With risk comes reward. That's one reason why the stock market (stocks and bonds) offers a greater return than safer investments. Unfortunately, unless you're either quite lucky or time things very well, safer investments likely will not keep you even with (or ahead of) inflation -- and that's the same as losing money, which I suspect is one reason you want to avoid the stock market.

So far this year, inflation has been running at around 3.8% a year. A quick check on the Money Magazine Web site of a sample of savings-account rates averages out to around 4.8%. Money market accounts are much lower -- often as low as 1%. U.S. Savings Bonds (E/EE) purchased today are paying 3.7% -- just under the rate of inflation. Treasury Notes are paying about what savings accounts do; no improvement there.

You could consider an annuity, but the high costs of running them and their relative lack of liquidity makes them less competitive than the equities in which the annuity offerer invests.

It's pretty plain that these alternative investments probably won't do much more than keep you about even with inflation. If that works for you, great! But maybe the question for yourself is not how you can avoid the stock market totally, but how much you are willing to invest in the market to help insure keeping ahead of inflation.

Here is a link that might be useful: Money Magazine Web site interest rates

Over the long term, the stock market is where you want to be.Yes, there will be wild gyrations,both up and down..

I'll give you a personal example. i have 2 children,18 months apart in age.In 2001, after the market corrected, i stopped dollar cost averaging into 1 of the accounts, and continued to do so in the other.The account i stopped averaging into, i moved the $$$ into the account as i saw fit..since then, the account i continued to dollar cost avergae into, has not only recouped the losses from 2001, but has also outgained the account i "micromanaged"..Even so, the account also has recouped all of it losses..

If you are concerned about stock market losses, then set aside enough $$$ that will let you sleep at night, and invest SOMETHING monthly/quarterly or so regardless of which direction the market is heading..Use a low expense fund, such as those by Vanguard..A good start would be the Vanguard Total stock Market index, and perhaps balance it with a Vanguard Bond fund...good luck

You could buy a house.

And live in it.

But quite a few people say that they are expensive, right now - and may be in for a fall, which may be a serious one in some markets.

Don't be afraid to learn how money works. No one cares as much about your money as you - except perhaps someone who has a desire to move some of it from your pocket into his/hers.

I think that it intimidates some people. Or they think that it's such a big issue that they can't begin to get their mind around it.

While I was a personal financial advisor, I wanted people to learn how to manage their own money. Told them that if Mom brings home a loaf of bread from the store, puts a few slices on the supper table and Jamie Junior, coming in famished from running around all afternoon, stuffs a whole slice into his mouth at a time ...

... unless he has an awfully big mouth (bigger than mine, and I've been accused of having a rather big one, at times) ...

... he's got a major problem. Won't be able to carry on with supper till he gets a lot of chewing done - will likely have to spit some out and work on it later.

I say that learning how money works is somewhat the same - take it a bite at a time, and you'll get through a whole loaf in a week.

And there are more loaves at the store.

There are two rats that eat your cheese.

First, you have income each year.

The I R S (or Canada Revenue Agency - or whatever agency is hungry to collect income tax in your country) wants to talk to you every year about all of your income.

And they want part of it.

Also, if you invest where you get that wonderful guarantee that, along with therent on your money, they'll give you back every dollar that you gave them ...

... they never mention the other guarantee - they won't give you one dollar more, either.

And, as that principal will never make any more income relative to this year that what it earned right now ... therat of inflation will nibble a corner off ofeach of those dollars, every year.

Gotta go, for now - a friend is to pick me up here at the libvrary in 6 minutes to attend a meeting of investors that we attend monthly, have done for about 6 years, and I have to go to the car to get some charts and notes to take.

'Bye - and good luck with your investing.

ole joyful

Take it a step at a time

Treasury bonds are about 5% now and no state tax should your state tax income. They are painless to purchase online.

The stock market is a good investment. Take your time and learn the basics before investing. There are many brokerages online that make the investing easy to do.

Thanks to all of you. I do have an account with Wachovia that is "professionally managed" and fully invested in equities, and about 60% of my 401K is in equity/index/international. My problem is that I constantly monitor their performance. Wish there was an easy way for me to just check once-twice a year...

mugnaini, that simply is a matter of self-discipline. Decide that you're not going to react to short-term fluctuations in the market. Choose a couple of months in which you will look at the statements Wachovia and your 401(k) administrator send and file away the others without an in-depth review.

