How to be Rich, Happy and Free from Scams

Put your prospective planner's frankness to the test with these four tough questions. By The Mole, Money Magazine's undercover financial planner (Money Magazine) -- Conventional wisdom says you should pick a financial adviser you connect with, and one who has good references and no problems with regulators. Sure, that's a good way to start, but it won't tell you if he or she is likely to chase market trends or put a desire for fees ahead of your best interests. The questions below will give you insight into any planner's style and candor. 1. What was your largest mistake over the past 10 years? Be wary of self-serving or trivial examples, such as "I'm too dedicated to my clients." I'd rather hear my adviser say that she used to underweight international stocks or even tried to time the market and failed. The key is that she's willing to admit to real errors and can tell you what she learned from them. After all, nobody's perfect. If Warren...

Human beings tend to get emotional in a down market. But those that can endure the pain, will reap the benefits. By The Mole, Money Magazine's undercover financial planner NEW YORK (Money) -- Question: I'm seeing my account values take a daily dive and I've lost all of my gains from the past year, and then some. I'm hearing recession predictions and I'm wondering if I should cut my losses and get out of the market now. Do you think this is the beginning of a bear market? The Mole's Answer: Don't panic! The bad news is I have absolutely no idea what the market will do in the short-term, nor does anyone else. The good news is that I'm 100 percent confident that: The market is a great long-term investment. The ups and downs of the market impact our financial futures a whole lot less than our reactions to it. Unfortunately, we seem unalterably programmed to buy high and sell low. And even though history shows us time and again the error of this, we keep do...

Indexing and dollar-cost averaging are always sound approaches to long-term investing, but right now they're especially timely. By Michael Sivy, Money Magazine editor at large NEW YORK (Money) -- Volatility. That's the one thing that seems predictable in today's stock market. Share prices are swinging up and down more violently than they have anytime in the past five years. And that seems likely to continue. Most bear markets are the result of economic recessions. As investors begin to anticipate weaker corporate profits, they pay less for stocks. Once it looks as though the downturn is almost over, however, investors become more enthusiastic and stock prices typically rebound. This whole process can take up to a year. The current bear market, however, is the product of an unexpected economic shock - gigantic losses at banks because of irresponsible subprime loans. That's an important distinction because it makes market moves more sudden and unpredictable. We still don...

by Henry Hebeler Recently I got one of those invitations to attend a get-rich-quick seminar. Included were two free tickets valued at over $100 each. The seminar promised to provide life-altering financial strategies. It had been a while since I attended one of these seminars, so I decided to go. The meeting was held in a lavish setting: an expensive hotel ballroom lit with fancy chandeliers. The room was equipped with a PowerPoint display on a huge screen. Attendees began to fill the room, directed by lots of assistants who gave out colorful brochures. Precisely on time, the speaker walked up to the podium and took command. I'll call him Slick (not his real name, of course, but it fits). Slick described himself as a self-made, very wealthy man who made a lot of money in a company buyout, real estate and then the stock market. He had retired very young, got tired of living the easy life and then decided to help others learn how to be successful investors. He was an excellent ...

by Tim Paradis Investor Urgency Builds As Market Swoons but Answer Is the Same: Don't Panic Don't panic. That advice could probably serve as a stand-in for "hello" at many brokerages these days. With Wall Street stumbling -- particularly since the beginning of the year -- uneasy investors are calling on financial advisers with an urgency not seen since the start of the decade. Like last time, when the economy was reeling from the flameout of technology stocks and the Sept. 11 terrorist attacks, long-term investors who can resist giving in and selling out will likely emerge the strongest. But as before, the latest stock market pullback has unnerved individual investors, many of whom are ferrying money from equities into bonds and cash. In the week ended Jan. 15, when many analysts were predicting an imminent cut in interest rates, assets in money market funds ballooned by $15.96 billion to a high of $3.17 trillion, according to iMoneyNet. And investors p...

by Alan Murray Will the baby boomers' retirement cause the stock market to go bust? That question, studied and debated for more than a decade, is no longer hypothetical. Kathleen Casey-Kirschling, the former New Jersey teacher who was born one second after midnight on January 1, 1946, became eligible for Social Security benefits this New Year's day, making her the first splash of a demographic tsunami. Over the next three decades, nearly 80 million boomers will join her. To some prognosticators, the prospect of this swollen generation stepping down is a fright -- many times worse than the stock market's tumble last week. If the baby boomers stop working, they ask, who will produce the goods and services to keep the economy growing? If they stop earning, who will pay taxes to fund their Social Security and Medicare checks? And if they sell off stocks and bonds to finance their golden years, who will buy? The answers to those questions remain covered in fo...

