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Answers to 5 Burning 401(k) Questions
Tweet Share on Facebook May 15, 2008 Comment (45)I can vouch for this: Personal finance writers field plenty of cocktail-chatter questions about managing and investing money. That's certainly true for Mark Bruno, a 30-year-old reporter who writes about retirement and investing for Financial Week. Inspired by questions from friends, family, and peers about getting started with their retirement savings, Bruno wrote Save Now or Die Trying: Achieving Long-Term Wealth in Your 20s and 30s, which he says offers pointers on "saving the right way." Here, he shares a handful of those tips:
How do you know if you're on the right track with your 401(k)?
Everyone has different incomes, debts, and lifestyles. It's too difficult to say that a certain level of savings means you're on track—because while it might be true for some, it may be totally meaningless to others. Plus, if you're 30 to 40 years away from retiring, you should just be concentrating on how you're going to start saving, and not what it will take for you to stop. -
7 Funds for Your Portfolio
Tweet Share on Facebook May 12, 2008 CommentThere are lots of different opinions about how many funds you should own. Some say you can make a portfolio work with just three low-cost Vanguard index funds (a U.S. stock fund, a foreign stock fund, and a bond fund) or one target-date fund. Today, CNNMoney weighs in with a list of seven must-have funds, plus alternatives, for your portfolio:
1. A blue-chip, U.S. stock fund (recommended: Fidelity Spartan 500 Index fund). Note: The minimum investment for this fund is $10,000. (Each of the Vanguard funds mentioned below requires $3,000, and the actively managed funds range from $1,000 to $2,500.) CNNMoney's alternatives for this category include iShares S&P 500 index, which is an exchange-traded fund, and Selected American Shares, an actively managed fund.
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Wal-Mart Takes Flak for Its 401(k) Fees
Tweet Share on Facebook May 8, 2008 Comment (3)Updated on 05/09/08:An earlier version of this article linked to a report in Pensions & Investments. This report was originally published in Financial Week.
You might expect the nation's largest companies to offer 401(k) plans with low fees, especially since these firms most likely qualify for low-cost institutional share classes of mutual funds (the cost is low because institutional investors buy shares in large blocks). But that's not always so.
Wal-Mart, the country's largest employer, is facing a lawsuit that claims the company invested in expensive mutual funds instead of lower-cost alternatives, reports Financial Week.
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Rebalancing: Let Your Broker Do Heavy Lifting
Tweet Share on Facebook May 7, 2008 CommentIt's the same idea as the automatic alerts banks offer that notify you when your balance dips below a certain threshold. Beginning this week, Fidelity is giving brokerage clients the option of using a "monitor and alerts" feature, which E-mails investors each quarter when their asset allocation is off its target by more than 10 percent. Fidelity says it's considering also making the tool available to 401(k) investors.
The alert, which is free to brokerage clients, will direct investors to a "monitor" page, where they'll see rebalancing steps they can take. To participate, investors must select a target asset mix by completing a retirement quick check, an income plan, or a portfolio review.
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4 Easy Ways to Build Profitable Portfolios
Tweet Share on Facebook May 6, 2008 Comment (1)Morningstar's guide to building a simple, low-stress portfolio aims to calm anxious investors who seem steps away from overhauling their entire portfolio in reaction to the market's recent swings. (Making dramatic adjustments based on short-term news is never a good idea.)
But Morningstar's suggested portfolios work for starting-out investors, too. Analyst Andrew Gunter assumes investors have time horizons at least 10 years out and are willing to ride out the ups and downs of the stock market. For the sake of picking bond funds, he also assumes investors are holding their portfolio in a tax-deferred account, such as an IRA or 401(k).
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5 Ways to Invest That Stimulus Check
Tweet Share on Facebook May 5, 2008 Comment (2)Still wondering what to do with your $600 windfall? If you've already got a nice savings cushion going, consider kick-starting a portfolio (or adding to an existing one). Here are five mutual funds that require small initial investments:
Pax World Balanced ($250 minimum): Pax, the granddaddy of socially screened mutual funds, avoids companies that derive significant revenue from weapons, gambling, or tobacco and favors those with good track records on issues such as the environment. In one dose, Pax World Balanced offers a diversified portfolio that contains stocks (both foreign and domestic), bonds, and a little cash. The fund, which has gained an average of 7 percent per year over the past decade, charges 0.96 percent in annual fees.
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What-If Investments
Tweet Share on Facebook May 5, 2008 CommentNew York magazine asks, "What if you'd had $100,000 to spend in 1998?" According to the magazine, if you'd bought 3,298 shares of Apple stock in 1998 (at $30.32 per share, an investment of $99,995), it would now be worth just shy of $2 million.
Sounds great, huh? Now consider this: If you had bought 1,500 shares of an early social-networking site, theglobe.com, in 1998—which, at $63.50 per share means a $95,250 investment, it would be worth just $30 today.
This is a fun game. New York also applies it to gold (you would have been disappointed for a while, but eventually your $100,000 would have tripled), the domain name consumers.com (it would now be worth $250,000, according to SwiftAppraisal.com), and cases of 1998 Dom Pérignon (64 cases at $1,559 a case would now be worth $115,136).
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Must-Read Books for Novice Investors
Tweet Share on Facebook May 5, 2008 Comment (18)As part of our recent package on 20-somethings and personal finance, I wrote a guide to building a portfolio on the cheap. One of the story's subjects—Jason Barnette, who began investing in stocks after he graduated from college in 2004—told me his investing philosophy was shaped by Peter Lynch's book One Up on Wall Street: How to Use What You Already Know to Make Money in the Market.
Which got me thinking: What are the best books for starting-out investors? Morningstar recently posted a "Beginning Investor's Reading List," which included the following:
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Future Fortune 500 Bigwigs
Tweet Share on Facebook May 5, 2008 CommentCheck out Fortune magazine's "Faces of the Future," a list of 20-something up-and-comers working for Fortune 500 companies. They include Suzanne Murphy, a 25-year-old Chevron engineer working on an offshore drill in the Gulf of Mexico, and Zaheen Mir, who—at 26 years old—is a vice president in structured credit at JPMorgan Investment Bank! Here are excerpts from my recent interview with another up-and-comer: 29-year-old fund manager Connor Browne.
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Why Stocks Are Up When the Economy Is Down
Tweet Share on Facebook May 5, 2008 CommentHome sales are down, economists' forecasts are pessimistic, and consumer confidence is the lowest since 1982. So why are stocks going up?
Strange as it may sound, says Kevin Depew of Minyanville, "the economy and the stock market are two different things. That's why it is important to consider long-term economic issues within the context of short-term movements in supply and demand."
