested in stocks. Bonds are a safer choice because you almost always get at least the money you put in back, plus interest. Municipal bonds are particularly secure, he said, unless the municipality defaults, which is rare. If you do choose to invest more in stocks, Carmen suggests index funds and ETFs for diversification purposes over individual stocks.
Q: I have 2 separate 401(k)s: one from my previous employer and the other from my current employer. Should I roll them into one? Are there benefits to doing that?
Yes. Rolling 401(k)s into one is always a good idea, Carmen said. Between the tax benefits and dollar cost averaging, it pays to keep your 401(k) going and maximize the benefits.
Q: Talk about timing. I started a new job and can for the first time put money into a 401(k) plan. Given all that's happened these last two weeks, I was thinking about declining until January, the next time I can enroll. I need guidance on whether or not this is a good move.
Do it now, Carmen said. Don’t wait. No matter what the market does, 401(k)s are always smart investments for the long term. Because it is pretax money, it works even when the market is down thanks to dollar cost averaging.
Carmen said she would keep maxing out the IRAs. If you put money in stocks, make sure it’s money you are ready to lose and try to stay away from investing too heavily in individual stocks – instead, go with index funds or ETFs.
Q: I recently received a settlement of $230K. Where is the best place to put it so it lasts me the rest of my life?
Think about CDs, Carmen said. Certificates of deposit are timed investments, so if you have some money you don’t think you will need for a while, lock it into a 10-year CD and feel safe knowing you will earn the interest. But never lock up too much because there are steep penalties for taking money out of a CD before its time is up.
Q: Should I sell my stocks and put the money in a CD and a little in a saving account so that I can get the money immediately in the event of an emergency or leave them alone?
Keep your money liquid by investing in a high yield savings account, checking account or money market account. Do not keep too much in individual stocks, especially if you may need to access it for emergencies.
Q: I bought two beachfront properties with 20% down. Now they’re both underwater and I’m wondering if I should foreclose? Will the banks still make me pay the difference?
It is possible the banks can still come after you even after foreclosure. Carmen and John Ulzheimer suggested trying to refinance the properties first.
Q: I'm thinking of buying AIG stock. If I do and the company starts to make money, will AIG have to pay back the government first or its shareholders?
AIG could still go down further. John Gannon of FINRA made the point that the government bailout of AIG is so complex that if you are considering taking the gamble of buying AIG stock, it is imperative you do the necessary homework to understand the ins and outs of the transaction.
Q. I have money in a safety deposit box. Will it be safe even if the bank closes?
Safety deposit boxes are NOT insured by the FDIC. Carmen stressed that people should not put cash in safety deposit boxes. Instead, go with high yield savings accounts where it is safe and can grow a little.
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