“From birth to eighteen a girl needs good parents. From eighteen to thirty-five she needs good looks. From thirty-five to fifty-five a woman needs personality; and from fifty-five on the old lady needs cash.”

- Kathleen Norris

Welcome to Money-Smarts, MsMoney.com's weekly newsletter of financial facts, features, and tools. Money-Smarts is designed to provide quick and useful information to help secure your financial future. Enjoy, and tell a friend about MsMoney.com!

In This Week's Issue:

• Market Summary for Friday, May 4, 2001
• Tips for the Week: Daily Advice to Help Get You Through the Week
• Read the Latest: Buying on Margin
• Run the Numbers: What’s the Monthly Fee to Finance a Car?

Market Summary for Friday, May 4:

Close

Net Change

Percent Change

DJIA

10951.24

+154.59

+1.43%

NASDAQ

2191.53

+45.33

+2.11%

S&P 500

1266.61

+18.03

+1.44%

30-Year Bond

5.67%

----

N/A

Source: Reuters

Tips for the Week: Daily Advice to Help Get You Through the Week

Monday: The mix of vehicles in which you invest determines approximately 90% of your investment's performance. Understand the different asset classes and which investment vehicles make the most sense for you, given your goals. Learn more about where to invest your money.

Tuesday: Thinking about buying a car, house, cell phone, or computer? Ask your children to research the products, as well as financing options, on the Internet. You'll get valuable information, and they'll get valuable lessons in comparison-shopping and how to pay for big-ticket items. Learn more about buying a car or home.

Wednesday: Reassess your asset allocation whenever your personal circumstances change: for instance, if you have children, remarry, retire, become divorced or widowed. Certain situations may demand a more aggressive portfolio while others call for switching to a more conservative investment strategy.

Thursday: It's never too early to start saving for retirement. Click here to find the right IRA for you!

Friday: Financial goals flow naturally from well thought-out and heartfelt values (what does financial health mean to you?). Once you clarify your values, figuring out your financial goals--and how to get there--is easy. Learn more about financial health and how to achieve it.

Read the Latest: Buying on Margin

By Kimberly Clouse

Margin accounts, margin calls, and shorting stocks. What are these and how are they related? A margin account is a brokerage account in which a customer can buy securities with money borrowed from the broker. An investor must have a minimum amount of cash or securities deposited with the broker--the amount is referred to as the "margin"--when buying stocks on margin or shorting stocks. An investor typically establishes a margin account when she wants to either (1) buy stocks on margin or (2) short stocks.

Buying Stocks on Margin
When an investor buys stocks on margin, she is expecting the price of the security to rise. Suppose the investor wants to buy 1000 shares of Acme Corporation stock at the current market price of $50 per share. To purchase these shares, she would need $5000 plus any commissions charged by the brokerage. However, if she were to buy on margin, she would borrow up to 50% of the purchase price ($2,500) and pay the remaining $2,500 out of pocket. If Acme stock performs well, she earns all of the gains on the $5,000 investment even though half of the purchase price was borrowed. As long as the gains on the portion bought on margin--$2,500 in this example--exceed all borrowing costs, then the investor has benefited by buying on margin. There is typically no set time by which the investor must repay the margin loan, but eventually, of course, the investor must reimburse the broker for the funds borrowed and pay interest (based on the broker call rate). More-->

Run the Numbers: What's the Monthly Fee to Finance a Car?

Click here to calculate the future value of your savings adjusted for taxes and inflation.

Questions

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