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 »

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You need to separate your safe investments from your risk-based investments in retirement. This I learned from Greg Heiple of the Teeter Totter Principle. TTP is a simple method of helping you balance your safe investments like cash and fixed interest against your risk-based investments like equity mutual funds and stocks.

Greg gives a very real example of the traditional way of managing your nest egg egg in retirement. Try playing with his Free TTP Responsibility Calculator to get a “feel” for what he is talking about. Also take a look at the Teeter Totter Principle presentation.

What should strike you about it is the simplicity of it all. But there is more to it than that.

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A Baby Boomer friend of mine has sent me his WRAP Account results through to June 2008. We both decided in November 2006 that we would hand our retirement nest eggs over to the “Professionals” so we could spend our time doing other things as we move into semi-retirement.

Our retirement nest eggs were put straight into a diversified portfolio of mutual funds within a few days of giving our financial planner our money.

It turns out that our timing could not have been any worse. From November 2006 through to November 2007 the markets became more volatile. Property was in the doldrums already but then we got hit with International fixed interest losses because the Aussie dollar was rising against the US Dollar. Then we got hit again with dropping interest rates in the USA. The International share losses offset the Australian share gains to give us zero returns.

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