Marcia and Phil Helm, a couple in their thirties, have been married for several years. They have no children,?

Question

and each has a professional career. Marcia is a trainee for a management position at a large department store, and Phil is an engineer at an electronics firm. Their careers have promising futures, but neither has exceptionally good income protection in the event of a layoff. The Helms have saved around $8000, and $7400 of it is in a 3.5% savings account at the credit union where Phil works. They have about $600 in a regular checking account (with Mid-City Bank) that doesn't pay any interest. The Helms' combined take home pay is about $5000/month, and Phil thinks they should take the $7400 out of their savings and invest in the stock market to earn a better return. He points out that, excluding their life insurance policies, they have no other investments. Marcia thinks this plan might be too risky, but she does agree that the 3.5% yield is not very good. A friend suggested they take out certificates of deposit (CDs) with long maturities cause the CDs were paying around 6% in interest.

Answer 1

The trains were 25.64 miles apart.

Answer 2

Phil should tell Marcia to go cook dinner. With Investment Banks at historical lows bet on the American Financial system and go with BAC. 8.6% dividend @ -30.00. Keep building your position on any weakness and enjoy the benefits of a bright future after they take a class on how to save. 7,400 dollars saved between two working people over several years is just ridiculous.

Answer 3

They should look at preferred stocks, corporate bonds, UITS or REITS.  They need to understand that to get high returns/interest on their money they need to be invested for longer periods of time with their money at risk.

Higher rates are effected by long time periods and credit worthiness of the investment.

Answer 4

Where to invest the $7400 is secondary to the real important question, which is why have the Helms only saved $8000 under these circumstances?  That is not nearly enough of a cushion and investing $7400 in stocks would only leave $600 in cash, which is a pitifully small cushion.

(If the Helms have other savings or investments not mentioned, I take it back -- but you didn't mention it.)

They should concentrate as much on controlling outgo as on improving their income, try to boost their savings up to at least 10% (20% or higher should be attainable with these salaries and no children).

Then after they have their finances more under control and have saved substantially more money, it may make sense to invest a portion of that into long-term investments such as stocks.

P.S. I do hope "neither has exceptionally good income protection" doesn't mean you do not have disability insurance.  If so, stop now and go buy disability insurance.