Another option would be to move your 401(k) entirely to index funds for various equity markets -- and maybe even do the same with your Wachovia funds. This at least eliminates the need to measure if your chosen funds are "beating the market" (most don't) and could even add to your gains by reducing the costs you pay to keep the funds running.

It's important to decide on your time frame. I know, for instance, that the money I shovel into the stock market (in mutual funds; some are aggressive, others more sedate) is for the long haul. Knowing the time frame is long term helps when the market bucks and kicks (I'm a nervous Nellie). I contribute with the Ronco grill philosophy, "set it and forget it" (well SORT of). One of the smartest things I ever did was send in a considerable sum of money in the weeks following the attack on the World Trade Center... . I saw opportunity, called the advisor guru, and began buying shares.

I also keep money in CDs and we, as a household, work to keep our expenses low. We don't live extravagently, we often "make do", but it works. Needless to say, we carry no "consumer debt"! You have to "let go" of the desire to track your money's progress.

You send your nickels out to play and they'll bring their little friends home...

Mugnaini, If you are within 1-2 yrs of retiring, then I'd be concerned with how heavily invested you are in stocks. If you are young and will be working for more years, spend more time on gardenweb.com and less on Wachovia's website.

We've gone paperless with our accounts ...except for the quarterly statements. We look at our results when the mail lady brings the mail. Pretty much we try not to bother the rest of the time. And I work for the brokerage where our money is, talk to my broker almost daily and practically never talk about specific results.

I don't think you're suffering from a case of low risk tolerance. It sounds to me like the internet isn't your friend in this case - too much info is at your fingertips -work on letting go.

Some of the most sensible investment advice I've seen comes from Paul Merriman, who is a fee-based financial adviser in the Seattle area. In a nutshell:

1) The market is the collection of all investors, which means that it is impossible to "beat the market" unless someone else does worse.

2) It is impossible to tell in advance whether an attempt to "beat the market" will be successful.

3) Therefore, the best you can ever hope to do consistently is not to do much worse than the market as a whole.

4) You can avoid doing much worse than the market as a whole by buying index funds. How much worse you do depends on what the fees are that are associated with the index funds.

5) In other words, over the long term, the best you can do is to buy low-cost index funds.

6) "The market" really consists of lots of different market segments with different characteristics, such as large-cap companies, overseas companies, etc.

7) It is impossible to predict which of these segments will do the best at any given time. As with (3), the best you can do is to avoid doing worse than average by diversifying.

8) Therefore, the best overall strategy is to buy a very broad range of low-cost index funds and hang on to them.

Merriman's website goes into *much* more detail, including recommendations for specific funds. I am not a customer of his, but my wife and I are pretty much following his advice in our own investments.

Here is a link that might be useful: Paul Merriman's website

I beg to differ from the impossibility of "beating the market" argument.
To my mind that is like saying that there is no point in doing a class homework assignment because you can just copy it from a classmate.
If you have not done the work you have failed to understand what is involved.

If I had relied on index funds I would have been caught up in two of the Canadian stock market disasters.
Those were Bre-X and Nortel for those who want to look them up.

As an example of "beating the market" I became aware of excitement about a drilling program through a friend who worked for a drilling company. I bought shares in the company they were drilling for. Once results were announced publicly and I felt that the share price fully reflected the knowledge I sold at a comfortable profit.

Perhaps even more important than making good profits is avoiding meltdowns. A former co-worker went to work for a promising looking company I had bought shares in. From him I learned that they had a short-term mentality. I sold out my position at a loss but avoided a greater loss.

Another consideration is that if I buy the market I am taking a position in companies I consider to be unethical. My personal views seem to differ from those in funds sold as "Ethical Funds."
On the advice of my broker I once bought a medical fund. When I looked at the companies held I found that there were some involved in selling what I considered to be quack remedies. I sold that fund.
Ian

Year in and year out, index funds outperform about 80% of the actively managed counterparts in their market segments. Which means that only one in five professional fund managers manages to beat the indices each year. I have no reason to believe that I can do a better job of picking stocks than people who do it for a living, and even they don't do very well.

