The past twelve months have been particularly unsettled in the financial markets. First, the major stock indices each continued their rallies, including record closes for both the Dow and the S&P during the spring of 2007. Then things changed at the end of the summer, but rallied again in October. Second, following a run of seventeen consecutive rate increases, the Federal Reserve finally began cutting its target rate in September in response to the economic fallout from the sub-prime mortgage mess.

What does this mean to you? It means that the investing landscape has fundamentally changed, and now, more than ever, it pays to have a skilled professional that can help you sort through the clutter and help you make sound financial decisions for yourself and your family.

Volatility like we have experienced in the past year is simply part of the investing landscape. By refusing to overreact to short-term market moves, or news headlines, you keep your money “in the game” when the market inevitably rebounds. Keep in mind that the primary objective of news coverage is to generate ratings. If a headline frightens or angers, it is more likely to draw attention and, hence, higher ratings. This is why you do not hear or see nearly as much coverage about the gains that occur in the markets. It is much more “catchy” to lead with things like “Dow crashes, market plummets, stocks in free-fall, another bad day on Wall Street” rather than ”Stocks up again today.”

When you peel back all of the financial doom and gloom showered upon us by the popular media, you see that over the past twelve months the Dow Jones Industrial Average (DJIA) has actually grown by more than 1%, with the NASDAQ and S&P down by just 3 and 4% respectively*. This is hardly the type of performance that should spook long-term investors away from their chosen investment allocations. And this is another reason why it is important to have someone who can help you see the big picture even when it is clouded by short-term market turbulence. Having said that, there are a few key concepts that, if applied consistently, should help you weather the current (and future) economic storminess.

Match your investments to the objectives they are designed to meet. If you are saving for a retirement that will begin in 5-10 years, and possibly last more than 20, keep a portion of your account invested in stocks for long-term appreciation. If you are saving for a short-term goal (1-3 years away), avoid principle uncertainty and use CDs or money market accounts.

Keep an eye on inflation. Inflation is a silent drain on your savings and investments. It makes everything more expensive, from automobiles and food to electricity and even a college education. This means that just to maintain the same ability to purchase items, your money must grow as fast as prices increase.

Learn about the tax code. Understanding some basic tax concepts can help you save money on your taxes if you plan accordingly. For example, did you know that long-term capital gains are taxed at a lower rate than your current income? Did you know that Roth IRAs not only can be withdrawn tax free, but they do not require any withdrawals during your lifetime? Did you know that your social security benefits may or may not be taxable? † Whether you already knew all of these facts or they were news to you, I challenge you to learn more.

At Space Coast Credit Union, we have a staff of nine financial advisors, available through CUSO Financial Services, L.P. throughout our branch network ready to help you navigate the increasingly complex financial markets.

Thomas Decker, VP Financial Services

*Source Yahoo! Finance April 7, 2008
† Source www.irs.gov, April 8, 2008 Investments and investment advisory services offered through CUSO Financial Services, L.P. (CFS) an independent broker-dealer and SEC Registered Investment Advisor are not NCUA/NCUSIF insured, are not credit union guaranteed and may lose value. Space Coast Credit Union is in partnership with CFS. Financial Advisors are employees of Space Coast Credit Union and registered through CFS. (Member FINRA/SIPC).

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