Even though most of you may know that your investment focus is
supposed to be long-term, I realize that it may be difficult for
you not to wonder what will happen tomorrow in the stock
market.
Even though most of you may know that your investment focus is supposed to be long-term, I realize that it may be difficult for you not to wonder what will happen tomorrow in the stock market. And the next day, and the next day – “When will my statement show a positive return?”

For those of you who are looking for an alternative to the stock market for your personal investments, let me share with you a couple of ideas. Just keep in mind that you should first make sure that whatever you decide to do, please follow your outlined long-term course of action. It is much more important to follow the path toward your goals than to go off on a tangent by reacting emotionally to what is most assuredly a difficult and challenging economic and investment environment.

For the investor who is most concerned with safety, many money managers are recommending an investment in Government Bonds. Yields with these types of investments can fluctuate. In addition, the principle amount invested can fluctuate as well. Many people believe that because Government Bonds are associated with the U.S. Government, they do not fluctuate in value. This is false. As interest rates rise, almost any type of bond will lose value. Because interest rates have recently fallen considerably, Government Bonds and similar types of bonds have performed reasonably well versus stocks lately.

For that same conservative investor who wants to avoid stocks and bonds altogether, there are a few other choices. These include bank Certificates of Deposit (about 1.50 percent for six months last time I checked) and fixed annuities. I recently saw a fixed annuity that paid the investor 4.10 percent per year for three years. This interest is tax-deferred as well. The insurance company that issues them guarantees fixed annuities. It is important to study the credit worthiness of the insurance company before investing.

Finally, many banks and brokerage firms offer money market accounts that currently pay a little bit less than 1 percent. Money market accounts are readily available to the investor which is a popular investment characteristic these days. There are other intriguing ideas, but they are too cumbersome to mention here.

How do you proceed with a strategy using these types of investment vehicles? If you are frustrated with stocks and mutual funds, but at the same time you believe that it is a good time to buy stocks (because you feel prices are low), consider dollar cost averaging. Dollar cost averaging involves continuous investments in securities regardless of fluctuating prices. The investor should consider his or her financial ability to continue purchases through periods of low price levels. Dollar cost averaging does not ensure a profit. I have mentioned this strategy before, but here might be a good way to use it:

Make an investment in a Ginnie Mae fund. Each month, choose a day for a fixed amount of that Ginnie Mae investment (for example, 2 percent) to automatically go into a good blue chip stock fund. That way, you are earning interest on the Ginnie Mae fund while a small portion of that money gets invested periodically into the blue chip sector of the stock market. The potential advantage of this strategy is twofold: First, you are earning interest on the Ginnie Maes, and second, you are hopefully investing in the stock market at low prices. Of course, you will not know if those prices are indeed low until later, but you are hedging your bet with the Ginnie Maes. I think this methodology has merit for some investors. Everyone is different and the Ginnie Mae dollar-cost-averaging may not be best for you. However, when you are programming your game plan, maybe keep it in your arsenal.

Recent stock price movement will probably be recorded in history books. Your grandchildren and their grandchildren and their grandchildren, etc. will most likely read about it. You can tell them that you were there. Hopefully, another bull market soon, you can tell them that they participated in that increase.

-Jeff Welch helps individuals with long-term financial planning. He is a registered representative of and securities offered through Financial Network Investment Corporation, member SIPC. His office is located at 339 Seventh St. in Hollister. Phone 630-1525.

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