So if you are willing to bet your financial future on having more accurate knowledge of individual companies than the professionals, all I can say is good luck.

Ditto. Most of the empirical, not anecdotal, evidence is in favor of index funds. That's not to say you can't place a very educated bet on an equity. It's just that most people don't have the information or inclination. For them to try it themselves is foolish and for them to farm it out to people who, statistics tell, get it wrong more than they get it right, is foolish as well.

In addition, those kinds of funds rarely have the lowest expense ratios -- and that can kill a lot of the good guessing.

Ian from the benighted (at this time of year) northern end of BC,

Thank you for the information.

Thank you also for your integrity - I wish more people followed such high standards.

Good wishes to you and yours for a great winter.

ole joyful

You want to avoid risk?

Don't get out of bed.

Don't eat.

Don't cross the street!

Don't ride in a *car* (it's much safer in a plane).

Risk?

It's all around us.

Get used to it.

Learn to manage it (as well as you can).

Don't forget - making a fuss about it, saying that the sky is falling, sells newspapers and keeps people watching TV.

Some people advise not to put money into the market that you can't afford to lose.

How soon do you expect that Exxon may go broke?

Go check out the chart that shows the fluctuation in their stock price over several years, and see whether you could have stood some of the drops without chewing your fingernails to the bone (or losing sleep at night).

If you're going to pay more for gas (and you know that you are) ... you may as well have asset growth and increased income to help pay for it!

(I'm not recommending that you buy Exxon, whether now or later [you should have 10 years ago, but that choice is gone], as I don't know it ... I'm simply using it as an example).

Go to Yahoo's home page, click on "Finance", then enter the symbols of whatever stock you choose in the box that says, "Stock quotes" (Exxon is "XOM", Johnson & Johnson [that I think has increased their dividend annually for 40 years] is "JNJ") and you'll find current quote, plus highs and lows for today, volume bought and sold today, and high and low prices this week and the latest 52 weeks. Over on the right you can see a chart of stock price fluctuations today, and if you click below that chart you can see the price changes over the last 3 mos., 6 mos., 1 year, 5 years, as a line, or bars showing high, low and closing prices daily, etc. If you click on a heading at the top left of the page, "Historical prices" or something similar, you can ask for daily, weekly, etc. prices at open, high, low and close for that period, and the volume of shares traded, and it'll show when dividends were issued.

Check a business paper - Wall Street Journal, Barron's in the periodicals or business or finance section of your library, to find the symbols for a lot of other companies, plus a great deal of other information of similar kind.

If your library subscribes to the "Value Line" evaluation system of hundreds of stocks, you'll find a truckload of information, and there are various other evaluative systems available.

Many say that as one ages, one should hold less of one's assets in "risky" equities and more in "safe" stuff, such as Guaranteed certificates, bonds, etc. where the number of dollars are guaranteed.

There are some reasons specific to the Canadian situation which encourage me to the conclusion that I follow, but I am nearly 80 years of age, and I hold about 80% of my assets in equities. I expect that I'd follow a similar path were I to live in the U.S.

But I've put some time into learning how the game is played, and feel comfortable with my choice.

Do I check the prices of my stocks frequently? No.

I have mainly quality stocks - the kind of stuff that one wants to depend on for retirement income - I've held most of them for quite a few years, and don't plan to liquidate them any time soon. Prices go up, they go down, they go sideways ... but the general trend is up, and I'm happy with (most of) them. And if I choose well 70% of the time ... I'm laughing.

With the ones that fluctuate more (a fairly small percentage of my total asset), I check them more frequently, but don't buy and sell them much, either.

One guy who writes in what I consider Canada's best personal financial magazine has followed a system that takes him about a couple of hours a year to operate ... and it's had a better rate of return over the past 20 years than 90% of the mutual funds, and quite a lot better than the main market average. About 4 loss years in 20, I think ... and usually after a loss year there's a rate of growth substantially above average.

Which means that, if you'd sold on a drop, you kick yourself twice ... once dealing with the loss when you sold.

And a year or two later, when you checked the much higher prices then!

Learn how money works.

An interesting hobby.

And ... it pays well!

ole joyful

Greetings everyone.

Some folks may find some useful advice in the posts above.

All that I said in the previous post still applies.

