Bernanke’s wealth takes a hit

The stock market's rise hasn't been a boon for everyone. An article in InvestmentNews says Federal Reserve Board Chairman Ben Bernanke's assets may have declined in 2010, even as the stock market rose.

Federal Reserve Chairman Ben Bernanke

According to numbers released by the Fed, Bernanke had between $1.06 million and $2.31 million in 2010, mostly invested in two retirement accounts. That's down from the $1.15 million to $2.58 million reported the year before. In 2010, the S&P rose nearly 13 percent and the Dow Jones Industrial Average increased by 11 percent.
Bernanke has been in charge of the Fed during the worst economic crisis since the Great Depression and has lowered the benchmark interest rate to near zero. He began his second four-year term in 2010, earning an annual salary of $199,700. As a former Princeton professor, he earns an additional amount from textbook royalties -- reported at between $150,000 and $1.1 million in 2010.
It's disheartening when your investments decline as the market rises, but you shouldn't necessarily use the stock market as a financial benchmark, especially when planning for retirement. The volatility from one day to the next is enough to send you reeling. Instead, craft a plan that will meet your needs for the long term, and don't sweat the day-to-day stock market fluctuations.

How Banks Invest Money

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   To Make Money, Banks Need Money

   • Aside from the startup capital and additional cash that the bank must keep on hand, banks must have a source of funds they can use to invest. To meet this need, banks use the funds in customer deposit accounts to invest in loans and other projects in order to generate a bank profit. When a customer deposits money into a savings--or, less common, checking--account, the bank puts that customer's money to work; in exchange for use of the money, the bank may pay a small portion of the returns to the depositing customer in the form of interest. While banks generally keep enough money on hand to pay out customer withdrawals, banks wager that most customers will not withdraw their funds at the same time, as this action (known as a "run on the bank") would create a situation in which the bank would be unable to meet customer demand.

   Banks Loan to Consumers

   • Using both bank money and the funds held in customer deposit accounts, banks initiate loans to consumers in the form of lines of credit, mortgages, credit cards, and unsecured personal loans. The bank's loan officers carefully evaluate the borrower's ability to repay the loan before handing out the funds, and doggedly pursue repayment if the borrower should fail to make timely remittance. As the borrower repays the loan, a considerable portion of the repayment--sometimes as much as 30 percent--is retained by the bank as profit in the form of interest. As mentioned in Section One above, a small portion of this profit is paid to deposit customers in the form of interest on their savings account.

   Banks Make Commercial Loans

   • In addition to the usually lower amounts of consumer loans, banks also use their own funds and customer deposits for larger commercial investments. Commercial investments may range from financing a housing development or real estate project to capital equipment loans to business lines of credit for use on virtually any need. Although the amounts are usually larger and the terms governing commercial financing may be somewhat different, the basic premise of commercial lending is the same as in consumer loans: the bank lends or invests a given amount, then collects repayment including interest of up to 30 percent annually.

   Banks Also Make Other Investments

   • While the mainstay of bank investments is in commercial and consumer lending, many banks also explore other profitable investment ventures. Some banks, for example, have a foreign exchange (forex) investment branch that buys foreign currencies when the domestic dollar is strong and sells them for a profit when the dollar fluctuates downward. Other investment programs used by banks include hedge funds, insurance, stocks, bonds, and even retirement fund management.

How to Invest MoneyWhen you're learning how to invest money, it's wise to learn from the masters. These tips learned from professional money managers will help you get started on your way to investing for retirement and profit.

Things You'll Need

• Pen, pencil, paper
• Internet access
• Computer

1. • 1
     Think of Boring Stocks. When you're first thinking up companies to research for potential stock purchases, think dull. Think about what you use every day - tape, staples, computers, shoes, printer cartridges, paper, and dishes. What companies make these items? You can start your research there.
   • 2
     Write Down Your Ideas: When you're trying to think of companies to research, consider those not widely exposed to the population that have a product (shoes, tacos, computers) you think is excellent. You might find a good company with a lot of room for profitable growth.
   • 3
     Research Your Choices: You can find numerous places on the internet to research a company's debt, etc. Yahoo offers such services. Look at the links listed below to find good places to learn more and research.
   • 4
     Check the Company's Debt and Earnings. Make sure the company operates with low debt and that they have consistently increasing revenue from quarter to quarter. If they have high debt, trouble can happen when times get tough.
   • 5
     Continue Learning. Learning how to invest your money is a process. Read books by Peter Lynch, Ric Edelman, and Warren Buffet. The books are better than magazines because, in books, you can learn a process from successful money managers.