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What Market Tumult Means For Average Stakeholders
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Certificate-of-deposit rates have been going up. Should I just park my money in one?
Banks have been raising CD rates because they need your money to raise capital. But it might not be such a sweet deal for you because of inflation. The highest-yielding CDs are in the 4 to 5 percent range, and inflation is above 5 percent, said Greg McBride, senior financial analyst at Bankrate.com. "A lot of investors are looking to CDs as a way to preserve their principal, but it's very important to pursue the highest yield," he said.
What about my local or regional bank? Will there be any spillover effect from this financial crisis?
It depends on how much exposure your bank has to subprime mortgages. Ask your bank manager. Regardless of the answer, if you've got $100,000 or less in your name in that bank, you have nothing to worry about.
The Federal Deposit Insurance Corp., an independent agency of the federal government, insures up to $100,000 per depositor per insured bank or savings association. The deposits it protects include checking, savings and so-called NOW accounts, money-market deposit accounts, and certificates of deposit. It does not insure investments in stocks, bonds, mutual funds, life insurance policies, annuities or municipal securities.
Certain types of retirement accounts get even more coverage. Individual retirement accounts, for instance, are insured up to $250,000 per depositor, per insured bank.
What's going to happen to the stock market in the next few days? What should I do with my investments?
It's going to be a rocky week. "We are likely to see a little bit more turmoil. We might have a bounce here or there, but for some period of time I think this is going to continue to roil the financial markets," said Pran Tiku, president of Peak Financial Management in Waltham, Mass.
Some economists and investment strategists say the market will begin to turn around at the end of the year or early next year. But unemployment will have to drop and housing prices will have to level off before a true recovery takes place, they said. In the meantime, investors should stick with their long-term investment plans. Rebalance your portfolio if you need to, but don't start dumping or picking up stocks every time there's a news flash, strategists said. "My advice is to not do anything rash or tax-foolish, but also do not be afraid to take losses and wait for the chaos to clear," said Charles W. McMillion, president and chief economist of MBG Information Services.
