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So the Stock Market Takes a Dive... No Problem
By Erin O'Briant
I'll admit it: When the stock market began zooming up and down this summer and the TV pundits started talking about bears on Wall Street, I got nervous. After all, I had $140 invested!
More importantly, I was working as a freelancer. If the economy went into the tank, was I going to lose my job and end up in the poorhouse?
Well, in the opinion of two Noe Valley money experts, I probably have nothing to fear but fear itself.
"This is still a great time," says Fern Larocca, owner of a financial consulting firm called Advanced Financial Designs and an 18-year resident of Dolores Street. "The economy is very strong, we have low inflation, low interest rates, low unemployment. And the shops in Noe Valley seem to be thriving. I think they're even going to have a good Christmas shopping season."
"I have confidence in the American economy," agrees Jon Richards, a stock market expert who edits a financial newsletter, NoteWorthy Investments, from his home on Hoffman Avenue. "This isn't the time to panic, unless you think it's Armageddon -- which I don't. This is the time to buy."
And though the average Noe Valley resident may not be gobbling up stocks right now, most folks don't seem overly concerned.
"I'm not in the stock market to make a quick buck," says Amy Royer, a Fair Oaks Street resident and member of a Bay Area women's investment club. "Sure, the [August] crash has brought down the value of the club's stocks, but in the long term we'll still make good money."
So maybe I did get carried away with my visions of debtors' prison. Anyway, I'm glad to know that while things may be a little tighter over the short term, we're probably not headed for another Great Depression -- whew!
You Don't Have to Be Rich to Invest
I figure, if those "in the know" are this optimistic when the market is gyrating like a belly dancer, maybe I should add to my measly $140 investment. But I'm certainly not wealthy. Where should I start?
How 'bout with whatever I can handle.
"Sometimes people think investment clubs are just for the rich," said Royer, "but that's not true."
The 10 to 12 members of her investment club each contribute $40 a month. Then they use the group's funds to purchase stocks they pick together. "Some investment clubs want you to pay $500 a month or more, but it doesn't have to be like that," Royer said.
Larocca recommends that non-investors start by looking at their employer's 401(k) plan, a tax-free retirement fund offered by many companies. "A lot of companies will match your 401(k) funds -- so that's free money," Larocca said. "If you don't have a 401(k), you can put money in an IRA [individual retirement account] and get a tax break. Or you can put as little as $100 a month into a no-load mutual fund."
"My advice is to buy good no-load mutual funds," echoes Richards. "No-load" means that you don't pay a fee to invest in the fund.
If you're feeling adventurous, you can research mutual funds on the Internet at morningstar.net or talk to a broker or financial planner who can recommend funds to you. They'll most likely suggest you diversify -- spread your money among a number of investments -- and keep your hands off the dough for as long as possible.
It might interest you to know that since 1948 the S&P 500, which measures the stock prices of 500 leading U.S. companies, has experienced 10 "bull" markets, periods of extended growth. The average length was 3 years and 4 months. During the same 50 years, the market went through 9 slowdowns or "bear" markets. The average bear market lasted only 1 year and 4 months. Until this summer, we'd been riding high for more than seven years. So we're way overdue for a bear market. But even if it's now upon us, it shouldn't be around forever.
Anyway, once you decide on your investment goals (and time horizon for achieving them), it's just a matter of scraping that $50 off the top of your paycheck each month.
Saving Is Your Top Priority
You know you should be saving -- socking money away into a savings account, a bond fund, or maybe under your mattress. But many of us barely break even at the end of the month, leaving nothing to fall back on. Here are some saving tips from my panel of experts:
* Don't let credit card debt keep you from saving. Even if you owe money on a credit card, you still need to hold back something each month for yourself. Meanwhile, stop using your credit cards, and consolidate all your debt on one low-interest card. Then pay it off every month.
* Get financial counseling. A professional can help you make up a budget you can live with, assess your debts and income, and show you how to make better financial decisions. The National Center for Financial Education at (619) 239-1401 or www.ncfe.org and the Consumer Credit Counseling Service at (888) GO2-CCCS or www.credit.org are good places to start. Both are nonprofit organizations.
* Keep track of your spending with a computer software program, which can help you budget everything from your grocery list to your retirement.
* Start now and get into the habit of saving each month. Even if it's 10 bucks.
* Pay yourself first. The first check you write each month should be to your savings account, mutual fund, or 401(k). Better yet, deposit the money through automatic bank drafts -- that way you'll never miss it.
10 Percent Is a Good Rule of Thumb
One question on everybody's mind is, how much should I be saving? Larocca recommends that you skim off about 10 percent of your gross earnings each month.
Richards says there's no strict number. What you save depends on your resources, family responsibilities, and personal goals. But the amount should be a sum you're comfortable with.
Says Richards, "Do whatever you need to sleep at night."