Ask Karen Gibbs

Veteran business correspondent Karen Gibbs answers your personal money questions and addresses current topics that affect YOUR finances on a daily basis. Karen is the financial expert in your corner--no question is too basic or too small. Karen boils down the issues simply: here's what you need to know, and here's what you need to do. Send your money questions to and post your comments below.



Investing in Stocks and Bonds

Karen Gibbs

Hi Karen, considering the recent volatility, why are stocks considered the best long-term investment when compared to bonds?

- Denise, Westminster

Close up of stock PricesGreat question, Denise, and the key phrase here is “long term” – some time frame longer than ten years.

Most stock market analysts look at rolling time periods, meaning they look at stock price action over a longer period of time.  In some cases they use ten years, others use 25 years.  Rolling means they look at successive years, dropping the first and adding the latest year, similar to a moving average. 

While stock prices can have wild swings daily and yearly, the median annual rate of return for the S&P 500 index from 1925 to now is around 10%.  For that same time period, the median annual rate of return for treasury bonds is around 4% - that’s a gap of 6%.  Stocks are considered a higher risk investment than bonds, and to offset that risk, they must pay a higher rate of ...

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Hi Karen, with interest rates expected to rise, should I borrow as much money as I can for a student loan?

- Monique, Columbia, MD

Monique, that’s a smart way to think about yGraduation cap, diploma and moneyour money!  My advice would be to borrow as little as possible, if you must borrow at all.  Have you exhausted all scholarship and grant applications?

Student loan debt is a serious problem both on the personal and the national level.  According to the Federal Reserve Bank’s 2014 Report on Household Debt and Credit, student loan debt ($1.1 trillion) is second only to mortgage debt ($8.05 trillion) and handily outpaces auto loan debt ($88 billion).  40 million students carry an average student loan debt of $29,000, forcing them to delay major life decisions such as buying a home, having a medical procedure performed, retiring, having children and getting married (in that order according to a study conducted by the American Institute of CPAs).

The social cost of such a debt load ...

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The Truth about Time Shares

Karen Gibbs

Hi Karen, I keep getting offers to discover the joys of time share living.  What are some of the pros and cons of time share investing?

-Maria, Baltimore

 Time Share Resort with pool

Maria, time shares are once again getting attention as the economy recovers.  But first, let me caution you to not think of time shares as an investment.  Time shares are a purchase and depreciate dramatically.  Their average rate of return lags real estate and stocks and the resale market is practically non-existent.

Most time shares require a sizeable up-front payment in exchange for a specific property, available at the s

 special assessments.  The average up-front payment is $19,000 and average annual maintenance fees are $900.ame time every year for an agreed-upon length of time.  Time shares also charge annual maintenance fees and are subject to

As the time share industry has grown, so has flexibility with time, location and exchange.  If you like going to the same place every ...

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Is your Credit Invisible?

Karen Gibbs

Hi Karen, what does it mean to be “credit invisible”?

 - Butch from Baltimore County


Credit ReportButch, the term “credit invisible” refers to people with limited or no credit history with the three major national credit reporting agencies.


According to the Consumer Finance Protection Bureau, or CFPB, 26 million Americans, or 11% of the population, lack a credit history.  Additionally, another 19 million, or 8% of adults, have a limited credit history that’s not enough to generate a credit score.


The impact of credit invisibility is that those adults are not included in the economic mainstream.  As the CFPB found, the lack of a credit history and score can stop them from getting an education, starting a business or providing a roof over their head.


The CFPB found that credit invisibility affects mostly young adults, those with low-incomes, minorities and new immigrants.  80% of young adults between 18-19 years old ...

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Hi Karen, my nephew is now a college graduate.  What words of financial wisdom would you share with him?

- Sonya, Baltimore


Grad Cap and MoneyCongratulations to your nephew, Sonya.  I’m sure you are a proud aunt and have set a great financial example for him.


As is the case with most college students, your nephew probably has student loans that he must repay.  Fortunately, most student loans have a “grace period” of anywhere from 60 days to three years from graduation, before repayment must start. Use that grace period wisely, and plan on repaying that loan within 10 years.


Starting with the student loan payment, help him create a monthly budget of expenses.  Include the necessities of rent, food, transportation.  Add in utilities such as gas, electric, cable/Netflix and cell phone bills.  Factor in monthly health care premiums and a modest amount of spending money.  Compare his total estimated monthly expenses with his monthly ...

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