February 7, 2008
Time for a little defense
Investors nearing retirement might want to start playing a little defense, says Robert Powell in MarketWatch. You may not be able to “recoup losses incurred since the market peaked last year,” but you can still “lock in” what you have and will earn. How? Steer money to high-quality investments that earn “real income” from interest, dividends, and rent, and then reinvest those earnings. Broadly diversify so “no single investment can cause you insurmountable harm.” And avoid “knee-jerk investment decisions” by having a system in place to sell when a security drops too much, say 10 percent, or inflates too high.
Don’t cry over bond insurers
The flailing bond insurance market won’t sink the U.S. financial system, says Matthew Goldstein in BusinessWeek.com. Yes, “vultures and hedge funds are circling” the shares of MBIA and Ambac, and yes, “there will be fallout” if they lose their AAA ratings. But Wall Street banks have bigger worries and, “more importantly,” the $1.5 trillion in insured municipal debt is probably fine. Munis didn’t even exist until the mid-70s, the chance of a municipality defaulting are “miniscule,” and critics say that “a big chunk of muni bonds don’t need coverage.” Besides, if MBIA and Ambac fall to AA, and thus wither, there are “plenty of others ready to fill the void.”