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CNN Live At Daybreak
Where's a Good Place to Hide Your Money?
Aired July 17, 2002 - 08:49 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
PAULA ZAHN, CNN ANCHOR: With the bad news bears stalking Wall Street, investors are looking for alternatives to stocks. So where's a good place to hide your money? Real estate, bonds, precious metals, under your mattress? How's that for safety, depending on your neighborhood.
This morning, Lauren Young, of "Smart Money" magazine is here to show us some havens for investors in turbulent times.
Good morning.
LAUREN YOUNG, "SMART MONEY" MAGAZINE: Not your mattress. Let's start off with that, OK?
ZAHN: That's good advice.
People are so turned off on the market right now. Investors confidence has never been lower. What are you telling people about stocks?
YOUNG: Stocks are not bad. They're just supposed to be part of your overall portfolio. And as we know, some things work and some things don't. When stocks were working, all the things I'm going to talk about today weren't. So diversification really is key.
ZAHN: Let's talk about diversification and how you get there. Let's talk about some of the things that used to not work so well and are working pretty well right now. Start off with mortgage funds.
YOUNG: Mortgages -- they invest in home mortgages. They're government backed. Ginny Maes are the kind of codeword on the street for them. There's a bunch of mutual funds out there. I'd recommend funds, I need to say, not the bonds themselves, because you can get a lot more diversification. Now, I like it Pimco Total Return Mortgage. It's a great fund. And Vanguard. Pretty much all the things I'm going to talk about are Vanguard. Vanguard has a great Ginny Mae fund.
ZAHN: And how much does it take to get into the funds?
YOUNG: Usually, it's about $3, 000. If you put a little bit of money in every month, and that's a great thing to be doing right now, is don't invest $10,000 at once. You might want to Put in $1,000 every quarter or every month, and easy to set up with these fund companies. They're happy to take your money.
ZAHN: Very happy. Everybody's happy to take your money these days. On
to the corporate funds now. How do those work?
YOUNG: I'm telling you buy corporate bonds, and you're probably saying, why would I want to invest in any companies?
ZAHN: Because America loves CEOs so much right now.
YOUNG: And had all those great buzzwords for them -- the thief executives.
But the good thing about corporate funds, and I'm telling you to invest in the really, really high quality stuff. Corporate bonds and all bonds in general have grades, and a is the best. So you want to ask when you invest in these things if you're getting a grade debt. And just keep in mind that if a company goes bankrupt, if you're a bond holder, you're in much better shape than a stockholder. Bond holders get something on a dollar.
So in a worst-case scenario, you have got a better shot at it. Now the funds that I like are -- there's a great vanguard corporate bond fund. So that would be one to look for.
ZAHN: And once again, the minimum amount to get in for?
YOUNG: $3,000 on that one.
ZAHN: On to the inflation index bonds.
YOUNG: Everybody is talking about these. You know, there's not really a lot of inflation out there. But what's nice about these funds, or these bonds themselves -- there's not a lot of them either, is that the government issues these bonds. They're backed, again, by the U.S. government, and they're basically indexed to inflation. So right now, the yield, and everybody's talking about yield, is three percentage points above inflation. You're getting a nice return on it.
ZAHN: So once again, with all of these bonds, investments, how long do you recommend people hang in there for? Is it a certain amount of prescribed time?
YOUNG: Everybody, when you invest, you really should be doing it for the long haul, if you're looking to buy a house or pay college tuition, you're not in the investments necessarily where you should be. Your money should be in cash. But if you're looking for retirement, and you're young, so you've got quite a long time. You've got a long time. You need to really allocate your portfolio and have a good, diversified nest egg, not everything in one basket, which is what everybody did for so long.
ZAHN: A lot of Americans had made the choice to buy their dream home, and many of them are getting killed as they're trying to sell it. I know that varies from sector of the country to sector. How about real estate stocks right now?
YOUNG: Everyone is talking about real estate -- everyone. It's been the best investment for the past five years. Now, there are some great REIT funds out there, and those are Real Estate Investment Trusts. They buy commercial property. Vanguard has a great one. T Roe has a great one. Real estate, the typical home price appreciated 7.4 percent last year. So it's only going up.
ZAHN: But there are people who tell horror stories about getting killed, depending on how depressed the individual markets are.
Gold stocks? Good idea or bad idea?
YOUNG: Everyone has a gold bug, too. And gold always does well when the stock market is doing terribly. One great gold fund is First Eagle Sogen. That was actually the best performing fund in the past year. It's up more than 100 percent.
ZAHN: What, what, what?
YOUNG: It's up more than 100 percent.
ZAHN: You're kidding?
YOUNG: No, gold prices -- keep in mind, that when gold stocks -- gold stocks don't necessarily move in tandem with gold prices. So when gold prices go up, gold stocks even go up further, and it actually works on the downside the same way, so they'll go down further. So it's very volatile, is what I'm trying to say.
ZAHN: Up 100 percent, down 100 percent.
YOUNG: Exactly. And don't be surprised to see that on the mutual fund charts either.
ZAHN: Lauren Young, "Smart Money." Thanks for your advice. Appreciate it.
YOUNG: Thanks, Paula.
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