When Wall Street's in turmoil, advice abounds - but a lot of it can be biased
- |
If your e-mail inbox is like mine, it's filling up with tips on how to handle the crisis on Wall Street. But given the current turmoil, this is prime time for scams, bogus business opportunities, and questionable advice.
I understand if you are worried about losses in your investment account. But stay calm. Don't be so eager to make money or preserve what you have that you make a costly mistake.
First, be leery of offers that guarantee you'll make money in a down market. I got one e-mail from someone pitching a deal where you set up a website for $250 and watch the money just click its way into your bank account.
But it is not as easy as just setting up a website and waiting for the checks.
There is some helpful advice - but much of it is from biased sources.
Biased advice isn't inherently bad. I received an e-mail from the CMPS Institute, which provides training and certification for mortgage bankers and brokers. The subject line: Hurricane Wall Street: Four Steps Consumers Can Take To Protect Themselves.
I thought the first two were very helpful:
The SIPC maintains a special reserve fund to help investors at failed brokerage firms. If customer assets are missing as a result of a closure or bankruptcy, SIPC steps in.
SIPC coverage is limited to $500,000 per customer, including up to $100,000 for cash. For more information, go to www.sipc.org.
SIPC does not provide insurance if the value of your investments tanks.
I would be cautious about the other two tips.
The organization advises people to max out their home equity line of credit before lenders cut them off. But a loan isn't a good safety net. Instead of borrowing and paying interest on money you don't need, save more.
"Although it sounds counterintuitive, you should have as big a mortgage as possible - even if you don't need it," the institute says.
Why recommend people take out a mortgage if they don't need it?
CMPS is also a membership group for mortgage professionals who have a financial interest in getting you to take out a mortgage.
Haven't recent events proved that we all should be saving more and borrowing only as absolutely necessary?
Michelle Singletary is a columnist for The Washington Post.
