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INSIDE MONEY: FAMILY FINANCESFINANCIAL CALCULATORSSALARY SURVEYLEGAL ADVICE

Maximize Your Investing Power

By Mary Snyder

Choosing the right vehicle for your investment dollars is much more than just checking a box on the 401(k) application. The choices range from the conservative money market account to the much riskier stock market accounts and the choices you make will influence your financial future. So how should you invest your hard earned dollars?

Investing your money is important for all, but women are faced with the additional factors of living longer, often working fewer years, and earning less than men. Take the time to educate yourself -- making the right investment decisions today is essential for a financially secure tomorrow.

Making the Choice
"It is important to think about yourself and your future. Many times moms do that the least - they put their children's needs above their own. Just five percent in a tax deferred plan can make a huge difference down the road," says Virginia Morris, author of "A Woman's Guide to Investing" and "A Woman's Guide to Personal Finance."


Reviewing your 401(k) options can often leave you confused and frustrated. The choices are often limited and the levels of risk are indicated as high (or aggressive), moderate and low. The first knee jerk reaction most women have is to put their money in low-risk investment vehicles, but low risk equals little to no growth and an investment fund needs to grow your money. "It's not guaranteed, but over the long term stocks have always done better than any other fixed income investments, such as money markets or bonds," says Morris.


To determine your risk level, you need to consider the length of time your money will be invested. You should have a percentage of your money in stock market mutual funds, a portion in bond funds, and a smaller portion in money market funds. The percentage breakdown is directly impacted by the years you have to invest - the more years the higher risk you can incur. If you have more than ten years until retirement, an aggressive approach is appropriate, according to Morris.

Know Your Goals
Before you can begin to map out your investment strategy, you have to determine your financial goals. Do you plan to retire early? Is travel in your future? What lifestyle do you envision in your retirement years? These are just a few of the questions you need to answer to get a clear picture of your investment strategy.

Consider contacting a financial planner for consultation. Take your company 401(k) options and have the planner aid you in mapping out an investment plan that includes your needs, wants and desires for the future. The time and money you spend on the consultation is an investment into your financial future.

Women as Investors
"The average woman makes a good investor," says David R. Reiser, a senior vice president of investments at Paine Webber and the co-author of "Wealth Building: Investment Strategies for Retirement and Estate Planning." "But women need to get more involved in investment decisions and the investment processes, whether married or single" says Reiser.

"Women who handle the investments for the family can statistically be more successful than a man," says Reiser. This success is attributed to four factors:

  1. Women trust in their choice of a financial advisor. Women take the time to interview, consult, and select the advisor who meets their needs.
  2. A woman is comfortable with delegating the day-to-day operations of her investment strategy to a trusted advisor, while she reviews the monthly or quarterly updates and keeps a view on the overall package.
  3. Women have the patience to allow their plan to go to work for them over the long term.
  4. Once a plan is set in place for savings and investments, women are more disciplined to adhere to the plan.

There is No Time Like the Present
Considering the volatile state of the stock market, should you invest your money in stock market mutual funds? Certainly. We all love a good sale, but for some reason we are frightened when the stock market goes on sale. This isn't to say you should run out and buy any stock market fund; you need to do your research, know what you are buying and how it is performing. Look at the fund's performance over the past three, five, and ten years. Has the fund performed well in up periods and down periods? Who is the fund manager? And how long has this manager been with the fund? A fund's performance is a direct result of the manager of that fund. Make certain that the performance you are reading is from that fund manager.

The stock market is never a guarantee, but consider the history of the market. "Over the past 75 years the average return on stocks is approximately 11 percent. The return on government bonds is in the five and a half percent category and the return on money market funds, where many women put their money, is about three percent," says Morris

A money market account may look like the safest place to put your money, but with inflation at three percent, investing in a money market account will not give you the financial security you will need in the future.

Keeping On Track
Once you have made your choices and begin investing your money in your 401(k) take the time to review your funds annually. "More than 95 percent of the people who put money in a 401(k) never change their allocations and this is unwise," says Morris.

How are your funds performing? And how is this performance based against the market as a whole? You can't expect your funds to do hugely better than the market, but if a fund is not doing as well as the market find out why and research your alternatives.

Invest your time and your money in your future today and create a financially secure tomorrow.

Also see:
Get out of debt
Financial calculators
Estate planning checklist

Recommended Books::
A Woman's Guide to Investing
Nine Steps to Financial Freedom
Wealth Building: Investment Strategies for Retirement and Estate Planning

Mary Synder is a writer and co-author of "You Can Afford to Stay Home With Your Kids."



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