Mutual Funds actively buy and sell equities with your retirement money and Index funds basically buy and hold those same equities. Index Funds claim they provide better returns at lower costs and that is probably true.

But they rely on the Mutual Funds to buy and sell equities on a regular basis. In a rising market Mutual Funds churn their portfolios to make profits. Index Funds sit on the site lines and ride the trend up.

Couple that with the brokers and researcher recommendations about what to buy. Most of these brokers/researcher recommend buying stocks not selling them. So in good times this tends to push up the price as Mutual Fund Managers act on the recommendations.

In good times prices go up and the system works. Thus we have rising stock price. Everybody plays the game and everyone is happy.

As long as no one gets greedy it can go on for years giving you a trickle down profit in your retirement funds and paying mutual fund managers big bonuses. Read the rest of this entry »

Today for the first time I read an article that is inciting a revolution amongst American Workers with Employer Sponsored 401(k) Retirement Funds to get seriously involved in managing them. Hooray! Hooray! Hooray!

Bill Donoghue is the hero who may start the revolution. He is calling for American Workers to unite to protect their 401(k) savings. Thank you Bill for your article, “Bear-market revolutionaries“. I just hope Baby Boomers in particular read it and take action.

Unless the mainstream financial commentators who know and understand the problems take the initiative and write about it, nothing will happen. Bill please keep this problem front and center.

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I emailed my financial planner in August of 2007 about my concerns for protecting my nest egg. Subsequent event show they were well-founded. Between the letter, this email and several other emails asking more and more questions to which I really didn’t get any answers I could rely on, I waited until the November 12th before asking for my money to be redeemed. I thought 3-4 months was enough time for them to satisfy my concerns. I really got nothing from them.

This Post is the last one I’ll do showing I was trying to get answers to my questions. But it could form the framework for others to use if you are not sure what to ask.

It is very important that you make sure your financial planner knows who you are whether you have your own retirement funds or are in a company fund. You need to establish contact and ask serious questions.

Greg Heiple of The Teeter Totter Principle has just released a new book call the BalanceZone I have been reviewing over the weekend.

My next post will be about it as I believe the BalanceZone is an evolutionary step from TTP to help us Baby Boomers manage our nest egg with or without the help of a financial planner. Read the rest of this entry »

I thought I might publish my initial letter to my financial planner so you can see why I decided to remove my money from my WRAP Account and put it in cash. I gave my retirement nest egg money to my financial planner in November 2006.

By about May of 2007 I was getting concerned about how it was being managed. The returns were not good and as time went on I became very nervous about the stock market. After having managed my own retirement funds for the previous ten years I didn’t want to become paranoid about not being in control.

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Many Mutual Funds are now seeing their total funds being reduced dramatically by stock market losses and investor redemptions. In order to stop the redemptions Mutual Funds try to intimidate Baby Boomers not to do anything to protect their nest eggs in retirement.

I have taken some statements from the newspapers to make my points. Unfortunately most financial commentators think the same way and have a similar view on investing as the fund managers they write about. But rather than get into arguments with the writers I’d rather try and promote a different view. I want to win the war not just a battle.

Their liberal use of the phrase “Investors should not panic” without any qualification is probably one of the most flagrant ways they intimidate us. First of all if an investor uses a rational investment strategy and exercises stop losses when triggered to exit the market this is panicking by their definition. Even though this may be a well thought out strategy designed to minimise losses and a recognition that the market has proved your investment strategy wrong. There is no loss of face here because the investment didn’t work out. Just forget it and move on. Read the rest of this entry »

As I read more and more about the poor returns from the funds I also see more and more financial gurus rationalizing the losses on the funds and advising intelligent investors to hold on. Baby Boomers need to filter out some of these messages as they don’t apply to you.

It runs something like this. Investors have had 4 years of great returns so one bad year should not result in you taking you money out of the funds. (If you have lost much more than 10% on your risk-based assets like equity and property funds this is actually good advice I think - You’re stuck with your investments for now).

It implies that since the market has gone up in the long term it will soon recover and continue on in its merry way. They have no way of knowing this. Baby Boomers cannot rely on these sorts of statements when their retirement relies on the money they have saved in their nest egg.

It also implies that all fund contributors are investors. Baby Boomers are not investors any more once they have retired and are living off their nest egg. They are capital preservers first and foremost. If their funds make more than is needed to preserve capital that is a bonus. Chasing high returns is risky. The important thing is to avoid large losses because they will be too hard to recover from when taking a pension. Read the rest of this entry »

A friend of mine has emailed me his WRAP account Mutual Fund returns for 2008.

My friend had all his retirement nest egg in a WRAP account until recently. It is one of the top fund mangers in Australia. When the market started going crazy in January he became very risk averse as he watched his money disappear. It affected all assets in his WRAP account.

So in February he decided to redeem what he could for minimum loss and ride out the stock market volatility with the rest and hoped to reduce his exposure to equities if the market bounced.

He had a 50/50 balanced portfolio and so pulled out the 50% of his nest egg he had in fixed interest and cash. This is now safely earning 8% interest in term deposits. He’s thankful for that as he now has $21,343.05 in 5 months worth of interest on that money. The rest has been left to the ravages of the markets. Read the rest of this entry »

We are all concerned about the banks and how secure they are. Mr Paulson said the banks are 99% secure but is going to extraordinary lengths to ensure they have access to tax payers money. He and the FED are manufacturing money to keep all the bankers employed, I mean keep the markets liquid and prevent a complete mortgage collapse.

With the new rules on short selling on selected stocks it appears the professional money is jumping back into the market and we are on target for a mini-rally or another bounce.

Either way it might be a good idea to take a serious look at your equity funds, ETF’s and stock holdings in your portfolio and make some decisions.

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