If you still want to invest in the market during shaky times like now, defensive stocks are the way to go. Defensive stocks are those that are not dependent on the overall economic cycle. Though they are not the stocks of choice to have when the economy is booming, they do outperform cyclical stocks in hard times.

By now we're all well aware of the sub prime lending crisis that spread like a disease, attacking the stock market once and once the market began to recover, more bad news. Today it has gotten worse. Wal-Mart announced that their earnings will be less than expected due to consumers tightening up on their spending. Home Depot made a similar announcement but it is understandable if not expected due to the nature of their business and the current state of the housing market. However, like any consumer knows, you can only curb your spending to a certain degree, at the end of the day, we still need food, gas, electricity, clothing (especially when there are children in the household) and a roof over our head. This is where defensive stocks come into play.

Products such as tobacco, pharmaceuticals, alcohol and utilities are not dependent on the economic cycle. Additionally, food companies that make most of their income from grocery store sales, as well as alcohol and bottled beverages are additional safe options when trying to protect your portfolio from a beaten up market.

Investing In ETFs

ETFs or Exchange Traded Funds and similar to index fund and mutual funds in that they are invested in an index, commodity or basket of assets. The difference is that they trade like a stock on an exchange.

Investing in both individual stocks and mutual funds have their drawbacks. When you buy an individual stock, all of your investment dollars are riding on the company you invest in. One factor of successful portfolios is diversification and to obtain diversification investing in individual stocks is extremely expensive, it would cost tens of thousands of dollars to create a portfolio that held just one of each of the stocks in the S&P 500. Not to mention the amount of transaction fees you would rack up. The obvious alternative to this mutual funds and index funds.

Mutual funds on the other hand offer the diversity and balance needed for a successful portfolio and there are a wide range of funds that track the different indices, sectors and markets. Mutual funds do have their drawbacks though. Most mutual funds have a minimum investment, $2500 is not uncommon. Additionally, mutual funds carry expense ratios and fees that can take a huge chunk out of your earnings. Mutual funds are meant to be held long term and you don't have as many options as you would with individual stocks. On top of that the majority of actively manages mutual funds fail to beat their benchmark.

ETFs To The Rescue

ETFs offer the best of both worlds. You receive the automatic diversification that you would with a mutual fund but it behaves like a stock. This means that you can buy as little as one share. ETFs also have lower expense ratios than their mutual funds counterparts.Unlike mutual funds that are priced once daily, ETFs price fluctuates throughout the day just like a stock. Since ETFs behave like a stock, you have the option to short sell and buy on margin.

Additionally, there is an ETF for pretty much everything you can think of. The most common are Spiders (SPY) which tracks the S&P500, Diamonds (DIA) which tracks the Dow Jones Industrial Average and Cubes (QQQQ), which tracks Nasdaq 100. There a so many many more though for every index and every and sector. ETFs are also broken into categories such as large cap, small cap, growth, value, etc...There are also ETFs for bonds and fixed income and they too are categorized into everything from total bond market to short term bonds. There are even ETFs for commodities such as gold, oil and silver.

The only costs involved in purchasing ETFs are you're regular transaction fees. You can buy stocks free or at a low cost with either www.zecco.com or www.sharebuilder.com

Good luck and happy investing,
Finance Girl

Why You Should Invest In Money Management Software

If you don't know where your money is going, its time to invest in a money management software program if you don't already have it on your computer. I've tried both Microsoft Money and Quicken and find both of them to be excellent for managing personal finance and taxes.

After about a month of tracking your finances you will have a rough idea of where you are spending and what areas you can make some budget cuts. However to get a really good assessment you will need about 3 months.

One great feature of money management software is that you get to see the big picture. The software generates reports and graphs that show where your money is going for both the month and the year to date. You can also see how much you spend in each category for these periods.

You can easily import credit card, bank and Sharebuilder statements to the program and manage them from there. The program will even download unbilled transactions.

