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September 17, 2008
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As I must say, please do not take this as investment
advice.
But as it can be useful for us each to share our
strategies during these difficult times, I offer my current
investing setup fyi.
I actually have been in this setup for a while now.
I am out of mutual funds and stocks, with all of my assets in money
markets or other cash equivalent savings. Truer cash
equivalent savings is better, such as CD's, but many IRA's don't
provide that as an option, as is the case with some of mine.
And so that money sits in money market funds.
I have reduced my contributions to retirement
accounts only to that portion my employer matches, and all of that
goes directly into money market. The additional portion I used
to contribute I have opted to no longer contribute at this time.
Instead, I take that money and do one of three things
with it:
1) Put it toward debt I owe
2) Save it in cash equivalents
3) My favorite investment of the moment, the
US Government I-Bond series
Why I-Bonds? Well, for one thing, they are
guaranteed to 1) never lose value; and 2) always earn more
than the rate of inflation.
Currently, I-Bonds are earning about 4.8%.
Compare that to the market ride going on out there, and that is
pretty nice. They only change the rate once every six months,
so you don't have worry about daily fluctuations. Until they
set another rate in November (they are set November and May), I am
guaranteed that 4.8% rate. And in November, the rate will be
guaranteed to be higher than the rate of inflation.
You can cash I-Bonds in after just a year if you
chose. And if you use these bonds to pay for, say, your
child's college or other qualified education expenses, you don't pay
Federal taxes at all.
So I have security, a nice, guaranteed earning rate
which is always above the rate of inflation, even in the case of a
negative inflation rate (ie deflation) they are guaranteed to not
decrease in value (ie the lowest rate they will ever earn is 0
percent, they can't go negative,) and I can have a great tax savings
if I use them to save for my child's education.
But above and beyond all of this, to me, at this
time, it is important to be patriotic. I don't want my
government to have to be beholden to China. When I buy these
bonds, I am the one holding the investment in the greatest country
to ever exist, the United States of America.
It's not only my best investment at the moment, it is
the one that feels the best.
So to sum up, I am paying down debts, have basically
no risk, and am earning decent interest. In short, I am taking
good care of my financial situation and putting myself in a strong
position while helping my nation stay in a stronger position, by
keeping our bond debt here at home.
Back in World War II, Americans were called on to buy
bonds. Now you can invest in Bear Stearns or Lehman or whoever
is left standing. But my faith, and my heart, is with my
country. And now, so is my money.
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