MONEY matters

If greed or fear has played a role in your investing decisions, (and for most investors the answer is yes, greed and/or fear has definately come into play) then this NY Times article called How Greed and Fear Kills Returns is a must read.

Be a contrarian when managing your investments and take reporter Carl Richards advice, "It makes far more sense to ignore what the crowd is doing and base your investment decisions on what you need to reach your goals, then stick with the plan despite the fear or greed you may feel."

Having recently crossed over the 50 year young mark in one piece, (and knock on wood, no mid-life crisis to deal with thus far) my focus as a financial planner has been and will continue to be focused on retirement planning.  I’ve quickly learned that it’s one thing to be in your 30’s and even 40’s contemplating as well as advising clients on how to transition into a successful retirement, yet it’s a whole other ball game to be in your 50’s and suddenly be reflecting on my own retirement plans.  Even the word retirement has taken on new meaning for me. And who among has hasn’t received the infamous AARP welcome package only to stare at it in disbelief thinking “what, are you kidding me?”

What really concerns me about my fellow baby boomers nearing retirement is the risk they’re taking with their money. The great stock market and real estate crash of 2008 will be a memory that is not soon forgotten. One of the major fallouts from the crash, at least from my vantage point, is the undue risk people are taking with their investments in order to play the catch up game.

For many investors, low cost index funds are just too boring. Here’s an article from the New York Times by Paul Sullivan titled, Index Funds, Dowdy to Some, Get Notable Endorsement, that adds some gravitas to the fans of index funds.

He interviews Burton Malkiel, author of investment advice books,who practices what he preaches. In his retirement portfolio, he says "all the serious money is indexed."

As many of you know, I’m a huge fan of John Bogle, founder of the Vanguard Group. He penned an op-ed piece today, "Restoring Faith in Financial Markets" offering his usual common sense wisdom on the state of the investing world in 2010. Definitely worth the read,

If you feel like the big banks are treating you like a number and you are in the mood to deal with smaller, more customer oriented banks, please check out Arianna Huffington’s, (co-founder of The Huffington Post), campaign to inspire people to move their money to community banks.

Covered in more than 150 media outlets and endorsed by major celebrities including Bill Maher, Michael Moore and Alan Cumming, the Move Your Money project was created to encourage individuals and institutions to divest from the nation’s largest Wall Street banks and move to local financial institutions.

I would add one thing - don’t overlook the value of credit unions, which are all about serving their members. Redwood Credit Union here in Sonoma County, CA is one of the best credit unions I have ever been a member of.

Here’s the link to learn more about the Move Your Money campaign.

Years ago, there was a commercial on TV where the actor would look seriously into the camera and say: we make money the old fashioned way, we earn it. He was speaking of a stockbrokerage company that successfully utilized that slogan for years. I mention this commercial because I believe we’re headed back to the old fashioned days, where a penny saved was a penny earned.

Prior to the recent stock market crash, our homes and investments were going up in value each year and in many cases, faster than many of us anticipated. That was good news for many, but it also came with consequences.  Due to the rapid rise in net-worth, many people neglected or just simply forgot how to save money during these times. And if you ended up not saving and spending too much one year, cheap money was available in the form of refinancing your home mortgage. Those days are gone.

From my perspective as a fee-only financial planner, investors seem confused about bond funds and fixed income investing in general. As the stock market continues on its upward path, please don’t lose sight of how important it is to maintain an asset allocation to bonds or bond mutual funds. To help you make sense of all this, here’s another link to some outstanding info from Vanguard.

Remember as well, being financial empowered means increasing your financial intelligence. Here’s your homework: http://www.vanguard.com/jumppage/bond/

According to the Investment Company Institute, investors poured $220 billion into bond funds during the first eight months of 2009, compared with just $27 billion in 2008.