Jennifer and Julia are sisters, both in their 20s. Jennifer drives a leased BMW convertible, and she makes about $42,000, including tips, as a part-time bartender at two different restaurants. Although she has no employee benefits, she enjoys having flexible work hours so that she can go to the beach and the local nightspots. Currently, Jennifer has $10,000 in credit card debt. She has $1500 in a bank savings account, and two years ago she opened an individual retirement account (IRA) with a $1000 investment in a mutual fund. Her sister Julia drives a paid-for Honda Civic, pays her credit card purchases in full each month, and sacrifices some of her salary by putting $100 per month into her employer’s company stock through her 401(k) retirement account. Over the past seven years, the stock price, which was once about $40, has risen to almost $70, and Julia’s 401(k) plan is now worth about $16,000. Julia also has invested about $14,000 in aggressive-growth mutual funds, and she plans to use that money for a down payment on a home purchase. She earns $58,000 as a manager of a restaurant, plus she receives an annual bonus ranging from $2000 to $4000 every January that she uses for a spring vacation in Mexico. Julia’s employer provides many employee benefits.

What do you recommend to Jennifer and Julia on the subject of investment fundamentals regarding:

1. Getting more money to save and invest?

2. Prerequisites to investing for Jennifer?

3. Portfolio diversification for Julia?

4. Dollar-cost averaging for Jennifer?

5. Investment alternatives for Julia?