With the turmoil in the financial markets many people are wondering what they should do with their money. I don’t know what you should do with your money but I can tell you what I am doing. I just invested a little more in my Roth IRA which is 100% invested in a value stock mutual fund. I figure if the stocks were undervalued before they should really be undervalued now. It is a bit disconcerting to see my balance go down but I have faith that the market will eventually rebound. On the theory that stocks are cheap right now I hope to max out my IRA before the end of the month if I have enough cash flow.
If you’re worried about safety than putting your money in an online savings account is a safe way to go. As long as you put your money in an FDIC insured account you’re protected up to $100,000. This is a case where less risk doesn’t lead to less return when you compare them to money market mutual funds. The Reserve money market mutual fund recently broke a buck causing investors to lose part of their principal and the fund is paying less than 2%. In an online savings account such as FNBO Direct you don’t have to worry about losing your principal and it pays 3.50% APY. Why would you invest in a money market mutual fund?
I’ll end with the standard disclaimer. I’m not a financial professional and I’m not advising you how to invest your money. I’m just telling you what I am doing with my money.
I have just finished paying off all of my consumer debt and I am in the process of saving 3 to 6 months of expenses in an emergency fund. Once I am done with that I will be investing in the stock market again.
In the long run, we have to believe that our stock market will recover. How long will that take? Maybe 10 years, or even 20? I will, hopefully, retire in 30 years, so maybe I will get to buy stocks at a discount for a few years before the market rebounds. As long as you do not need the money now, a down market is not the end of the world….
That is unless the US Government decides to bail out every failing financial institution AND eliminates short selling (to protect the losers from losing more – so Un-Capitalistic)…. Oh wait, I think they did!