debt looking risky, demand for U.S.
Treasuries shot up—which lowered
rates on mortgages here. Homeowners
who refinanced will have more cash
to spend, boosting economic growth.
Oil prices fell as Europeans, hunkering
down, drove less, making it cheaper
for us to drive. And a falling euro has
strengthened the dollar—making
imports cheaper for Americans.
Even the market’s slump in May has
a silver lining for investors looking
decades ahead. (Yes, that includes you.
People in their 50s or 60s may need
their money to grow for 40 years.) If
you’re adding steadily to your invested
savings for retirement, you’re now
buying stocks at lower prices. That
greatly enhances your potential long-
term return: The less you pay for stock
investments, the more you’re likely to
make when you sell them. That’s why
experienced money managers aren’t
sorry to see market “corrections” that
keep stock prices in line with reality.
5. The basics of
finance still apply
Consult a financial professional to see
how these strategies might help you.
Diversify You need a broad mix of
stocks, bonds, and cash.
Protect your future cash flow Put
money you’ll need to spend within
five years in a money market fund.
Stay flexible Don’t tie up all your
money in supposedly crash-proof
gold or a deferred annuity.
Slash your investment expenses
You can own a diversified portfolio
at minimum cost with three low-cost
index funds: total U.S. stock market,
total foreign stock market, and total
U.S. bond market.
Contributing editor Lynn Brenner
made the case for banking at a credit
union in the July–August issue.
For black-and-white reprints of this
article call 866-888-3723.
FROM TOP: ILLUS TRATIONS B Y ANDRE W BANNECKER; PHOTO: NICHOLAS EVELEIGH (PROP ST YLIST: JESSE NEME TH); ILLUS TRATION B Y STEVE SANFORD
Back of the Envelope THE STRESS TEST YOU ALREADY TOOK