The guy whose system I spoke of, whose Canadian system, using solid stocks, takes about 2 hours per year to operate, as one can choose a basket of 10, or 5, or 4 stocks and several of the chosen stocks, usually about 6 to 10 of the list of 10, continue unchanged, year to year.

The system has a growth rate averaged over 20 years of about 14% ... at low (for Canadian residents) tax rate on current income, plus much of the gain stored up over a number of years till one sells, then there's a tax advantage on the gain, in Canada.

But if one puts one's asset into the bank, where it produces interest ... one must pay part of the interest to the income tax people ... and interest is taxed at top rate.

The borrowing agency guarantees that the number of dollars that you lent them won't shrink: the parallel guarantee that they never mention is the number of those invested dollars won't grow, either.

So folks who put those grow-proof dollars into the bank must put some of the interest with the principal to maintain purchasing power, to counteract inflation.

I expect my stocks to increase in value, at least partially offsetting the inflationary costs.

I'd rather buy (part of) the bank!

Not only have my bank shares' values grown, directly, over those years ...

... the dividend rate grew from a nickel or a dime, 41 years ago, to $3.48 annual rate, last year. Taxed at a low rate in earlier years, but the tax rate on that kind of income dropped again, last year.

As that mutual fund manager said, "I like to buy a Dollar ... for 60 cents".

I agree - but I'll buy it myself, saving the management fees that he charges.

I'm sad that so many investors, when stock prices fall ... rush to the exits, instead of getting ready to buy more, and buying them.

Further ... had some of you U.S. guys chosen to buy some Canadian money to have bought those stocks 5 - 6 - 7 years ago, 65 - 69 - 75 cents U.S. would have bought you CAD$1.00.

If you were to choose to sell those stocks now (and I don't know why you would) every CAD$1.00 now does not buy only 69 cents U.S. ... but within a couple of cents either way of $1.00. Which would have meant an additional 1/3 - 1/2 growth of your invested asset. In addition to the growth over those years.

I've written recently of a guy's mixed Canadian and U.S. system that, running for 16 years, has produced 5 year growth rates averaging 16 - 36% (a difference of 20) ... and 10-year growth rates averaging 19.6 - 29.3% (a difference of 10): note the lower rate of volatiity over the ten-year periods, please.

The longer you leave quality stocks ... the better they do.

Remember how the skilled advisors say to invest your dollars in good stocks, watch them a little in case the company gets crippled, but don't sweat blood if a $20.00 stock goes down $1.00 ...or $2.00 ... or $3.00 or more.

If it's a quality stock, it'll likely recover.

In fact, while the market is dropping, remember what a mutual fund manager told a group of us sales people almost 25 years ago ... "I like to buy a Dollar for 60 cents".

During a substantial drop in the market, recruit some extra money in addition to the regular investment program that you follow.

As you don't know when the bottom will appear, invest some funds from time to time, in a regular fashion.

Would you rather buy coffee that's worth $1.00/lb. usually ...

... for $1.20 ...

... or, after a drop in the market - for 80 cents.

As long as the quality is there, I like the last scenario the best.

How unfortunate that so many investors buy a stock for a Dollar ... and when the market goes down, they get upset, angry and scared ... and sell for 60 cents!

Good wishes for learning more about how the markets work, every month and every year.

It's a hobby that pays well.

Maybe use mutual funds for a while in the early years of your investing program, for diversity, but later learn how to buy various stocks from time to time, building your own diversity?

The fees that you pay to regular mutual fund managers are substantial - comparable to the rate of income tax that you pay.

And, if you put the money into the bank in "guaranteed" financial products, you must take some of current ernings to add to the principal to keep the purchasing power of your dollars even.

When you put $20,000. into the bank 15 years ago, the bank would pay you (rather slim) interest every year, as agreed.

If you need your $20,000. now and go to collect it, they'll pay you exactly $20,000. - which would have bought a nice car, 15 years ago ... but not now - cars are more expensive, as are most things.

So, you must pay income tax on the current income, and at the top rate, by the way.

You must put part of it with the principal to maintain purchasing power.

I don't like earning interest!

Good wishes to you and yours.

And teach your kids about how money works, O.K? Please!

They'll use that information every day of their lives!

ole joyful