In addition to being able to categorize your spending and track accounts, you can manage bills and due dates and the program offer due date reminders. Both Quicken and Money allow you to pay your bills online and schedule payments.

If you have investments, both software programs allow you to manage your portfolios. They also retrieve historical, value and fundamental data on your securities. Quicken also allows you to access accounts online and download recent activity at scheduled intervals. This is particularly useful in the Investing Center because it allows you to track your stocks daily performance, in percentages and dollar value gains and losses.

My favorite aspect of these programs are that they generate excellent charts and graphs that allow you to compare your spending, balances and investments both to each other and over time.

Money management software is essential to getting a hold on your finances and keeping track of your financial history.

Yours Truly,
The Finance Girl

Negative Savings Shocker

I was recently appalled by a statistic I came across stating that in 2005 the American personal savings rate averaged -0.5%. We have gotten so used to living above our means that we have reached a savings low that hasn't been matched since the DEPRESSION!

Spending more than you bring in is nothing but a recipe for disaster. I know it's a challenge to live within your means but it's a bigger challenge to live under a growing pile of debt.

As Thomas Fuller said, ''Debt is the worst kind of poverty.'' If you're living in the red, you're in pretty bad shape and any money you make isn't really yours, it's your debtors! But there is hope if you can discipline yourself and figure out what method works best for you. Then you can not only be debt free but you can also begin to grow savings and do your part to increase this nation's embarrassing savings rate.

Seven Ways to Spend Less and Save More

Everyone should be saving at LEAST 10% of their income, however many people spend every last dime and then some.

Having a cushion of savings equaling 3-6 months of living expenses is extremely important for everyone. Unforeseen events such as job loss, illness and injury can be disastrous and can leave you in financial ruin that can take years to climb out of...if you're unprepared. If you're thinking to yourself that you can't afford to save 10%, then you need to be saving it more than anyone! Saving money takes time, effort and discipline but you can do it and the following steps can help.

1. Make saving automatic. You can start an automatic savings plan with your bank where they transfer a specified amount from your checking to your savings on dates of your choosing. You can also make the same arrangement with an online bank which tends to offer higher interest rates than traditional banks. Some good options are www.emmigrantdirect.com and HSBC's online banking service.

2. Set yourself a limit for how many ATM withdrawals you will make and for how much, then stick to it!

If you know that the cash you have on you has to last till your next planned ATM visit you will find yourself spending your money smarter and making less frivolous purchases.

3. Subtract credit card purchases from checking account immediately so you're prepared for the bill.

Credit cards are a form of financing. Whenever you use a credit card and carry a balance, you are taking out a high interest loan. Why would you finance groceries and gasoline outside of times of desperate financial hardship. Charging day to day purchases is fast, convenient and allows you to go about your day without walking around with wads of cash but pay the balance in full at the end of the month and only resort to financing charges in emergencies and irregular large expenses such as car repairs and the like.

4. Avoid impulse buying! Give yourself a cooling off period before making purchases, the larger the purchase the longer the cooling off period should be!

If you give it some time and still can't live without it, then by all means treat yourself.

5. Spare change adds up! Put all your spare change in a jar at home or at work and then deposit it in your savings account when it gets full.

Loose change is something that many of us don't even make note of and you're not going to amass a fortune saving it. However it is painless and effortless to save and when your container is full, the cash will feel like found money.

6. If you're a nonstop shopper, it's time to stop! Reward yourself every time you pass up a purchase no matter how small the purchase is (hey, lattes add up!), put the money you would have spent in a clear jar somewhere where you can see it on a regular basis. You will impress yourself as you watch it grow.

7. Once you have finished paying off a credit card or loan keep making payments into your savings, investment or retirement account. People always claim to be low on funds available for saving and investing so take the opportunity to put some freshly freed up cash to work.

These steps are simple, practical, ans they work! Hopefully you will incorporate them into your daily life and it won't take long before you see the benefits of saving money and spending smart.

