Tag Archives: Active management

Looking Under the Hood of your Company Retirement Plan

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Dear Mr. Market:

401k under the hoodIf you ask any hard working American what their goal is the answer will usually have something to do with retirement.  While this common goal should be attainable through focus and discipline the market has certainly thrown its fair share of setbacks at investors.  For most Americans their home is their largest asset, and second is their retirement plan (401(k), 403(b), Simple IRA, SEP IRA, etc).  You have a limited amount of control over the value of your home but how can you manage and monitor your retirement plan to help make your retirement goals a reality?  In this article we will take a step back to the basics and look at factors that will have a profound impact on the performance of your retirement accounts and what you can do to control them.

Last fall legislation was passed requiring 401(k) providers to completely disclose their entire fee structure to participants. Investors will now be able to see what fees are associated with the various funds in the plan and what they are paying to participate in their employer’s retirement plan. According to CNN Money, a working couple will see nearly a third of their investment reduced by these fees over their careers– that amounts to nearly $155,000!! Schwab reported that nearly 30% of investors had absolutely no idea that they paid any fees for their retirement plan. Continue reading →

Is Jim Cramer Really Your Financial Advisor?

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Unknown-8Dear Mr. Market:

Many investors have made fortunes off you and others have of course lost their shirts. There is another tranche of folks that we want to bring to your attention and that is about the people who have made money regardless of how well they predicted your next move; let’s talk about the entertainers that you keep in business.

Anytime someone has made millions of dollars from investing we’re going to at least listen and try to learn what they’re all about. In the case of Jim Cramer, however, he’s made his money from Continue reading →

Are you really looking for horrible investment advice?

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Dear Mr. Market,

How great would it be to have a job where you could constantly deliver results short of expectations and never have to worry about being fired?  What if you could always simply blame your lack of performance on random external forces or global events?  Imagine if you had a yearly performance review that went something like this…

 “You missed your target goals by 28% and were wrong more often than you were right!  Nice work, we are going to give you a bonus and a 10% raise!”

pay performance

 This doesn’t happen in the real world…or does it?!  The financial services industry has become notorious for overpaying executives even when the company itself is struggling to survive or is even on the verge of declaring bankruptcy.  For example, Richard Fuld of Lehman Brothers was one of the 25 best-paid CEO’s for eight years straight – right up until his firm collapsed in 2008.  It has been called ‘”the largest bankruptcy in history”;  it triggered a chain reaction that produced the worst financial crisis and economic downturn in 70 years!  What about professionals in the financial industry that consistently underperform but are not at risk of losing their jobs? Continue reading →

8 Summer Reminders for your Investments

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images-12Dear Mr. Market:

Through the end of last week the S&P 500 had posted a return that was up just over 19% for the year!  We’ve seen investors pull money out of fixed income investments at a record pace as they are chasing the impressive returns that the equities markets have posted.  If you’ve been in the market you’ve certainly enjoyed some positive returns, but the question now is where do we go from here?  Below we’ve taken a few moments to put together some talking points that every investor should consider with their own portfolio.  As we are over half way through 2013 we find this a perfect time to revisit some reminders that we’ve touched on throughout this record-breaking year: Continue reading →

Making Cents of Investing…Really!?

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Dear Mr. Market:

Making centsAs we close out the first quarter of 2013 investors are intrigued with impressive returns on top of the double-digit results posted for 2012.  Throughout the first quarter mutual funds set records for the amount of money invested in them.  The sad truth is that while investors watch the market continue this upward trend, breaking records in the process, the average investor is not seeing the same results in their accounts. In a recent report published by Goldman Sachs, nearly two thirds of the actively managed mutual funds underperformed the broad markets (S&P 1500 – consisting of large, mid and small cap stocks) last year.  While only a third of the funds beat the market last year the results are even more disappointing in 2011 as 84% of the funds couldn’t beat the broad markets.  While the so-called ‘experts’ have not posted impressive results what is even more shocking is what investors are paying these underperforming managers on a yearly basis.

According to ‘The Motley Fools’ the average actively managed equity fund charges an expense ratio of approximately 1.5%.   If you sit back and really think about this the numbers are eye opening.  If you invested $10,000, into an average actively managed fund, you paid $150 a year every year whether the fund performed well or underperformed (like the majority of them did the last several years).  This is like paying a private tutor to teach your children and being satisfied when they come home with straight “D’s” on their report card the majority of the time. Continue reading →