Take a deep breath. Take another one. Now remember this: The carnage in the markets will not last forever. Not every CEO is a crook. The bears will go back into hibernation -- someday. And regardless, you have a life outside of your money, right?
There was no soothing the major market indexes today, as investors seem to just be waiting for the next scandal to break. The Dow slipped below 8,900, and the Nasdaq hovered at its five-year low. The S&P 500 and the FOOL 50 fell more than 3%.
We've been living through a market of extremes the past five years. But it was never as good as it was in 1999, and it's not as bad as it feels now. That doesn't mean you can't get mad. Go outside and yell a few things. Write your legislative representatives. Go out for a jog. Come back and have ice cream. And remember that if you're dollar cost averaging into stocks right now, you are getting far better prices than you were a year ago. All is not lost.
In today's Motley Fool Take:
S&P 500 Goes All-American
The S&P 500, the flagship stock market index of Standard & Poor's Corp. (a unit of McGraw-Hill (NYSE: MHP)) is the subject of a major policy change. Its component companies based outside the United States are being removed, replaced by businesses based here in America. This will make the index a true barometer of America's (and only America's) leading corporations.
On their way out, as of July 19: Royal Dutch Petroleum (NYSE: RD), Unilever (NYSE: UN), and five Canadian firms: Alcan (NYSE: AL), Barrick Gold (NYSE: ABX), Nortel Networks (NYSE: NT), Placer Dome (NYSE: PDG), and Inco (NYSE: N).
Being added: Wall Street investment bank Goldman Sachs (NYSE: GS), delivery giant United Parcel Service (NYSE: UPS), life insurers Principal Financial (NYSE: PFG) and Prudential Financial (NYSE: PRU), online marketplace eBay (Nasdaq: EBAY), video game publisher Electronic Arts (Nasdaq: ERTS), and integrated IT solutions provider SunGard Data Systems (NYSE: SDS).
There are a bunch of interesting ramifications to this change:
Hundreds of millions of dollars are now invested in index funds tracking the S&P 500. (By the way, the Fool has long recommended index fund investing.) All these funds will have to sell their shares of the outgoing firms and snap up shares of the incoming firms.
Those companies being removed may see their stock prices slump, as firms being added will likely experience the usual small bump up in price. In addition, the 493 other firms will also experience a boost in trading. Funds will need to rebalance a bit, since the total market value of the incoming companies is slightly smaller than the total market value of the outgoing firms.
According to The New York Times (free registration required), "The five Canadian companies being dropped make up 8.3 percent of the S&P/Toronto Stock Exchange composite index, and 11.6 percent of the S&P/TSX 60. It is likely that a tenth of the shares of each company will have to find new owners in coming days.
Standard & Poor's expects that, among other things, these changes will result in lower operating expenses for index funds and exchange-traded funds, which might translate into even lower fees for these investments.
"Every fortune ever made in finance has rested on a simple premise. Those with the most information make the most money. That edge, knowing what others don't, is priceless." -- Paul Gibson
Qwest for the Truth
As if things weren't going badly enough for Qwest (NYSE: Q), now the U.S. attorney's office in Denver has launched a criminal investigation into the accounting practices at the battered company. Just last week Qwest had denied a Wall Street Journal story claiming that it was being investigated.
The Denver-based provider of global telecommunications services has had its share of troubles, above and beyond its beleaguered sector. While the company has tried to win back the faith of the investor with a new CFO hire over the weekend and a reorganization plan, the industry's troubled ways and the company's huge debt load would be worrisome even if everything else were on the up and up.
The company's makeover strategy is simple. While it had grown through acquisitions like that of Baby Bell U.S. West and global telecom partnerships, Qwest is out to shave costs and focus on its consumer, business, and wholesale units. It will probably have to get better on its own. You can't count on Warren Buffett to lend a hand to every troubled telecommunications specialist.
Discussion Board of the Day: Qwest
Will things get better for Qwest now that the cards are laid out on the table, or is this just the tip of the iceberg? How will Warren Buffett's investment in Level 3 (Nasdaq: LVLT) affect the telecom sector? All this and more -- on the Qwest Discussion Board. Only on Fool.com.
Which 529 Is Best for You?
By now, most parents have at least heard about the 529 savings plan, the best way to save for a college education in most circumstances. It's hard to beat the high contribution limits and tax-free growth offered by these state-sponsored investment accounts.
But even if you're sold on the virtues of a 529 savings plan, which should you choose? Since most plans are open to anyone -- you could live in California and contribute to New York's plan for the benefit of your grandchild who lives in Florida -- you face the daunting task of choosing from among the options. Not all plans were created equal. In fact, some stink.
A couple of publications have attempted to make the job easier for you by reviewing the panoply of plans and choosing the best. According to a USA Today analysis of 43 plans, the best are the following: the College Savings Plan of Nebraska, the Virginia CollegeAmerica Plan, the Michigan Education Savings Program, the Tennessee Baccalaureate Education Savings Trust, and the Minnesota College Savings Plan.
The Nebraska plan must have something going for it, because it turned up on the list of Kiplinger's top four 529 plans, along with the Kansas Learning Quest Education Savings Program, New York's College Savings Program, and the Utah Education Savings Plan Trust.
Those plans are good places to start if you're looking for the best plan for your child (or yourself), but don't forget your own backyard. Many states offer perks to residents, such as a state income tax deduction. If your state offers a solid plan and incentives, there may not be a need to look any further.
What else should you look for in a 529 plan? Consider these characteristics:
- A variety of solid investment options: How have the funds fared over the past few years? Are there enough choices within the plan?
- Low costs: Look for low expense ratios (less than 0.5%) and low administrative fees. The lowest-cost plans often offer funds from Vanguard and TIAA-CREF. And don't choose a plan offered solely by brokers unless you need the assistance. You will pay 3% to 5% in commissions upfront, and -- according to the USA Today analysis -- many of the broker-sponsored plans have higher ongoing expenses and poor performance records.
- Rides on the space shuttle: If you find a plan that offers this incentive, we recommend you strongly consider it. Unfortunately, no plan currently offers this feature.
For more assistance in evaluating 529 plans, visit our College Savings Center and Savingforcollege.com.
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If your credit card was issued by NextBank, today is the last day you'll be able to use it. The company says it no longer has funds to keep the credit card division operating. The shutdown affects hundreds of thousands of customers, who should have already been notified via email or other means.
The watchdog group Judicial Watch has filed a lawsuit against Vice President Dick Cheney and the company he once headed, Halliburton (NYSE: HAL). The suit alleges Cheney and other officers engaged in fraudulent accounting practices in order to artificially inflate the value of the company.
Things have been busy at Vivendi Universal (NYSE: V) in France. The Wall Street Journal is reporting that French stock market regulators raided the company's headquarters as part of an investigation to determine whether it has properly disclosed all material information over the past several months.
United Parcel Service (NYSE: UPS) is warning that it's already losing some business to competitors because of a possible strike by the Teamsters union. The two sides are trying to hammer out an agreement by the July 31 deadline.
And Finally...
Today on Fool.com: Our leaders want to fix what ails the market. Bill Mann hopes their solutions address the problem.... The real ethical crisis in corporate America is the legal "fudging" of numbers, not illegal fraud.... In Fool's School, how should retirees allocate their money?
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