Markets and More

A couple of interesting things to talk about today. In looking at what type of stocks have done well so far this year, it looks like the Mid cap sector takes the lead. According to today's Wall Street Journal, the mid-caps are up about 2% year to date, the small-cap growth and core styles are up slightly and the small-cap value style is down .1%. The worst hit is large-cap value at -2.6% while large-cap growth is down .7%: which is quite counter intuitive because typically it's the value sector that holds up better in declining markets. The total index is down 1.4% year to date. The return numbers are based on the Dow Jones Wilshire U.S. indexes and does not include any international markets. I just like to point out how important it is to have a weighting in all size market capitalization and how if you just owned a Wilshire 5000 index fund, you would be at a disadvantage.
In the news last week are the results of a study done by Fidelity Research Institute that concluded Americans have only saved enough to replace 58% of pre-retirement income in retirement. This is starkly below the 80% benchmark most financial planners use. My rule of thumb in figuring out how much someone will be spending in retirement is to assume that all debts will be paid off by then and that spending will really be related to living expenses, travel etc and then later on, health care expenses. Not everyone is in the situation of being debt free by retirement--those people may need to work part-time in their Golden Years.
Many of you may not realize that a source of great irritation for me is the whole 401k industry. It angers me that while the pressure for preparing for retirement is clearly being pushed from the employer to the employee , yet most of us are stuck with plans that include high cost, mediocre-at-best mutual funds. Additionally, plans do not disclose what the costs are--which get passed directly to employees. The Department of Labor has apparently made it their priority to force 401k plan sponsors to disclose all fees including indirect compensation. It's a start at least. One easy remedy is for a plan sponsor to include a brokerage option within the plan which would allow employees to funnel their 401k contributions to a brokerage account where they, with the help of a financial advisor, could choose their own investments.
Thanks for reading.