When the stock markets are beginning to move up again, it is a good time to 'buy low' - select companies that have a history of a high dividend yield AND have shown relative stability during the economic downturn.
Do you have the right mix of investments based on your age or near-retirement status? As you get closer to retirement, you may want to consider moving towards a 40% equity, 60% fixed income balance. Despite the decline in the stock market and concerns about the economy, you need to be careful not to overreact.
Government bonds are a good long-term investment. Bond prices move inversely to interest rates. When interest rates go up, bond prices go down and when interest rates go down, bond prices go up. Of course, if you plan to hold the bond to maturity the value of your bond doesnt change because interest rates change. Youll still get the amount promised when you bought the bond, all other things being equal. If you plan to trade bonds, be sure you understand the interest rate risks involved and how holding long-term bonds increases that risk. You can sign up for Treasure Direct to invest at http://www.treasurydirect.gov/tdhome.htm
With a $1 value menu and 4th quarter growth, McDonald's Corporation (MCD) would be a good investment for 2009.
Companies that generally still do well in a recession are involved in health care and produce or sell consumer necessities. Candidates include: Abbott Laboratories (ABT) , CVS (Caremark), Kraft Foods (KFT) and Wal-Mart (WMT).
A good dividend paying stock is Johnson & Johnson (JNJ). They sell everything from bandaids to drugs, and are little affected by the changes in the economy.
Capital Gains can be offset by capital losses, so selling stocks, mutual funds and other investments for a loss can help your tax situation.
Look to the relatively recession-proof business of government contracting for an investement opportunity.
If you need to reduce your capital gains, one strategy is to unload a few loser stocks.
Lower your credit card rates now, by asking your credit card companies for a better deal. Take advantage of 0% balance-transfer offers and payoff the balance within the prescribed time. You can save money by paying less interest.
In this roller coaster economy, it is important to stay out of debt. If you plan to retire soon, paying off your mortgage will give you a lot more flexibility, especially if your expenses have increased and your investments are down.
Don't overextend yourself by tapping into a margin account for funds. If you do have money to buy, look for big companies that have a high return on investment, such as Walmart, United Technologies, Exxon and IBM.
There are some good buys on the stock market - I'm buying Microsoft (MSFT on the NASDAQ exchange). It's a strong company, with no debt, and a 17% return on investment rate.
When the roller coaster ride of the stock market is on, you'll take a loss if you panic and sell low. If you have good stocks, just hold onto them... they'll go back up eventually.
Charles Coker, CPA One Skyline Place, 5205 Leesburg Pike Suite 213, Falls Church, VA 22041 Phone: (703) 931-3290 Fax: (703) 931-3690 Email:
