Five Tips For Protecting Your Money
All of the bad news coming out of Wall Street may have you wondering what you can do to protect your money. Early Show financial adviser Ray Martin has five things you can do today to help keep your money safe.
Make sure the money in you bank accounts are safe.
"I've been a financial adviser to my private clients for 22 years. I'd have to be a hundred years old to say I've seen this before," Martin says. "First thing to do on my checklist is check the safety of your money in banks. I can't say this enough with the failure of IndieMac bank a month or so ago, there were $1 billion deposits that were not FDIC insured. What do you do? Go to the FDIC.gov Web site and check the EDIE calculator, put in all your bank account information and find out what is insured and what is not. The insurance limits are $100,000 per account and $200,000 per joint account."
Check the safety of your money market fund.
"It was a shocker earlier this week when we heard that the reserve's primary money market fund - a $68 billion money market fund -- broke the buck. They had dealings with Lehman Brothers and they had Lehman commercial paper and they paid a high interest rate," Martin says. "Check your money market fund. If it pays more than 2.5 percent, that's a warning sign it's paying too high interest because it's risky. It should be lower than that. Or ask your brokerage firm for a money market fund in government securities. A U.S. government money market fund for the ultimate safety."
You recommend buying treasury bills?
"If you have more than $100,000 in cash, and you're concerned about its safety, seek the ultimate in safety, buy U.S. Treasury bills, 30, 60 and 90 days maturity and buy them directly at auction at the TreasuryDirect Web site, or in your brokerage account. You'll have the ultimate in safety and you'll better sleep at night." Martin says.
Next tip, establish a home equity line of credit.
You know, if you have good credit, more than a 700 credit score, no late payments, your home is worth significantly more than you owe on it and you don't have a line of credit, you should go get a credit facility here -- a line of credit," Martin said. "It won't hurt your credit score, it might even actually improve it and you'll have a source to borrow in case your money in banks and brokerage accounts is disrupted because of a failure of your brokerage firm or bank, you have a source to be able to borrow and get cash on a short-term basis."
The fifth tip is -- don't panic.
"Absolutely don't here. Now isn't the time to sell," Martin said. "Great investors are defined by moments like these. They look at things to buy. You know, we've had a bear market for 11 months now. The average bear market -- 18 months, down 19 to 32 percent, we're down 27. A lot of people saying maybe this is near the end of this bear market, this systemic bear market that we're having here and they're looking at things and saying we have great valuations on companies like GE, Johnson & Johnson, Proctor & Gamble, Apple, and you might want to start thinking about a portfolio. Don't buy yet, but think about how you're gonna restructure your long-term investments and there should be great bargains when we pull through on this. Wait for some stability first to return to the markets."