In lean times, distinguish between needs, wants

The Ticker

November 09, 2001|By Julius Westheimer

HOW DO YOU protect yourself in a rocky economy? The AARP Bulletin, November, suggests:

"Cut down on unnecessary spending. It's just ascertaining the difference between a `need' and a `want.' Do you really `need' that latte every morning?

"Pay off credit-card debt. With fees and interest rates on credit cards as high as 18 percent, there's no way you're going to get that back in the financial markets.

"Don't panic sell or panic buy. The worst thing you can do is to make immediate changes out of fear. Avoid knee-jerk reactions.

"Go over your portfolio with a fine-toothed comb. Don't hang on to stocks when you shouldn't. Let bygones be bygones."

"Think twice before retiring. If you're retired and your income has seriously dwindled, you may need to get a job -not easy in this economy.

"Take advantage of low interest rates. Although low rates have reduced income on CDs, money funds, etc., they are a boon to anyone seeking lower mortgage rates or a car loan."

MONEY MATTERS: "Investment advisory fees are mostly tax-deductible if they exceed 2 percent of your adjusted gross income. This regulation does not apply to management of tax-free bonds." (Bill Urban, tax adviser)

"November is historically the second-best-performing month of the year, with the S&P index rising 1.7 percent on average over 52 years. Only December is better, ahead 1.9 percent. All odds favor a decent November 2001." (2001 Stock Trader's Almanac)

"Bonds tend to outperform stocks in a sinking economy, and with significantly less risk. Emphasize high-quality issues, with top ratings from Moody's and Standard & Poor's. If you are in a high tax bracket, buy tax-free municipal bonds." (Lisa Black, portfolio manager, $6.5 billion bond portfolio)

"Dollar-cost-average new investment money. Bear market bonus: You are able to buy more shares when prices are down." (David Geller, financial planner)

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