Yours Truly,
Lianne

Sharebuilder

If you want to invest money but can't meet the large account minimums that many brokers and mutual funds require you can open an account with Sharebuilder and put your money to work for you.

The beauty of Sharebuilder is that there are no minimums. No minimum balances, no minimum investment amounts and no minimum amount of transactions. You don't even have to buy a whole stock! If you have your eyes on a stock that's $100, you can buy 1/5 of a share for $20! For this reason Sharebuilder is perfect for beginner investors and those with modest resources.

Another plus is that, if you buy a security but find yourself too strapped for cash to invest any further for, say, the next 5 years you can rest assured that your money will grow untouched because Sharebuilder does not charge inactivity fees!

Now is a wonderful time to open an account because they are offering a 30 day free trial on their standard membership. Before the close of the trial period you can switch to the basic membership which has no monthy fee. Opening an account with Sharebuilder is easy, you don't even need to make a transaction on the same day you open the account you can schedule your transactions for any and as many times of the month as you please. Once you have filled out the simple application form you have a few choices. You can set up automatic monthy transactions or you can make one-time transactions with no obligation to make further ones within any timeframe or ever for that matter.

Sharebuilder also has several account type choices. One being the basic plan where you do not pay any monthy amount but you are charged $4 a transaction, ideal for the infrequent investor.
There are also other account types that charge a monthy fee but include several transactions (equaling a lower rate per transaction than the basic plan, you can also made additional transactions for $2 or less). These plans are great if you want to purchase several securities within a month.

The way it works is, Sharebuilder takes the funds out of your linked bank account the Monday immediately following your order, your order is then executed the next day, Tuesday. You can make any changes you want up until 5:00pm Monday. Though the service offers real-time trades, the kind of trades you will be doing (wisely chosen securities to be held long term) do not require them.

Diversification is a crucial aspect of any successful portfolio. This is why I urge you to select the free trial account type that includes 6 transactions and $2 thereafter. Transaction fees are based on each security purchased so when you take advantage of your free trial you can start with a diversified portfolio free!

Congratulations on making the first step to putting your money to work for you and building wealth! Check back for more investment and financial advice and thank you for reading!

Yours Truly,
Lianne

What You Should Be Saving For

The Unplanned
Anything can happen! Life is full of unexpected curve balls and the only thing you can do is make sure you’re not caught with your pants down. Surprise car break downs, lay-offs and injuries are stressful enough and for a lot of us there is the added strain of not being financially prepared to deal with it. Do you really want to be laying in a hospital bed worrying about the debt you’re going to be in over the bill or find yourself jobless without enough money in your account to get you to the end of next week? Of course not! And you can avoid finding yourself in that situation if you build an emergency fund. A “reserve” of 3-6 months living expenses is commonly recommended and more than that is even better! 3 months of expenses can become a huge number but it doesn’t have to be overnight but be disciplined and put as much as you can spare away over time and slowly but surely it’ll begin to pile up.

Special Expenses
Weddings, college, new car and first home purchases are just a few examples of some pretty expensive milestones. Why drown in debt to pay for special events when you can prepare. I’ve met too many people who are still paying the bills for their wedding after the divorce! If it means that much to you to incur huge amounts of debt it should mean that much to you to save up as much as possible ahead of time. Of course I’m not suggesting putting off buying a home until you have every last dollar in cash but do find a middle ground. Remember, it all has to be paid sooner or later…with interest! The less you finance, the better off you are.

Retirement
It may seem a long way off but it creeps up on you and it’s better to save a slow and steady amount every year starting now that to be scrounging for money to live off of later. Social security will be non-existent before most people retire and it was never anything to count on count either way. At 20 years old you would only have to save $33 a month at 12% interest to have a million by age 67, however for a 30 year old to get the same results they would have to save $109 at the same interest rate. You don’t need a calculator to figure out which is the smarter move.