Investing Tips for 2011 From Ratings Guru Martin Weiss
Martin D. Weiss, author of The Ultimate Money Guide for Bubbles, Busts, Recessions and Depressions, told WalletPop in a telephone interview that he "foresees more bubbles and busts ahead."
"The first bubble and bust was tech stocks in the early 2000's and the second was housing. It looks like we're moving into a third one. We may see a bust as governments are forced to slash their budgets, lay off core personnel and reform pensions."
To protect yourself and your money, here are four steps he recommends to take:1. Make safety a priority
With the economy sending out mixed signals, the primary aim should be getting your money returned rather than getting a return on your money, advised Weiss, who is also founder and chair of Weiss Ratings, Inc., the country's leading independent rating agency. Build up a bigger cash cushion than ever before by investing less. "These are uncertain times and to invest whole hog is imprudent."
He also urged keeping a small amount of cash in your local bank for daily expenditures and turning to the U.S. Treasury for your checking needs. A U.S. Treasury-only money market account allows you to write checks at little cost. Fees are lower too for services like wire transfers and deposits.
"I think the Treasury money market account is safer as it's a direct obligation of the Treasury Department as opposed to a bank, which has to go to the FDIC which, for its part, must turn to the Treasury if there is trouble," he said. Just don't expect any yield when parking your money with the federal government.
2. Cut Costs
That mean paying off any debt you may have, selling off the home that is blowing a hole in your bank account, and cutting up your credit cards. Another way to trim your monthly expenses: don't buy life insurance.
"Not everyone needs life insurance," said Weiss. "Like any other financial product, there is a benefit and a cost. Life insurance sales are driven very hard by a heavy commission system in the industry. There is a tendency for the salesperson or financial planner who is commissioned based to say that no matter who you are and where you are in life, 'you must have life insurance.' That is not true."
If you feel you need life insurance, be sure to check on the health of the insurer. You don't want to invest in an insurance company that will die before you do.
3. Cut your Losses
Buy and hold simply does not work in today's turbulent times, said Weiss. Real life intrudes, like a loss of a job, a loss of a business or lower income. You need cash in order to live. Holding onto a stock or bond in the hopes that things will improve may, in the end, force you to sell at rock bottom prices.
"In today's uncertain times, stumbling from bubble to bust, it's best to be more nimble," he explained. "That doesn't mean day trading. But if a stock is down 15% to 20%, it's best to call it a day."
Invest with Caution
If you're able to set aside money for retirement and want to invest, be wary. Invest only in stocks that are less volatile, have steadier dividends, and for more protection, to invest in areas other than the U.S. markets.
For those who will check on their investments once a month, Weiss recommends looking into asset classes beyond stocks and bonds: precious metals, currencies and exchange-traded funds (ETFs). To make doubly sure your money is protected, invest in inverse EFTs, funds that do well because the markets are down.