From the Editor


Fundamental Advice for Weathering Market Volatility

Janet Bodnar

Financial advice that sounds simple is often difficult to execute because of our mental baggage.



Back in July, while Congress was still debating the debt ceiling, Kiplinger’s was being bombarded with questions from the media about what people should do with their money given the uncertainty. Here’s the advice I offered via Twitter: “Stay diversified, don’t panic and always keep some cash.”

SEE ALSO: 8 Keys to Financial Security

Even if I’m not limited to a 140-character tweet, I’d say that investors who do those things will sleep better in the face of market swings and worldwide financial angst. Unfortunately, financial advice that sounds simple is often difficult to execute because of our mental baggage. As senior editor Bob Frick reports in our cover story about how to be a better investor, investors tend to react in the heat of the moment. We tell you how to keep your cool.

In the spirit of helping readers become better investors, I asked staff members to tell me the best investment advice they had ever received or the advice they would most like to pass along. Interestingly, much of what they said involved avoiding psychological traps and sticking with basic investment themes.

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For instance, executive editor Manny Schiffres, who edits our investing coverage, never looks at his accounts when the market is getting creamed. “I know I’m oozing money, but if I see the actual amount, I’m much more inclined to panic and sell,” he says.

Senior editor Jeff Kosnett has learned never to sell just because the market is having a bad day. “If I had a reason to own something in the morning and that hasn’t changed, I’m not going to pull any triggers.”

“I’ll never forget seeing a table that showed how a handful of contributions made early would grow to a larger sum than a lifetime of contributions made later,” says senior editor Anne Kates Smith. As a result, she set up IRAs for her children as soon as they had earned income.

And contributing editor Kathy Kristof makes it a point to know what every dollar is earmarked for. “That keeps me from worrying about a short-term loss on a retirement account or putting short-term money in a volatile investment like stocks.”

Kathy, formerly a syndicated financial columnist for the Los Angeles Times, will share her experiences with readers in a new column about practical investing.

In a separate story, Kathy sizes up gold as an investment. That’s also a topic we’ve been getting lots of questions about, and here’s the advice I tweeted: “Should you buy gold? Go ahead, if you can stomach ups, downs and potential losses. Think of it as long-term insurance.”

Family matters. In our monthly poll, we were stunned to learn that more than one-third of our readers had given financial help to their adult kids over the previous year. So our story on the sandwich generation—caught between aging parents and sometimes struggling children—is right on point.

As someone who writes about young people and money, I know from ex­perience that parents are almost always willing to help out. But the arrangement can backfire unless everyone agrees upfront on a Plan with a capital p. How much financial support are parents willing to give? If kids are headed back home, how long will they stay? What will they contribute in cash for rent or the cable bill, or in serv­ices such as cooking and yard work? In this case, p is also for preserve—your family relationships and your money.

P.S. Find out what it’s like to become a shale millionaire—and how you can get in on the boom.



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