Elaine Coder earns well-deserved promotion

By Dan Danford

At the Family Investment Center, like a lot of small businesses, we keep an eye out for great employees. We're lucky to have Elaine Coder on our staff, and delighted to announce that she's moving up into a higher position here and will be serving clients even more in the future.

For a small business, there's nothing better than finding out your next great partner is already working for you - and that they're willing to do what it takes to get there. She knows us. She knows our clients. She knows how we do business. It's a wonderful find for us.

Elaine brings an excellent skill set to Family Investment Center. Her genuine concern for clients melds perfectly with relevant experience in finance and banking. She's been helping us serve clients for almost five years and she worked very hard to learn material and pass the required securities exam. I was more excited when she passed the exam than I was when I did. She's sincere, hardworking, and dedicated to each client's success. She's the perfect compliment to our other professionals, and we welcome her as a trusted colleague and professional.

Money market funds are good for big savings

On Mondays, we answer a question from a reader. If you have a question, please post it in the comments section.

QUESTION: I am saving up a large amount for an emergency savings fund. I'd like to put it somewhere that I can access it, but where I can't get to it easily to remove temptation to spend it. Is there anything that fits that definition?

ANSWER FROM DAN DANFORD: I like money market mutual funds. These are genuine mutual funds where the portfolio is invested in short-term government or corporate bonds. They use a special accounting system where the share price is held at $1.00. Dividends are credited daily, and paid monthly, so you'll draw solid market rates even on balances that last a few days.

Unlike bank deposits, daily rates are determined by bonds in the portfolio. So, if rates are rising, you'll see increased yields almost immediately. Bankers decide how much they'll pay (often determined by competition), and they are slow to raise rates. Occasionally, you'll see higher rates in local markets, but that often signals that a bank is looking for additional capital - a red flag. Bank deposits are covered by FDIC and money market funds are not. Still, shareholders of the fund own a pro-rated portion of the portfolio, so risks are minimal.

Most money market funds offer free checking services, but if you want to make it tougher to withdraw, decline them. Then, you'll have to telephone for withdrawals and they'll mail a check to your home. That will take a few days and should take impulse buying off the table. Good luck.

Save up now to pay for your kids’ college

By Robyn Davis Sekula

I frequently listen to Dave Ramsey. I like his straightforward advice, but I don’t always agree with him. One of the things I don’t see eye-to-eye with Dave on is paying for kids’ college education.

Dave once said on air that he was talking to someone who was a wealthy celebrity, who decided for his kids’ own good, he would not pay for their college – he’d make them work their way through. Dave applauded him. But I listened to that and shook my head in disbelief.

That’s just plain wrong. If you can pay for a child's education, WHY wouldn’t you? I understand the idea of working and earning money, but paying for college, on your own, is really daunting, and getting more so every year. There are kids who drop out every year because they simply can’t afford it, and it only gets harder as the years go past.

But let’s get one thing straight right now: if you can’t afford it, don’t do it. And don’t feel obligated to pay for a pricey private college education you can’t afford. If your child wants to attend a private school, and you don’t have the money to pay for it, they will have to take on debt or get scholarships. Perhaps offer to contribute what you would have paid for a public education and let them make up the difference. You shouldn’t sacrifice your own financial security to help out an adult child.

My parents paid for my college education. I wanted to attend a pricey private university two states away. We visited, and then my parents leveled with me and told me it would be very difficult for our family to afford, and asked me to consider in-state public universities. I chose James Madison University in my native Virginia, which, as it turns out, was a great fit for me and my parents (GO DUKES!). I am very grateful for their financial support – and years later, I realized that their ability to pay for my college education allowed me to start out my adult life without debt, which changed the very nature of where I could live and what I could do. I wanted to pursue journalism, and with any form of student loan whatsoever, I would not have been able to afford that career path. I met friends in journalism who worked collection jobs while they paid off their debt so they could then become a reporter. I’m so glad I never had to detour.

If you’re wealthy and willing to pay for any college they want to attend, great. Do it, and know that you’re giving your kids a wonderful gift.

If you cannot afford an expensive university without going into tremendous debt, then tell your children that. Be up-front about what you can afford, and what you cannot. I do agree with Dave Ramsey that most of the time, a solid state university can provide an education that’s near or equal to the education at a pricey private university. It’s what you do with the education that matters.

Do set some ground rules for your children, though. Tell them they are expected to maintain a certain grade point average. Tell them you expect them to finish in a certain number of years – four if that’s appropriate for their field – and that you won’t pay beyond that. In other words, you aren’t writing a blank check. If you want to pay for graduate school, and you can afford to do so, you can make that offer, but I would advise you to wait until they are well into college before agreeing to anything.