A lot of investors go about their investments in an illogical way. They are given a tip from their broker on basis of some rumor or news. They impulsively buy the scrip and afterwards wonder why they bought the stock. Such Behavior is foolish and must be avoided. The moment you receive a tip on a stock, confirm the news on Reuters or other business websites. The news, if any, will be on these sites; be it dividend payoffs, announcements, earnings, corporate move to buy another company, fight of top management or any other news. Broadly one should abide by following guidelines:- 1. Business of Company Buy stocks of only those businesses that you understand. Once you have bought a stock, keep watch on quarterly results of that company and also keep watch on the general trend in the sector of that stock. 2. Study the past performance All companies present particulars of their fiscal operation in their yearly reports. Study their past performance and then invest. 3. Know the promoters The ...

By Gerri Willis, CNN We've been hearing how bad the economy is and how a recession is looming. But before you start hiding your money in your mattress, remember there are opportunities in a down market. 1. Silver Lining for Homebuyers While it's true housing values have come down - dramatically in many places. And likely home prices are heading lower. So, if you're in the market to buy, now is the time to start the process. Start to look at markets you're interested and gauge your local real estate market. The other good news is for first time home buyers looking for a traditional mortgage. Both the 30- and 15-year fixed-rate mortgages are at their lowest levels since July 2005, according to Freddie Mac. Even if you're not buying a home, there's good news. Rent prices aren't really moving up much at all. According to data from CNNMoney.com and Rentometer.com, the median rent check barely moved at all. In some cities like Washington, Phoenix and Miami, rents ...

By Tim Paradis, AP Business Writer While Wall Street Debates Likelihood of Recession, Investors Shouldn't Wait to Place Bets NEW YORK (AP) -- While Wall Street debates whether the U.S. is headed for recession, investors don't have to wait for an answer -- they can take steps to limit their risks beyond simply defensive moves like rushing into bonds or converting investments to cash. A slowing economy requires investors to become more selective and take a long-term view while also looking for stocks and other investments that might fare better in a sputtering economy. Companies involved in agriculture, fertilizer and commodities are poised to do well because of increasing demand from fast-growing economies including China and India, said Todd Salamone, vice president of research at Schaeffer's Investment Research in Cincinnati. "Despite all the talk about recession, despite all the slow growth -- these are the sectors that have bucked the trend," he said. Salamo...

by Ben Stein Are we in a recession? No one knows. Indeed, it's literally impossible to know. A recession is six consecutive months of negative economic growth. At most, December 2007 would be our first month, so we wouldn't know until sometime in June 2008 if, by the end of May 2008, we'd been in a decline for six straight months. So no matter what anyone tells you, we can't know if we're in a recession yet. Mea Culpa The December retail sales figures were poor. Obviously, housing is weak. Autos look to be softening (good time to buy a Cadillac ). Even most commodities are off their peak. More important than any of these to us economists, however, are two factors. First, because of repeatedly being stung by losses in real estate lending, lenders are reluctant to lend, which is causing a slowdown in economic activity. Second, money supply growth has been sluggish for the last several months. This is often a signal of a weakening economy. I want to be honest here (a...

Hi guys, something to take your mind off the volatile market.... :) By Fred Reed There is near me an Asian sushi-beer-and-dinner establishment that I´ll call the Asia Spot. The region is urban, so the clientele is a mix of some of just about everything, but the waitresses are all Asian, principally Japanese, Indonesian, Vietnamese, and Thai. The Spot is a neighborhood bar. A large after-work crowd, many of them regulars, gather at happy hour. The social dynamics are curious. It would be an exaggeration to say, as someone did, that the black guys come to pick up white women, and the white men come to get away from them – but it would be an exaggeration of an underlying truth. The waitresses are a large part of the Spot´s appeal. A common subject of conversation among male customers is how very attractive these women are when compared to American women. It is not a thought safe to utter in mixed company. It is a very common thought. American women know it. Why are the Asians attractive? ...

by Jeffrey Strain It's one of life's ironies that retailers try to lure you into their stores with low prices, only to do everything in their power to make sure you spend more than you intended once you're inside. It's important to understand these methods so you don't fall for them. Double Discounts: Retailers know that most people aren't good at math, and they take advantage of this. More and more are using double discounts to earn more money while making customers think they are getting a better deal than they actually are. For example, if you are given a choice of buying a $100 item at 45% off, or buying the same item at 20% off with 30% additional taken off at the register, which would you choose? Most people simply add the 20% and 30% and assume that they are getting 50% off the item. When you do the math, however, it doesn't work out that way. Taking 45% off of $100 means the item sells for $55. But if 20% off $100 is $80; taking 30% off that ...

by John Rosevear Have you read (or seen) The Secret ? Yes, that Secret, the one that promises unlimited gains from the application of something called the "Law of Attraction." The book quotes assorted luminaries, including a "channeled" spirit being and a few people with mysterious degrees in "metaphysics" from heretofore unheralded institutions of higher learning. The Secret is available in book and DVD versions. I recently watched the video at the behest of a friend, and my impression was that despite the very slick presentation, dubious "experts," and New-Agey-magical-thinking context, there's actually some useful perspective in there. As you might have heard, the gist of The Secret is that much of what goes on in the universe is governed by that "Law of Attraction." This "law" states that, on an emotional level, like attracts like. In other words, if you really feel successful on a deep-down level, you will be...

