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Here are some investing ideas to consider for your money.  There are both short term and long term strategies, and you should always carefully consider whether your investment will be for the short term or long term.  Keep in mind that investing money for the long term that might actually be needed in the short term could cause you to pay penalties when you need to get the cash.  And always, always check with an investment professional for advice.

THE LURE OF PENNY STOCKS

Update April 14, 2014  What makes penny stocks so attractive is that they are cheap.  These shares of publicly traded companies can literally be selling for pennies a share and when you have a stock that cheap even a one-cent or two-cent move in the stock price can mark a big percentage change.  And if you have enough of those shares, a couple of pennies can mean a big percentage change in the value of your investment.  But take my word for it, penny stocks go down and go up.

When a stock selling at 10-cents a share moves by one cent, that represents a 10% move. 

Alot of people do buy into this kind of ride and they hope that they jump on the stock before it pulls out of the station.  But what if a penny stock that you bought at 10-cents goes to 5-cents?  Well, that's a 50% drop in your investment.

Twice in my life I gambled on penny stocks because they were cheap and they had a good story.  A good story means the company has a good idea but isn't necessarily making any money.  So be careful about "good stories."

The last two times I bought penny stocks I lost on both of them.

Penny stocks are pretty much like a slot machine in that a small bet can return a big win.  But that small bet can also be lost.  But it's the lure of the big return that makes penny stocks a dream play in the stock market.

UNITED STATES SAVINGS BONDS 

Do you have a United States Savings Bond?  Chances are you have many savings bonds that you accumulated over the years-- perhaps you got savings bonds when you or your children were born, or you got savings bonds for birthday presents or graduation gifts, or you got savings bonds for Bar Mitzvah or Bas Mitzvah gifts.  So, how much are your savings bonds worth now?  Remember, savings bonds stop earning interest at some point and you don't want to keep savings bonds that have stopped earning interest.  Do you need extra cash?  Then check your bonds with the calculator below to figure what they are worth now.

SPORTS AND INVESTING, THE CONNECTION

If you understand sports, and what makes a team win, you also can understand what it takes to win in the world of investing.  Take a look at the video below for what certified financial planner Brian Gilder says about winning at sports and winning when you invest.  Do you want to hit a home run in baseball and when you invest?  Sure you do-- but it's the base hits and the consistency of your play and investing that will make you a long term winner and a fnancial player that your team -- your family -- can depend on.

SOME STRATEGIES FOR HANDLING YOUR MONEY 

Update February 7, 2011  Our first strategy starts with a question:  Should you KILL or KISS your money?  Kill or Kiss your money?  What the heck is Alan talking about?  Well, when I say KILL your money, I mean keep it locked in long term accounts, such as certificates of deposit.  That should be easy to remember: KILL means Keep It Locked in Long term accounts such as certificates of deposit and bonds.  When I say KISS your money, I mean to Keep It in Short and Safe investments such as money market funds.

Now, some of the strategies for when to KILL and when to KISS your money.  You KILL your money -- you keep it locked in long term certificates -- when interest rates on savings are going down.  And that is exactly what is happening now with the various interest rate cuts by the Federal Reserve.

But you KISS your money when interest rates are moving up, and you have a chance to get a higher interest rate weeks or even days in the future.

The Federal Reserve has been aggressibely cutting interest rates in an attempt to prevent a second recession in this country, and the Fed has signaled that it is unlikely that interest rates will be rising soon.  There isn't much talk about interest rates going lower, but that is possible in this current sluggish economy.  So, this is a sign that you may want to KILL your money-- put your savings into long term certificates of deposit to protect it against future rate cuts.  Keeping your money now in short term CDs or even money market funds may mean that you will get even lower interest rates a couple of months from now should the economy weaken again.  Now, if there was talk about interest rates climbing soon, I wouldn't suggest that you KILL your money.  Then, if higher interest rates were on the horizon, you would want to KISS your money -- keeping it in short term accounts to make it available for higher rates later.