We’ve started saving for our three daughters’ education. I hope to be able to pay for them to attend a solid state university. I know that I’ll have to ramp up the savings to get them there. Yes, it’s daunting – but it’s a gift that will stay with them for the rest of their lives.

Dow tops 10,000 for first time in one year

By Dan Danford

Anyone in the financial industry had cause to smile today as they watched the Dow Jones Industrial Average climb over 10,000 for the first time in a year. What a wild ride it's been.

If you want to read all about it, start here: http://finance.yahoo.com/

We are excited to see the markets above 10,000 again. It surely demonstrates that investors are regaining confidence in the system, and that some sense of normalcy seems to be returning. Some companies are starting to see profitability again, and that's reflected in their rising stock prices. Of course, we have to also note that the recent past has seen highs on the Dow of 14,000, and lows of 6400. This has been a period of ridiculous volatility and we're hopeful - emphasize hopeful - that further good times lie ahead. No matter what, this is an encouraging sign, and we're pleased for Family Investment Center clients and other investors around the world.

Disability insurance is essential

We give out a financial tip on Twitter every day. For the past two weeks or so, we've given tips on disability insurance. This type of insurance is ABSOLUTELY essential for anyone in the work-force. Here are all the tips pulled together in one spot so you can review them. Please pass these on to friends who need it.

- Disability insurance is important. You have a greater chance of becoming disabled than dying.

- Look for disability insurance through your employer first. That is usually the best place to find it, and you’ll get a better rate as a member of a group.

- Disability insurance: one factor to examine is elimination period. That is the waiting period before payment begins. Longer = cheaper.

- Disability insurance: ask about waiver of premium. That means you won’t have to pay premium while you are disabled.

- Disability insurance: Inflation rider adjusts the amount of payout according to the cost of living. Great if you can get it.

- Disability insurance: Non-cancelable clause. As long as you pay the premium, the insurance company can’t cancel it.

- Disability insurance: Renewable means you can extend it if it expires.

- Disability insurance: Own occupation means that you will be paid a portion of your income if you cannot perform your current job.

- Disability insurance: Any occupation means that you will only be paid a portion of your income if you cannot work at all. Go for own occ if you can get it.

- Disability insurance: Some insurance companies market a hybrid policy; first 2 years is own occ, then switches to any occ.

- Disability insurance: Expect policy to pay out 60 to 70 percent of your income, maybe lower.

When is it time to sell?

On Mondays, we post a question and a response relating to finances. This week, we’re tackling a question that a great number of investors are pondering.

How do you know when it is time to divest of a particular stock or mutual fund and put your money in something else?

Make a change when something else offers genuinely better prospects. That's not an easy thing to know, especially for an amateur. With some 25,000 mutual funds or share classes, there is always something that might look better at a single point in time. People always flock to "safe" investments in a bear market, because they look good against the alternatives. But that's the wrong choice. The critical question isn't what looks better right now. The critical question is what looks better going forward. And Treasury Bills or bank certificates never compare better as we look forward to the next five to 10 years.

Others throw money at the hottest stocks or funds (as featured on the cover of Money magazine), but that rarely works, either. In truth, a fund or stock is called hot because it's recent performance is good. The best time to buy something is before it becomes hot. This is also true of much historical performance - things always look good after they've done well. Research shows that there is little evidence that past performance indicates much about the future (language the Securities and Exchange Commission requires in prospectus documents). Even the best funds in the world suffer occasional bad years. Is that necessarily a reason to change?

Everyone hates taking losses, but that's a bad reason to hold on to something. If you always take profits on your good things, and hold onto the bad to avoid losses, eventually you'll have an entire portfolio of bad investments. Focus on the future, not the past. Keep or buy things with good prospects, and dump the ones without. Take your losses like a grown-up, and move on.

Remember , too, that much investment news we encounter was crafted by public relations or sales professionals. So those great ideas we see were usually planted by someone. I've always rejected the notion that individual investors - including the typical stockbroker - can "outthink" the pros at Fidelity or Vanguard or American Century, with their legions of analysts. Did you know that 80 percent of trades on the NYSE are placed by institutional investors? That means that when you buy or sell something, the trade's other side is taken by a professional. Let that sink in for a minute. This is one of the best arguments for using mutual funds, and why so many professional advisors choose that approach.

This is another reason why we use Morningstar or other independent research firms in building client portfolios. We take responsibility for our decisions, and work on behalf of our clients. No one is going to "talk us into" making a trade or exchanging one investment for another. We'll make those decisions when - and only when - they make sense for clients. It's a huge benefit.

Should you invest in gold?

Dan Danford regularly contributes to Dad's Divorce, a web site for men going through the divorce process. Recently, Dan addressed the idea of buying gold, which has seen a surge in value recently. Watch the video below to find out what Dan has to say about this investment option.