Advice from an Expert:  Mr. Rick Spalding

By Taylor Wentz and Jordan Meyer

The following is an interview that was conducted with Mr. Rick Spalding, Vice President and Financial Advisor for American Financial Advisors at American National Bank of Fremont.  Mr. Spalding graduated from Midland Lutheran in 1976.

Q:        What is the best way for an 18-year-old college student to get started on their path to financial well being?

A:        It varies on the situation that the student is in.  If the student is getting all of their college paid for and working, he or she should be able to put some money away.  Every $1,000 that a person saves right now could be worth $64,000 when they retire, assuming an 8-10% return.  So, I would suggest putting money in a diversified investment now allowing you more growth opportunities over a longer period of time.  I would also look at each person’s risk tolerance and invest according to that.  I would just make sure that the investment is diversified.  I would also say to put as much away as you can.  The more money you can invest those first ten years will always be more than the last 30 or so years.

Q:        How much money should a parent invest in a child’s future investment?

A:        Well, different parents have different views so I can’t give a hard answer, but what I will say is that anybody can borrow for college but nobody can borrow for retirement.  It comes down to what their cash flow is like.  If they have a good cash flow and have some extra money, then they can invest in their child’s education as they would like.  It simply all depends on how the parents desire their child’s education to be paid for.  They can either help them out or make the child pay for it themselves.  I think a combo of these two stances is the most sensible.  Partial investment in the child’s education, yet allowing the child to partly fund his or her own education is a good thing to do.  Therefore, the student has a vested interest in the education he or she is receiving.

Q:        With the abundance of online buying and selling stocks, what are some things novice investors should look out for?

A:        One of the things you have to watch out for is turning your account.  By turning your account, you are trying to guess the market and I don’t believe you can guess the market.   I believe in the market, but only on a 5 to 10 year basis, with 5-years being a half cycle and a 10-years being a full cycle.  You can get your averages as long as you are allocated and diversified properly.  I think with the individual stocks and bonds, we have just given people another way to gamble.  I don’t think many people can do it, some can, but I don’t recommend it.

Q:        At what age do you recommend a person getting a credit card?

A:        At the age of responsibility.  If you can’t pay the credit card off, don’t get one.  Don’t get a credit card for credit but get one to keep track of your bills and allow for easy payments.  People get in trouble when they get a credit card for credit. 

Q:        Rationalize the risk and reward of investing in the stock market.

A:        Well everything has risk; it’s just a matter of how much risk you want to take.  Is it more risky to have all of your money tied up in mutual funds or is it more risky to have all your money in a pillow case on your bed?  The money in your pillow case isn’t going to get any interest, while the money in the mutual funds can go up and down.  However, the money under your pillow is going to get eaten every day by inflation.  To lower your risk, you just need to diversify your money which is why I suggest mutual funds.

Q:        If you could give 3 bits of advice to all ages of investors what would they be?

A:        Don’t take too much risk, diversify, save regularly.

Q:        If you were a home buyer would you want a variable or fixed rate?

A:        I don’t like variable rates.  I like to know exactly what my payments are going to be each month.  I know that at some point in time the low variable rate will go over the higher fixed rate; therefore, I know where I’ll be at with the fixed rate and not worried about it rising.  Also, there has to be something wrong if the rate is that much lower because they have to be able to make it up somewhere.  I once again go back to the old saying, if its looks too good to be true, then it probably is.