LADDER YOUR MONEY

But if you have a lot of savings, you can always use the method that professional money managers use-- they ladder their money.  What's a ladder?  Well, think of various types of savings accounts as having various interest rate steps, or rungs on a latter.  Short term accounts with the lowest rates are at the bottom of the ladder, and very long term accounts with the highest rates are at the top of the ladder.  When you "ladder" your money, you are putting various amounts on each step or rung with increasing maturities and increasing rates.  In effect what you are doing is diversifying your money and spreading it out over time and rates.

Laddering your money makes sense because as each "step" or rung matures or comes due, you can roll over that amount to the interest rate on the new ladder -- with its new steps and new rungs.

Laddering follows that old wise advice-- do not put all your eggs in one basket.  In other words, don't tie up all your money into one CD and instead spread it out among various CDs with various interest rates, that mature at various times.

One more note about your money in CDs:  It also makes sense to keep your money in several Certificates of Deposit instead of one larger CD just in case you need to get at your money.  It is better to "break" one smaller CD than to break a larger CD and suffer the penalty of breaking the larger CD.  Also, when you have multiple CDs at one bank, you might find there is an interest rate bonus for the additional CDs.

DOLLAR COST AVERAGING, AND ITS PITFALLS

There are lots of theories, which have become plans, for how to invest your money into the stock markets.  One of the most popular is the plan of "dollar cost averaging."

Dollar Cost Averaging tells you to keep buying shares over time, and over time the average price of your shares will be lower than the selling price in the future.  Yes, this works very well if your stock price is higher in the future than the average of all your purchase prices.  For example, you buy ten shares a month at $10 each for the first year, and then the second year you buy another ten shares a month at $11 a share.  And then in the third year you sell all of your stock for $12 a share.  This is the ideal situation for "dollar cost averaging"  -- when prices rise over time.

But what do you do when stock prices are not moving up consistently, or they are stalled or are even moving lower?  Then, do you still want to risk "dollar cost averaging?"

This is when another theory or plan comes into focus, and this one also has a slogan you can follow: do not throw good money after bad.  This is not too difficult to understand or to follow.  If you have a winning stock, you can keep buying shares of that stock as it rises, and hopefully down the road the selling price will be higher than the average of your buying prices.  This is dollar cost averaging at work, again.

But what if the stock you are buying is going down in value each time you go to buy more shares?  Then you are "dollar cost averaging," but you are "dollar cost averaging down" instead of dollar cost averaging up.

The problem with dollar cost averaging down is that no one knows when a stock price has hit bottom.  You could be buying shares as they go from twenty dollars to fifteen dollars to ten dollars and never know when the stock has reached bottom.  I know that some people like the idea of buying low and selling high, but when a stock is going down do you really know how low that "low" is?

This is why I believe that dollar cost averaging "up" is an easier and simpler strategy.  So, when you dollar cost average up, you only buy more shares in a rising stock.

Buying more shares of a stock that is tumbling in price could simply be throwing good money after bad-- putting more money into an investment that is losing.

If you are going to dollar cost average, do it in a stock that is going up in price--not in a stock that is falling.  That doesn't mean you have to sell the shares you already own, but it does mean you should hold off on buying additional shares until the tide has turned, and the stock price is moving up again.

The same holds true for mutual funds-- buy them as they rise in price, not when they are falling.

Yes, use dollar cost averaging, but dollar cost average into a rising stock market, and not into a falling market.  That's how I see it.

Here on our new media website "Moneyman" Alan Mendelson who is the original Best Deals TV Show reporter on KCAL9 and consumer advocate, shows you the best deals on TV, and the best buys, bargains and where savvy shoppers go to save, and how to get the most for "your money" with the best of Los Angeles, Orange County, Ventura County, Riverside County and San Bernardino County. Some content on www.alanbestbuys.com is paid advertising. The Best Buys TV Show is a paid infomercial program which may also include news and information which is not sponsored or paid for by advertisers.

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