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Clark reveals his personal investment strategy
July 3, 2008
It's not often that we have back-to-back Clarkonomics segments on the show. But there's been so much in the media about the bear stock market that Clark felt compelled to do it.
A bear market is when things are down 20% from their peak. That understandably has people frightened. So many folks stop Clark on the street to tell him they're dumping their mutual fund stock-type holdings and going into safe stable-value kind of things.
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CLARK'S TIP TOPICS
Find more consumer advice in Clark Howard's book, "Get Clark Smart" |
It got Clark thinking about how far down he is this year. After crunching the numbers, it turns out he's down 4.8% over the last 12 months. Sure, that hurts, but it's not a decline of 20%. So how is he "beating" the market? The secret is not that he knows about special stocks or has an exotic investment strategy; it's that he's taken a meat-and-potatoes approach to investing.
His largest allocation is putting just under 40% of his money into tax-free municipal bonds. The rest is divided evenly among large companies, small companies and the international markets. Clark also has a small amount of money in commodities and REITs.
In a word, he's diversified.
The penny-pincher also benefits through dollar-cost averaging. This means he keeps buying more shares every month instead of playing red light/green light based on market conditions. So as the market declines, his dollar buys more shares. T. Rowe Price's Automatic Asset Builder allows you to take advantage of dollar-cost averaging by investing as little as $50/month automatically out of your paycheck.
The purpose of investing is to create financial security. If you have a need to treat investing as a sport, Charles Schwab advises the "core and explore" approach. Put the money you really need to have into your core investments, similar to those that Clark described above. Then take a small amount that you won't lose sleep over and spread it around among the more volatile investments you crave.
As always, check Clark's investing guide if you're just getting started. He particularly likes the targeted retirement funds for those who want to take a "set it and forget it" approach to investing.
New student loan rates in effect
July 1, 2008
Good news for students and potential students! There are new loan rules in effect as of today (July 1, 2008). While it's a confusing system, the deals are better now than those that existed under the previous student loan rules.
Under the College Cost Reduction and Access Act (CCRAA), it really pays to be a freshmen this year or shortly after. That's because the interest rate goes down each year over the next several years. While it's 6% right now, next year it will be 5.6%. By 2010, the rate dips to 4.5% and then to 3.4% in 2011. If Congress doesn't act after 2011, the rate will then double back up!
Debt forgiveness is also a new feature of the CCRAA. Those who choose to go into public service can enjoy full loan forgiveness after making 10 years of monthly payments on their federal loans. For the complete scoop, check out Clark's CCRAA guide. Finally, if you are out of school and want to consolidate your loans, check your options at Ed.gov.
Payday lenders charge up to 1,400% interest
June 27, 2008
Payday loans have grown exponentially in states where they're still legal. The Orlando Sentinel recently had a story about a lender who went way beyond what the law permits and charged 1,400% interest! ... More
People's economic expectations the worst they've ever been
June 26, 2008
A highly respected organization called the Conference Board is known for issuing reports that usually only appeal to pointy-headed economists. But right now their reports are getting a wider audience in regular newspapers because they're so headline grabbing. ... More
Could you withstand a 50% decline in income?
June 24, 2008
According to Business Week, you now have a 1 in 4 chance of experiencing a 50% decline in your income because of a job loss. That puts most of us in a very difficult spot as the average American family is not saving and continues to live on borrowed money. ... More
More recent Money Management Tips from Clark:- Avoid the full-commission stock broker trap
- Avoid the full-commission stock broker trap
- Scams heat up when economy cools down
- The dangers of purchasing employer stock
- Free budgeting tools online!
- Clark explains confusing investment terms
- Avoid money-market funds that break the buck
- Don't let the state decide what to do with your estate!
- 75 million have no access to retirement-savings plans
- New rules coming for 401(k) investments
