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Investment Research Since 1978

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Are You Financially Prepared for Retirement?

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I just finished wading through the Employee Benefit Research Institute (EBRI) 2011 Retirement Confidence Survey (RCS). My findings are problematic. The EBRI is a private, non-profit, nonpartisan public-policy market research firm.  The 2011 RCS is the EBRI’s 21st annual retirement survey. The survey attempts to measure the attitudes of working-age and retired Americans regarding retirement, their preparation for retirement, and their confidence in various aspects of retirement. It is based on an interview of more than 1,200 individuals over 25 years old. The survey’s margin of error is +/- … [Read more...]

Stocks Get Bernanke Bounce

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In his twice-a-year economic report before Congress Wednesday, Federal Reserve chairman Ben Bernanke’s comments helped stocks rally during the morning session, with the Dow Jones Industrial Average surging 164 points—for a Bernanke bounce. He told the House Financial Services Committee that “We have to keep all options on the table” in fighting inflation or deflation. Well, that clears things right up, doesn’t it? Bernanke went on to say that “If we get to the point where the recovery is faltering” and inflation drops to zero, then he would consider additional stimulus options. Great, more … [Read more...]

Absolute Return

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The next time you see an advertisement for an absolute return fund, make sure you do your homework and understand exactly what you’re getting yourself into. I’ve been digging through the 100-plus prospectus pages of the Putnam Investments Absolute Return suite of funds and can tell you the reading isn’t as straightforward as I’d like it to be. Even in the reduced format of the Putnam Absolute Return 100 Fund’s summary prospectus 2/28/11 (only seven pages), there’s some mind-numbing small print. Here’s what I gather you’re up against for the Class A shares: a 1% sales load (charged at the … [Read more...]

This One Thing Could Save Your Life and Your Portfolio

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You might think I’m crazy buying $175 sneakers. I’ve never spent that kind of money on sneakers before, and it’s at least double what I’ve normally spent in the past. So I’m calling my Newton sneakers an investment. I was introduced to Newton sneakers by my Pilates teacher and trainer, Jane Beezer, as we were discussing the book Born to Run by Christopher McDougall. It’s reshaping the sneaker industry. And as it turns out, less is more. Years of running injuries can be tied back to a sneaker industry that babied our feet with too much cushion, encouraging a heel-first strike point rather … [Read more...]

A Little Mistake That Can Cost Hundreds of Thousands of Dollars

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You being in the top 97th percentile in good looks and wealth might be good. But being in the top 97th percentile in the fees you pay your investment advisor is…not so good. PriceMetrix, a wealth-management software firm, has come out with a report showing that a significant variation in pricing exists between investment advisors. The firm has quite a database to pull from—15,000 advisor books, 2.3 million investors, 380 million transactions, 1 million fee-based accounts, and over $850 billion in investment assets. The study examined the pricing on balanced accounts for households with … [Read more...]

Outliving Your Money

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Just over thirty years ago, the 3-Month Treasury-bill yielded 16.3% in the secondary market. At the beginning of this month, as you can see in the chart above, it yielded only 0.01%. That’s 1 basis point, or a difference of 16.29%. It can’t possibly go below zero. Though the yield is already negative when accounting for inflation, as investors line up to pay to lend the government money. Investors are in a real predicament, especially those living on a fixed income. How many investors built their retirement savings plans using such low rates as inputs in their models? Not many to be sure. … [Read more...]

Cheeseburger in Paradise

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Your financial freedom is at the mercy of a politicized Federal Reserve seemingly more interested in recapitalizing big Wall Street banks than helping you maintain your purchasing power. Near-zero interest rates and a declining dollar turn their lunch into a cheeseburger in paradise while you’re stuck brown-bagging it. The Fed’s dual mandate of full employment and price stability hasn’t exactly materialized, as unemployment logs in at about 9% (11% in Rhode Island), and searching for lower prices has become the great American pastime. Meanwhile, balanced economic growth, which is part of … [Read more...]

The Fed Is Killing the Dollar

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You can feel rich and poor at the same time. Take the college student living large on Mom and Dad’s tab. He may be enjoying his last semester of college but could also have a knot in the pit of his stomach; come next month, he graduates with no job. The same up-and-down feeling might apply to the purchasing power of your dollar today. For example, you can feel rich by being a vulture investor in Florida and buying a condo at a deeply discounted price. But then you’ll feel poor driving south when your snowbird daydreams are abruptly interrupted by the sticker shock of filling up the … [Read more...]

Capital Gains vs. Dividends: 10 Takeaways

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In 2008, one-third of investors over 65 had reportable capital gains, and 40% of investors between the ages of 45 and 65 had reportable capital gains. Both facts were reported by the IRS and highlighted in a report by the Tax Foundation. Here are my takeaways: 1. Obviously both age groups headed for the exits too soon, selling in a year when the S&P 500 was down 37%. 2. But that’s what happens when stocks are too heavily relied upon, as they were by investors trying to make up for the devastating losses from the tech bubble in the early 2000s. 3. Yes, 2000–2010 may have been the lost … [Read more...]

Up 5,000% in 10 Years

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Do you dream of buying shares of the next Microsoft before they take off? How about the next Apple? Apple shares are up 4,200% over the last decade. Even better than Apple, shares of priceline.com are up almost 5,000% over the last 10 years. These are life-changing returns. A modest $20,000 investment in priceline.com 10 years ago would be worth more than $1 million today. If only you had the foresight to identify the last decade’s winners ahead of time, you could be 10, 20, or 30 times richer than you are today. Sound like the beginnings of a pitch you’ve heard before? My … [Read more...]