The outlook isn't as bad as many investors fear, and there are ways to keep your investing plan on track. Money Magazine's Michael Sivy has a plan for defensive investing. By Michael Sivy, Money Magazine editor at large January 16 2008: 10:56 AM EST NEW YORK (Money) -- At this point, the conventional wisdom is that the U.S. economy entered a recession in December, even though the actual evidence that a downturn has begun is quite limited. We won't really have crucial data until preliminary fourth-quarter GDP growth is reported later this month. It's likely, though, that the U.S. economy will be weak through the first half of 2008 - and possibly for most of the year. So the natural question is: How much further do stocks have to fall? Are the potential losses so big that investors should be making lots of changes to their portfolios? It's certainly sensible to be somewhat defensive, whether there's a full-fledged recession or simply a slowdown. Diversification is...

Source: Deutsche Bank, Bloomberg December 27 for Friday December 28, 2007 Monetary policy was not particularly tight at any point in this economic cycle. Generally, recessions begin when the Fed over-tightens monetary policy in an attempt to dampen inflation pressures. While the Fed ultimately lifted interest rates by a substantial 425 bps in the current cycle, this was from record low levels. Real interest rates arguably never went into restrictive territory, and since the Fed was so quick to cut interest rates (-100 bps in the last three months) the probability of recession decreases substantially. In the current cycle, the real fed funds rate, defined as the level of the nominal fed funds rate minus the year-over-year change in the core CPI, peaked at 3.0% in June 2007. In the 2001 recession, the real fed funds rate peaked at 4.0%; and in the recession before that, 1990-1991, it peaked at 5.3%. The average real fed funds rate at the start of a recession is 5.0%, which is 200 bps abo...

By Larry Haverkamp (Doc Money) OH no! Inflation is coming. And lots of it. Check out the trend: Inflation in 2005 was 0.5 per cent. It doubled to 1 per cent in 2006. This year, it will be about 2 per cent. Last month, the Government forecast 2008 inflation to be 2 to 3 per cent. Now, the official forecast is 3.5 to 4.5 per cent. What is going on? We haven't seen inflation this high since 1980 and 1981 when it hit 8.5 and 8.2 per cent. The all-time record was back in 1973 and 1974 when prices rose 20 and 22 per cent. For hyper-inflation, check out Zimbabwe, Africa. Its annual inflation rate is 9,000 per cent. An expat there complained that the price he paid for his home 10 years ago will buy only one bunch of bananas today. THE BAD NEWS There are two reasons why inflation could come roaring back: demand and supply. Demand: Li Xinru lives with his wife and son on a small farm in China. Last month, the family bought their first car. Of course, the car uses petrol which adds to the wo...

Beware of annuities promising high returns at low risk. Most clients would do better investing on their own. By The Mole, Money Magazine's undercover financial planner (Money Magazine) -- Question: In "The truth about can't-lose funds," you did a good job of making fixed-indexed annuities (FIAs) look totally worthless. I provide FIAs to my clients, and I think several of your comments are not based in fact. FIAs are not appropriate for everyone but they do have their place. An FIA will not make you rich, but it is not intended to do so. What is your recommendation for the client that wants market participation without risk? The Mole's answer: You are referring to my November 8 column about an insurance product called an equity-indexed annuity, a type of fixed income annuity that promises upside stock market participation without any downside risk. I am not against all fixed-income annuities, but I am against equity-indexed annuities because the premise of these ...

By Jeannine Aversa, AP Economics Writer Subprime Mortgage Meltdown, Unemployment, Wall Street Losses Threaten to Trigger Recession WASHINGTON (AP) -- The unemployment rate leaps to a two-year high, record numbers of people are forced from their homes and Wall Street nose-dives again. Such is the fallout from a housing meltdown that threatens to slingshot the country into a recession. The big economic question these days is whether the weakening economy will survive the strains or collapse under them. The odds have grown that the economy will slip into a recession. At the beginning of last year, many economists put that chance at less than 1-in-3; now an increasing number says it has climbed to around 50-50. Goldman Sachs, the biggest investment bank on Wall Street even thinks a recession is inevitable this year. Hopeful it can be avoided, President Bush and the Democrat-controlled Congress are exploring economic rescue measures, including possible tax rebates. Federal Reserve Chairm...