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CNN Today

What Should the Smart Investor Be Doing as the Year Ends?

Aired December 27, 2000 - 4:10 p.m. ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

LOU WATERS, CNN ANCHOR: It has been another bad month for dot.com workers. For the seventh month in a row, the number of dot.com layoffs has eclipsed the total of the previous month. December's terminations topped 10,000, according to an international outplacement firm. That firm reports about one in five dot.coms has gone belly up in the last year, with the number of industry layoffs at more now than 40,000. Many investors are glad to close the books on Y2K. It hasn't been all that pretty.

Joining us now from New York with some year-end personal finance tips: Carrie Coolidge of "Forbes" magazine.

Thanks for joining us here. I heard some advice a couple hours ago from someone up on Wall Street, who said: Cash is king now. Hold onto your cash. Wait until the Fed makes its next move in January. Then think about investing. What do you think about that advice?

CARRIE COOLIDGE, PERSONAL FINANCE COLUMNIST, "FORBES": Well, that's not bad advice. In fact, now is a great time to put in your money in a money-market fund. They're returning a little over 6 percent. It's a very conservative, but very liquid investment. You can get your cash out very quickly.

WATERS: Well, if you do own the stocks right now, and if you're holding heavy on tech stocks, you are taking a pretty good hit this year. What ought you be thinking about now?

COOLIDGE: Well, now is not a bad time to think about selling some stocks that you think are dogs, weeding your portfolio out, and taking a tax write-off. In fact, even if there are some stocks that you like that you think might do better over the long term, you might want to sell them now, wait 31 days and buy them back, as long as you don't think they're going to go up within the next 30 days. You have to do that to take the tax write-off.

WATERS: What has happened, do you think, in the tech sector this year. And can we expect some -- I don't know what you call it -- realignment or some reenergizing in the coming year?

COOLIDGE: Well, I think that there were some overexuberance, with people investing in tech stocks this past year, many people investing in companies they had no idea what they -- what the companies even did. And I think next year, people are going to be a lot smarter about how they invest their money and understand the investments that they are making.

WATERS: Well, we talked about cash. We talked about stocks. How about bonds?

COOLIDGE: Well, actually, bonds: It's a very conservative investment, but smart for people who are thinking about investing for the long term. They are investing -- they are returning between 5-5.5 percent. But you will be tying your money up, perhaps for, you know, as short as six months. But there are some bonds out there that you can invest in that will tie your money up for 10, 20 or even 30 years.

WATERS: Well, as you know, most of America's investment money is tied up in 401(k)s now, with more than half the population investing through those instruments. What's the deal with them now? What should folks be thinking about?

COOLIDGE: Well, I think the important thing to consider with the 401(k) is that it's well diversified. You don't want to be overly invested in one area. You want to have a well-balanced portfolio. And I wouldn't mess around with it too much. Find something you are comfortable with and just leaving it alone.

WATERS: And with all this talk that we've heard about recession within the past several weeks, what can we anticipate for the coming year?

COOLIDGE: Well, I think that there is a lot of nervousness. There is nervousness about what's going to happen with interest rates. And people are worried about losing their jobs, even. I think, you know, the important thing is to think long term with your investments and to, you know, stay invested in equities. They beat inflation over the long term. But just be, you know, smart with your investments and be well diversified.

WATERS: But the economy still is healthy, is it not? It's increasing. It's just not increasing as much as we have seen over the past eight, 10 years?

COOLIDGE: That's right. That's right. Well, I think there was a lot of overexuberance over the past year. And people are settling back down to reality. And so they need to think long term. And perhaps the market is just settling down to where it probably should be.

WATERS: Nothing wrong with reality, is there?

COOLIDGE: That's right.

WATERS: OK, happy holiday, Carrie Coolidge, personal finance columnist with "Forbes" magazine -- appreciate it very much.

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