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Are Your Retirement Plans Too Cliché?
Tweet Share on Facebook April 15, 2011 CommentThe concept of retirement has changed from a monolithic block of time after you've stopped working, into a fluid and shifting experience that, for many people, may last almost as long as their career did.
For many of the clients we deal with, the idea of not being active feels more like a death sentence than a well-deserved break from a lifetime of accomplishment. We are consistently hearing about plans of part-time work, mostly either charitable or consulting, which will provide the dual benefits of some extra income in addition to providing an outlet for energy.
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Why You Should Buy U.S. Treasuries
Tweet Share on Facebook April 14, 2011 Comment (1)When PIMCO Total Return (symbol PTTAX), the largest bond fund in the world, not only sells, but shorts—or bets against—treasuries, it is as if Moses has descended with tablets and has a frown on his face. True to herd mentality, large bond funds like the Loomis Sayles Bond Fund (LSBDX), and Templeton Global Bond Fund (TGBAX) have liquidated treasuries as well. And just last month, another bond crisis centered around municipal bonds. Faced with pension obligations spiraling out of control and lower tax revenues due to high unemployment rates, every water district, hospital, town, city, and state was going to put up a "going out of business" sign and default on their bonds.
Everyone knows inflation is around the corner, the U.S. is going deeper and deeper into debt, and if you own a bond, it will only go down in value. At some point the U.S. is going to have to "pay the piper." The Tea Party may not prevail upon the government to stop spending ourselves into oblivion.
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3 Investments to Fight Inflation
Tweet Share on Facebook April 13, 2011 CommentInflation, which makes your money worth less and less over time, is coming. It could be here soon with a vengeance.
With an extended period of low interest rates, the declining value of the dollar, and unprecedented government spending, the economy and the markets are set up for a high level of inflation in the coming years. The big question for investors is how they will handle it.
Investing in a high inflation environment takes a different mind set. So, put on your thinking caps and read on.
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4 Investing Moves for the Current Market
Tweet Share on Facebook April 13, 2011 CommentInvestors have certainly ridden a roller coaster over the past several years. From its high of 1,565 on Oct. 9, 2007, the S&P 500 plummeted to a low of 677 on March 9, 2009. From that low point, the index closed at 1,328 on April 8, 2011, a gain of 96 percent off of the March 2009 lows.
This wild ride is not unprecedented. From Dec. 31, 1996 to March 24, 2000, the index gained 106 percent to 1,524 only to drop 49 percent to 777 on Oct. 9, 2002 in the wake of 9/11 and other events. The index then rose 101 percent through Oct. 9, 2007.
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Why Target-Date Funds May Not Be Your Best Option
Tweet Share on Facebook April 12, 2011 Comment (3)Target-date funds are a great concept. If you're not familiar with them, here's how they work: You choose a fund based on a goal such as retirement or college savings and when you'll need the money. A fund with 2020 in the name means that's the year you'll want to use the money. The fund company takes your money and spreads it among funds in different asset classes from domestic and international, to large-cap and small-cap stocks, as well as growth and value styles all in a way that's appropriate for your time horizon and risk tolerance. Then, as your date approaches, the fund company changes the target-date fund's asset allocation to be more conservative. This means the target-date fund will gradually own fewer stock funds and more bond and money market funds as the investing period winds down.
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Expand Your Investing Vocabulary
Tweet Share on Facebook April 8, 2011 CommentWith the closing of the first quarter and the beginning of National Retirement Week next week, the news is filled with stories about the economy, the direction we are heading, and predictions for the future. While the coverage is insightful, the stories are typically ridden with financial jargon that, for many, sounds like a different language. To help simplify things, here is a breakdown of commonly used terms, and how to make sense of them all:
Earnings. The direction of a company's earnings and the rate of change for those earnings are pretty reliable indicators of the direction of the company's stock price. If the earnings are improving, especially at a rate faster than analysts expected, you should see some appreciation. On the other hand, if a company's earnings fall short of expectations, be prepared for a downward move in the stock price.
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Why You Should Fire Your Investment Adviser Today
Tweet Share on Facebook April 7, 2011 CommentBurton Malkiel's famous tome, The Random Walk Guide to Investing, begins with the right exhortation for most investors: Fire your investment adviser today. Although it takes moxy to say "no" to that special someone who has earned your trust, the facts reveal that your investments will do far better with your wealth manager's hands no longer dipping into your cookie jar.
The facts are plain to understand. According to the U.S. Securities and Exchange Commission (SEC), the average adviser charges 1.11 percent in annual fees to manage your money. This same adviser is likely to put you into a portfolio of actively managed mutual funds that average more than 1 percent in fees. That places a more than 2 percent burden on your portfolio and drags down performance.
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Should You Pay Off Your Mortgage or Invest?
Tweet Share on Facebook April 6, 2011 Comment (9)Clients often ask if they should pay off their mortgage with their savings or take that nest egg and put it to work in the market. My answer: It depends, but in today's interest rate and market environment, I would likely suggest investing.
Yes, your house is an appreciating asset, but it is not appreciating as quickly as it once did, which may be true for a long time. The credit markets are generally dried up and it takes free flowing credit for the real estate market to boom, a phenomenon that may not happen again in our lifetimes.
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What if My 401(k) Plan Is Lousy?
Tweet Share on Facebook April 6, 2011 Comment (1)Many financial advisers (including yours truly) suggest that most people maximize contributions to their company's retirement plan. But what if your organization's plan is lousy? Lousy could mean a poor menu of investment choices, high expenses, low or no company contributions, or other deficiencies. Here are a few tips to help you make the best of a lackluster 401(k) plan:
Find the best funds in the plan. Even if your plan is sub-par, many times there are a couple of funds that are decent. Consider focusing your investments in those few funds and using investments outside of the plan to compensate in terms of your portfolio's overall asset allocation.
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6 Things to Expect From Your Financial Adviser
Tweet Share on Facebook April 5, 2011 Comment (1)Many people hire a fee-based adviser to help with their investments. Before you do, it's important to ask the right questions. It's also important that the adviser asks you the right questions.
Your first question: How do you earn the fees I would pay you? If you like the answer, be prepared to offer the adviser some guidance about your investment goals, time horizon, and risk tolerance. Only when an adviser knows your unique situation can he start to develop an investment plan for you. If you don't answer many questions, that can be a red flag about that adviser's intentions.
[See What Investors Can Learn From Fund Flows.]
And let him know you have the following expectations:
