New Money
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Your Portfolio at Age 30
Continue reading… 2 CommentsHere's a question I often ask financial planners when conducting interviews: How do you know if you're on track with your retirement savings, particularly at a (relatively) young age? Are there any guidelines, or savings thresholds you should be crossing at certain points in your life? Usually, the answer is something along the lines of "everyone's risk tolerance, timeline, and goals are different," so there is no magic benchmark.
A quick Internet search for retirement guidelines led me to Charles Schwab's "Strategies for Saving," which says that in your 20s, you should be saving between 10 percent and 15 percent of your income for retirement; in your 30s, you should shoot for from 15 percent to 25 percent; and in your early 40s, between 25 percent and 35 percent.
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Finding the Best Broker
Continue reading… 4 CommentsCompetition for your business is heating up among brokers—including the traditionally higher-end ones. According to SmartMoney's 2008 broker survey, the average commission charged by discount brokers (like Charles Schwab and Firstrade) is about 15 percent less than that of premium brokers like Fidelity. The gap was nearly 50 percent four years ago. Unfortunately, it's tougher to decipher and compare commissions these days, because they vary by frequency of trades, number of shares, and sometimes price of shares. Here are a few highlights from the survey:
• Some brokers, like TradeKing, charge a set amount no matter how often you trade, while others use a tier system that offers discounts for frequent trades. Read the fine print, though: Although TradeKing charges a flat $4.95 per trade, it also charges a penny a share for stocks priced under $2.
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6 Mutual Funds for the Long Haul
Continue reading… 6 CommentsYesterday, money manager and author Steven T. Goldberg shared his tips on picking mutual funds. Today, Goldberg highlights a handful of funds he'd trust with his own long-term money. Here are six picks, with descriptions in his words:
Selected American Shares. Chris Davis and Ken Feinberg have beaten their benchmark by an average of more than 2 percent a year for a pretty long time now. By far, the Davis family makes up the biggest shareholders of the fund. That tells you a lot. During the financial meltdown, I was worried because they had such a huge percentage of assets in financial stocks, but Davis turned out to be right in saying that there's a tremendous amount of diversity and that the companies he owns will be OK. They charge 0.57 percent annually for the fund's D shares, which you can buy directly.
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On Index Funds, Target Dates, and Fees
Continue reading… 7 CommentsSelecting a mutual fund may seem like a daunting task, with thousands on the market to choose from. Recently, I talked with Steven T. Goldberg, a former Kiplinger's Personal Finance writer (and a former colleague of mine), about how to pick funds. I figured he'd have some good tips, now that he's in the money management business. Goldberg also writes a weekly column for Kiplinger's—I particularly like this week's post on Five Great Green Funds—and he's the author of the book But Which Mutual Funds?: How to Pick the Right Ones to Achieve Your Financial Dreams. Here's what he had to say about choosing funds (tomorrow, I'll highlight a handful of his favorites):
Any new insights into the fund industry, now that you've crossed over into money management?
It's really satisfying to help people on an individual basis—I'm finding it a little more difficult than expected, mostly because of the psychology of it. Investors' portfolios are kind of like garages: places where they put all the stuff they don't know what to do with. There will be one fund someone's brother-in-law told them to buy, another stock they heard about at the water cooler, and a fund some broker sold them with horrible fees, none of which work together at all. Often, people just want to forget about it. It's also been made very, very complicated by fund-industry people telling you so many different things; it's easy not to do anything. -
Global Funds: the Lazy Man's Portfolio?
Continue reading… 1 CommentDuring a powwow of investing heavyweights earlier this month—the Investment Company Institute's general meeting—a panel of mutual-fund bigwigs was asked this question: What is the No. 1 innovation for mutual-fund investors over the past 50 years? Two of the four panelists said global funds.
Beginning investors are often told that they should pick a U.S. stock fund and then a separate international stock fund for some overseas exposure. Recommended international allocations are all over the board (I've heard everything from zero to 50 percent, though most financial pros say somewhere in the neighborhood of 25 percent.)
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Investing: Why You Should Make $25 Mistakes
Continue reading… 0 CommentsWhen Paul Sutherland was 17, a family friend gave him $2,000 to test his investing legs with the instruction that he could keep any profits over 11.2 percent. It was the 1970s, and stocks were in the midst of a long bear market, but Sutherland made out by trading gold, silver, U.S. and foreign coins, and paper currency. Today, he's the chief investment officer of the globally focused Utopia Funds, based in Traverse City, Mich. Recently, I asked him about global investing, hot sectors, and which funds he likes. Here's his advice for investors starting out (followed by a Q&A):
• First, you learn the basics. Read Security Analysis by Benjamin Graham and David Dodd. If you don't have time to read it, just look at the pictures!
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Picking the Best Index Fund
Continue reading… 0 CommentsIndex funds may be boring, but therein lies their beauty. Says fund tracker Morningstar, "Unlike [with] actively managed funds, investors don't need to worry too much about their manager departing or their strategy veering off course."
Finding the best index fund takes a lot less legwork than finding the best actively managed fund. For index funds, Morningstar offers the following advice:
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Reality Bites: Why Gen X-ers Will Have a Rough Retirement
Continue reading… 2 CommentsMembers of generation X aren't too optimistic about retirement, and rightly so. Among workers ages 25 to 34, just 18 percent say they're "very confident" about having enough money to retire comfortably, according to the Employee Benefit Research Institute. That's down from 31 percent in 2007.
Compared with the baby boomers, this generation has less of a safety net (think shrinking pensions and uncertain Social Security benefits), plus they'll probably be planning for a longer retirement, points out this story in USA Today.
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Are You Investing Too Conservatively?
Continue reading… 0 CommentsIn volatile markets like this one, the idea of a pure-stock portfolio may seem unnecessarily risky. According to a recent Fidelity survey of its 401(k) participants, 18 percent of investors had all their money in stocks as of the end of March, compared with nearly 35 percent at the end of 2001.
But if you're a young investor with decades of compounding growth ahead of you, going all-stock isn't as risky as you might think. Says 20-something blogger Amateur Asset Allocator, who sleeps soundly with only 10 percent of his Roth IRA in bonds: "Young investors are taking the much larger risk of not having enough money to retire comfortably in return for reducing short-term portfolio volatility."
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Investing Newsletters Turning Bullish
Continue reading… 1 CommentInvestment newsletter writers are getting more bullish about the market. Optimism has actually been on the rise for six consecutive weeks, to be exact. To see for myself, I took a look at two newsletters that landed in my mailbox this week:
• Eric Kobren, executive editor of the Fidelity Insight newsletter, points out that there are still "ample" reasons for concern: The housing market is in a funk, consumer confidence is low, food and gas prices are squeezing everyone, and credit is tougher to get. But stock investors are finding reasons for optimism, he says:
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Answers to 5 Burning 401(k) Questions
Continue reading… 45 CommentsI 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
Continue reading… 0 CommentsThere 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
Continue reading… 2 CommentsUpdated 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
Continue reading… 0 CommentsIt'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
Continue reading… 1 CommentMorningstar'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
Continue reading… 2 CommentsStill 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
Continue reading… 0 CommentsNew 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
Continue reading… 18 CommentsAs 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
Continue reading… 0 CommentsCheck 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
Continue reading… 0 CommentsHome 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."
