Friday, March 7, 2008

Where to Put Your Money in 2008 (A Novice's Observations)

Important disclosure: I am NOT a financial advisor, or in any way a formally educated professional in the realm of economics. Marketing is more my territory, which pretty much resides at the opposite end of the spectrum compared to finance. However, I do like to watch my money and make sure I'm doing the best I can with it, so I'll read various prudent publications, including, Money Magazine,, and so forth. (For the record, I focus on reading about investing "basics" such as saving money, avoiding debt, investing in the stock market, and home equity issues. I personally don't have the time or desire to get into more complex and exotic financial alternatives like options, municipal bonds, futures, etc. Those are way above me at this point in time.)

And from what I've been reading, there isn't much that's enticing about today's financial markets as we look at the strong possibility of a pending recession. So here's the situation we're in, as far as my amateur financial mind sees it:

-Stocks are taking a plunge.
-Housing prices are dropping as foreclosures go up and fewer people are moving in general
-Interest rates for CDs, savings accounts, etc. have dropped in recent months
-People are generally not spending much
-Debt levels for households seem to be rising, and many banks are in a credit crunch
-Taxes are historically rather low, but likely will be rising in the next few years as we have to pay off many expenses, such as the war we're in now, social security, etc.

All in all, not much to smile about there. But this leaves the important question: Where should I invest my money in 2008? Here are some possibilities:

-Invest in stocks. The market could keep dragging for a while, but the rebound could be here in the next few months, meaning you'll have a strong chance of getting a surge somewhere down the road. Stock investing is always the best long term plan for most people, so ignore current trends and just keep investing over time regardless of what Mr. Market is doing.
-Pay off debt. If you're not intrigued by the stock market for the short term, perhaps now is a good time to focus on lowering your credit card or other debt payments. This is a must if your interest payments are high to begin with (say 4% or higher), but even if they're lower, perhaps it's a good idea to get a head start since saving your money in CDs or money markets doesn't pack as great a punch as it did a few months ago. Chipping away or eliminating credit card debt or high-interest loans will go a long way to helping you, plus you'll feel less stressed about having to pay the bills.
-Put more money in your home equity. I've heard the expression that paying off the principal on your home is kind of like forced savings, and perhaps now's a good time to build on that. Doing this allows you to invest in yourself essentially, though the returns over the long run will not be as strong as investing in the stock market.
-Put it all on "black". Hmmm, okay, gambling probably won't get you ahead anytime soon so you might want to ignore that suggestion. But hey, it's your money.

Hope you enjoyed these random, simplified thoughts. While I'm no expert, these ideas could serve as a starting point for further research in your monetary plans. Good luck!

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