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January 31, 2014

Dave Ramsey: Diversification hedge against volatility

NEW CASTLE — Dear Dave: I’m a little worried about investing in the market due to volatility. Are there safer investments? — Matt

Dear Matt: You’re right; the market is volatile. It’s not as volatile as some things, but you have to remember that anywhere there’s money to be made — including long-term investing — there are ups and downs.

For instance, I like real estate. It’s not as volatile as the stock market, but there are no guarantees. We experienced that big dip over the last few years, and it was probably one of largest dips ever in the real estate market, except for the Great Depression.

Aside from real estate, I also like mutual funds. When it comes to these, one way to smooth out the volatility of the market is through diversification. That means you spread your money around instead of investing in one or two things. That’s how I handle my mutual funds, and I recommend others do the same. Spread your investments across these four types of mutual funds: growth, growth and income, aggressive growth and international.

I can’t say it enough, Matt. There are no guarantees when it comes to long-term investing. But diversification can help make the ride a little bit smoother! — Dave

Dear Dave: I’ve heard you say to never give collectors access to your checking account. Does that include payments with a debit card too? — Susan

Dear Susan: Absolutely! If you’re doing something like scheduling utility payments to come through your debit card or out of your personal checking account, that’s perfectly fine. But collectors are looking to get as much as they can on a bad, late debt. Never, under any circumstances, give them electronic access to your account.

I’ve been doing financial counseling for a long time now, and I’ve seen numerous situations where collectors have taken more than the agreed-upon amount from someone’s account once they gained access. This sleazy move left people without the money to pay their rent, the electric bill or even groceries. In fairness, the collection business does have a few good people in it, but it also has a high percentage of people who are scum — especially on the credit card side of collections. Some of them will lie and even make threats. It’s a huge problem.

There are other, much safer ways to handle these kinds of situations. Send a money order overnight or wire the cash to them. You can also send a cashier’s check. Some folks have even used a pre-paid debit card that isn’t attached to any of your accounts. This isn’t my favorite way to handle things, but it’s better than giving them the opportunity to clean you out and mess you over! — Dave

 

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