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Published: Wednesday, Feb. 13, 2013 11:36 a.m. CDT

Preschool Story Time on Thursday, February 14th!

Enjoy a story about Valentine’s Day with Youth Services Librarian Phyllis Peter in the Carousel Horse Room at 10:30 a.m. This program is designed for ages 3 to 5, siblings welcome.

Toddlers and Twos

Toddlers and Twos story time is Tuesday, February 19th. Choose to attend either at 10:30 a.m. OR 11:00 a.m. (not both). Toddlers and Twos story time is for children 18 months to 36 months old with a caregiver. If you have questions, contact Youth Services Librarian Phyllis Peter at 792-4108.

Blues Under the Blue Roof

Every Monday during February at 6:30 p.m. we will be welcoming a musician in the Meeting Room of the Library. Come join us on Monday, February 18th, in listening to Fruteland Jackson, a three time Blues Music Award Nominee and a recipient of the Blues Foundation’s Keeping the Blues Alive award.

The ABC Book Club

The ABC Book Club will be meeting in the conference room on Wednesday , February 13th from 1-3pm to discuss “Sugar Cookie Murder” by Joann Fluke. New members are always welcome.

Tax Forms

Federal Tax forms have arrived, but we are still waiting on some instruction booklets. All federal forms and booklets are available at www.irs.gov.

Iowa instructions and forms are available at www.iowa.gov/tax/forms/

Smart Investing, Week 2: Diversification

Risk is inevitable with investing, but diversification can help reduce some of this risk. “Two adages accurately sum up diversification – don’t put all your eggs in one basket and there’s safety in numbers, ” according to Margaret Van Ginkle family finance program specialist with Iowa State University (ISU) Extension and Outreach.

Van Ginkle cites the example of many Enron employees who put all their retirement “eggs” in Enron stock, ignoring both adages. When Enron went into bankruptcy, their retirement funds were wiped out.

And according to Craig Goettsch, director of Investor Education for the Iowa Insurance Division, “One of the most common mistakes I’ve seen as a securities regulator is the failure to diversify. A high percentage of persons we surveyed don’t grasp the need to spread their risk.”

The goal of diversification is to put your money in various investments so that if one investment loses money, the other investments may make up for those losses.

“Investing in one security, as many Enron employees did with their retirement funds, can result in disaster,” Van Ginkle says. “But if you invest in several different securities, the impact of any one investment on the portfolio’s return is not that significant, even if that security’s value goes to zero.”

For example, Van Ginkle explains the following scenario. Suppose a portfolio of equal amounts invested in 15 stocks. If one stock becomes worthless and the other 14 stocks in the portfolio average a 10 percent return, then the portfolio’s return would be 9.3% percent. “So, there is safety in numbers.”

And you should diversify your investments both by selecting a variety of asset classes, such as stocks and bonds, and a variety of securities within one asset class. Have some of your investment dollars in a mix of cash, stocks, bonds, and possibly other asset categories and then also diversify within each of these categories.

“You are not diversified if your portfolio consists of stock in one or two companies or in companies in the same sector of the economy,” Van Ginkle says. Different industries, such as oil firms and retail firms, may act differently to changing economic conditions. For example, when oil prices increase, oil firms benefit but retailers may lose business because consumers have less money to spend after filling their gas tanks.

Likewise, fixed-income investments are not diversified if you have only municipal bonds. “Fixed-income investments should include both government and corporate bonds and possibly some international exposure by having bonds in companies that operate in other countries Van Ginkle says.

To adequately diversify with individual stocks and bonds, you need enough money to select a variety of investments. Mutual funds are a way for even the small investor to become diversified. A mutual fund pools dollars from many investors and assembles a portfolio designed to achieve a specific investment objective (e.g., growth). “If you wisely pick the right funds you can take a small amount of money and get diversified via mutual funds,” For example, select a mutual fund that invests in both stocks and bonds.

Van Ginkle says that time period is another type of diversification that is often overlooked. “The inclination is to “time” buying and selling but this is very difficult, if not impossible, to do. It is easier to be invested for a longer period of time over different market cycles. Although there may be fluctuations over the short term when investing in stocks (for example, stocks lost 36 percent in 2008 but were up almost 26 percent the next year and then saw only a 2% return in 2011), by being invested over a longer period of time, these fluctuations can be smoothed out.

“Done properly, diversification can reduce much of the total risk of investing. Even with a relatively small amount of money, all investors should diversify their investments, whatever their goals. Diversification is a cornerstone of wise investing,” Van Ginkle concludes.

This Iowa State University Extension series is a part of the Smart Investing @your library® project at the Newton Public Library. “The Smart Investing @your library® program is made possible through a grant received by Iowa Library Services provided by the FINRA Investor Education Foundation and the American Library Association,” says Sue Padilla, Director at the Newton Public Library.

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