Need some money from your account? If you provide us with bank information it can happen in HOURS! Electronic links are the way to go; it saves time and gas (no need for the mailman!) and is the easiest way to TRACK it. So please consider providing us with bank information in the form of a voided check or deposit slip; if you need money regulary (monthly or quarterly) OR just occasionally!
July 25, 2008
July 24, 2008
Not Your Father’s Retirement
Great Grandpa didn’t concern himself much with retirement. Odds are he wouldn’t live long past his employment years, and large, nearby extended family would insure his care if he did enjoy a long life.
Grandpa, on the other hand, was privy to the Social Security benefit, along with a strong American economy growing at a fast clip. Lots of opportunity came his way. A good work ethic, savings habits, and less temptation by the consumer credit trap, and he had himself a nest egg.
Now, Father’s generation had not only opportunity for the entrepreneurial among them, but also a paternal manufacturing industry that is almost quaint when pondered today. George F. Johnson’s plants and homes, the days when IBM had never laid off ANYONE , EVER. And these were the days of the Defined Benefit Pension Plan; if you worked for 30 years, a retirement income was guaranteed for life. The investing that was required to make this happen was the sole responsibility of The Company. Dad’s generation needed no investment savvy to make retirement happen.
Oh, how the landscape has changed. Today’s worker has changed jobs many times. He has re-tooled his skills several times to remain valuable. IBM has not only outsourced many jobs to India, but has cancelled that wonderful Defined Benefit Pension Plan his father enjoyed. EJ making shoes in America? Not in a long time, I’m afraid. For today’s worker, there are no guarantees ANYTHING will be there after 30 years in the workplace.
And what happened to that extended family Great Grandpa had? They have moved several times, and are all over the country, that’s what.
The onus falls on every Young Person to make the best use of the payroll-deducted savings opportunities that are available to them. That means never living on more than 85% of their income from the first day they begin working. That also means getting good investment returns. Making money in REAL terms: more than inflation and taxes will eat up. It isn’t the Fixed Option. They must get investment help, and it isn’t available at the water cooler either.
Young Person must also understand that the Credit World is poised to steal their prosperity, not provide it.
If you are a young person reading this article, or the Parent or Grandparent or Great Grandparent of a young worker, this means taking action NOW. Call a financial planner NOW and have him/her look at the 401(k) investment options and put together a portfolio that makes sense given your age. Find a planner who will do this for a fee, because there are no commissions available to do this. That’s why brokers aren’t calling you to do this. YOU must take action.
If you are within 10 years of wanting to retire, don’t forget that you are the Investment Manager of your Retirement Funds. Are you qualified? Paying attention? Reading? Nothing will be more important in your financial life once you stop working. Are you ready? I didn’t think so.
You need to pay a professional planner because IBM isn’t doing that for you anymore. You need to get good advice because you literally cannot afford to get this wrong.
Whether your 25, 45, 65, 0r 85, mapping out a strategy for your financial future is the task at hand. Consulting a fee-only financial consultant will bring to your circumstances the years of experience and perspective to do the job right. You need a professional in your corner who will respond appropriately as the world turns. Grandpa would be proud!
Peyton R. Hawkes
Russell Hawkes Associates, Inc
How to Make Money in the Stock Market
How Can YOU make Money in the Stock Market ?
What does it take to make money in stocks? Research? Luck? Brilliance? Connections? Inside Information?
An academic study was done a few years ago, where 10 of the largest pools of money in the world were studied. Accounts such as the California and New York teachers retirements, the GM pension plan, and other very large pools of money were monitored for 10 years. The goal of this study was to determine the exact cause for varying performance. Some funds made money, while others lagged behind. Why? Better stock picking? Better market timing ? The results were quite interesting!
About 6% of the variance was due to stock selection. Buying Lowes instead of Home Depot, Microsoft instead of IBM, Toyota instead of GM, etc. Another 2% was attributed to timing. WHEN did they buy, and when did they sell? Over 90% of the performance variation was due to asset allocation policy differences. Buy stock or bonds? Buy domestic or international? Buy growth stocks or value stocks? Large or small companies? Manufacturing or Service sector? These decisions made the biggest difference in performance when all was said and done.
What can we learn from this? Being that over 90% of the variance was due to asset allocation policy, doesn’t it make sense that our own asset allocation policy receive our greatest attention as investors? Too often I hear “hot tips” from the watercooler portrayed as an important strategy for financial success, which is simply an inaccurate place to put your energies.
What might an Asset Allocation Policy look like for your family? Well, it might state that 60% be invested in stocks, and 40% in Fixed Income investments. That the stocks be 35% in Growth, 25% in Value. That 80% be domestic, and 20% be foreign. That the Service sector outweigh Manufacturing. That the bonds be laddered for stable pricing, and also contain some foreign government bonds.
If this were your family’s policy, it would be the most important part of your success. So instead of buying hot stocks, or trying to time the next market upturn, most of your attention should be in your policy development and refinement. Over the long run, this will determine your success or failure!
Of course having an asset allocation policy is important, but there is more to do. With roughly 13 different asset classes to manage, you must also find good managers to fill each one. Searching among over 14,000 mutual funds available, good research will yield superior managers. Once these managers are in place, they must be monitored. If they fall behind their peers, they should be replaced. If a manager leaves one fund and goes to another, you should know this. If the approach to investing that you bought originally changes, that fund might need replacing.
My suggestion is that if you don’t have the experience or ambition to develop and maintain an asset allocation policy, and select and monitor managers, you should hire a professional to do it for you.
If you retain a FEE ONLY firm to do this, their selections will be made without the bias of commissions, and selected from the entire universe, not just ones that pay commissions.. Also, a FEE ONLY firm will not hesitate to replace underperformers, because there are no commissions involved to make a trade.
So remember that, over the long term, good stock picks are offset by bad ones, and market timing has not worked consistently for anyone. Focus on what’s important; your long term asset allocation policy, patience, and attention to the performance of your managers. This is where the really savvy investor cashes in! Peyton Hawkes