11/25/2008

5 Tips: Navigating Today's Troubled Markets

It’s not easy to sit back and watch the Dow drop triple digits in one session.

Feeling panicky? Before making any hasty moves, here are five steps to consider first.
Don't Panic

First and foremost: Stay calm. The worst thing an investor can do is panic and go on a massive selling spree, says Ben Tobias, a Plantation, Fla.-based fee-only certified financial planner. Investors who sell now will turn paper losses into real losses and won't have money invested to recoup those losses when the market rebounds, he says.

And make no bones about it – the broader markets will recover. History has shown that over the long haul the stock market goes up, not down. Indeed, the periods after a crisis are often very robust.

Troubled Markets,Stock Losses,inflation,Economy
Make Sure You’re Covered

If headlines of bank failures have you eyeing your mattress as your safe haven, take some deep breaths. Chances are the money you have held at your bank is FDIC-insured. If so, even if the bank shuts down, up to $250,000 (per depositor) in a checking or savings account (or $250,000 in retirement accounts such as IRAs or Keoghs) will be covered by the government. (To find out if a bank is FDIC-insured, visit the FDIC web site.) Those who have more than $250,000 in deposits should consider spreading it among several accounts at different FDIC-insured banks. That way, all of your holdings will be covered.

And what about the money you have at your brokerage firm
? In most cases, investors' assets at brokerage firms are safe even if the firm files for bankruptcy or shuts down. All brokerage firms that conduct business in the U.S. are required to be members of the Securities Investor Protection Corporation (SIPC), which insures accounts up to $500,000, including cash of up to $100,000 held in brokerage accounts, according to the Financial Industry Regulatory Authority (FINRA).

In some cases, when a firm runs into trouble, you still may be able to trade or transfer your account – as is the case with Lehman Brothers. Thus far, it hasn’t been necessary for the SIPC to step in. For more, click here.


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