Do You Have A Plan?

Do You Have A Plan?

Plans. They're something other people make, right? And what's the use of a plan when the stock market is so volatile? You can watch a stock take years to rise well above where you bought it, only to see all that gain lost in a matter of hours. Plans. Who needs them? You do. Especially you.

Investors need plans and discipline more than ever. It's been a tough few years. No one knows how long this recession will last, but having a plan that is almost (nothing is absolute in investing) bulletproof will help you get through the roughest days, weeks, months, even years of turmoil. Here's where you start:

Pay off your credit cards. The interest charged on these will overwhelm what you might make in the stock market over time, unless you get extremely lucky with that one stock that skyrockets. You won't. So pay off the cards, get out from under the burden of 13% or higher interest charges. Most large stocks, on average, return about 10% a year, over a long period of time. You do the math.

Save some money. Enough to live on for 6 months. If you want even more comfort, save enough for 12 months. If you have a job now, you know plenty of people who don't. You also know that finding a new job takes a long time. And most likely you won't make as much money. So being a little more cautious on savings now will let you sleep better and buy extra time to find a new job. If you never lose your job and things get a lot better, you've got that much more to invest when you feel more comfortable.

Invest in the best. If you have the savings and have extra money to invest, or an IRA or other retirement program with funds, then look at the stock market. It's not all bad. Especially strong companies that are increasing earnings, even with a lousy economy. Examples: IBM (IBM), Intel (INTC), Google (GOOG), Ford (F), Computer Sciences (CSC), Apple (AAPL), Varian Medical Systems (VAR). There are many more. These companies have found a way to more than survive in a difficult economy. They've grown. While this isn't a recommendation to buy any of them without doing research, these are companies that warrant your attention if you're looking to invest. The theme is the same for all of them: they have years of increasing profits; they are large; they will most likely lead the stock market when a rally occurs. Stay with the best, and your headaches will be milder because all stocks give you a headache at one time or another. The better ones just don't hit you as hard.

Get some income. Two ways to get paid: dividends and interest. Dividends are paid by stocks. The average dividend return for stocks paying dividends is 2%. If you buy stocks that are too far above the average return, the risks go higher that the dividend won't continue. Exceptions to this are companies built to pay dividends. See Real Estate Investment Trusts as an example (REIT's). They invest in real estate. We all know what happened to that over the last 3 years. Other companies have plenty of cash and can pay dividends for a long time as their earnings and cash flow are strong. Examples: R. R. Donnelly (RRD), National Presto (NPK), Reynolds American (RAI), Diamond Offshore (DO), Portland General Electric (POR). These should get you started in the right direction.

The other source: interest. We all know interest rates are low. The only way to get high yields is to go to high yields. That also means taking lots more risk. If you have the right mind set for high yield bonds, buy mutual funds that specialize in them. They give wide diversification and professional management, the only way to go with these securities. You know you can get less than 1% from treasury bills and CD's right now. But if you want to be almost guaranteed of getting your principal returned, then you go with these types of investments. Of course, there are pleny of mutual funds that specialize in high grade bonds or mixes of bonds and dividends. Check out any major finance Web site's mutual fund section for further help.

Finally: enjoy the moment
Part of any great plan is to live in the now. Yes, it's important to plan for tomorrow. But you only have today. So balancing some of your plans to include small rewards for today can help relieve some of the stress this current economic cycle is producing. That small reward may be a walk in the park with your loved one or taking your kids to the swing set and spending some time. Or having friends over for dinner; everybody bring something. These are probably the best investments with the greatest rewards.

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