Misery loves Company?

A new bulletin out by Employee Benefit Research Institute is reporting the survey results of savings of Americans aged 19-39. 67% reported having savings, including employer retirement plans, of less than $20,000. Check out the link at http://www.ebri.org/publications/facts/index.cfm?fa=fastfacts.

Summer 2008

Well, July did not prove to be the month that the market makes it's turnaround. The S&P500 was down 1%, the DJIA up a paltry .3% and the Nasdaq impressed with a positive 1.5% Year to date numbers are all negative, double digit numbers and still down over 20% from the Fall 2007 high. The only bright spot is small cap stocks. Small-value posted a whopping 5% return for July (still down 5% YTD) beating large cap stocks which were negative in July. Many long time investors view this as a positive sign. Small and mid cap stocks tend to be leaders when the economy rebounds. In fact, the market, over several previous recessions usually begins to turn up about six months before the recession is officially ended. Ever the optimist, I do think the worst is over. For all of you sitting with cash or bonds--who didn't check with me first before selling stocks, it is time to get back to your long term asset allocation. My favorite saying is: no one rings a bell when the market has bottomed--which means, no one can time the market effectively. Buying and holding a well diversified portfolio is the only way to earn real wealth over long periods of time. Interesting fact, the average mutual fund has returned 8 or 9% on average over time but the average mutual fund investor has earned around 3% over time. Why? Because the average investor buys high and sells low. Seasoned investors watch the behavior of retail investors to gauge when the market has bottomed or hit a top--by whether Mom & Pop are buying record amounts or selling record amounts. Guess where we are now? That's right, the retail investor has much of his/her assets in bonds and money market funds and is pulling money out of equity funds. You'll never build wealth following the pack--you need to stick to your plan.

Market volatility does create opportunity. Right now, it appears that municipal bonds are quite the bargain. When you can buy bonds that in some maturities offer higher yields than treasury bonds, investors in the highest tax brackets should strongly consider it. While buying individual bonds can be treacherous for the retail investor, there are some notable bond funds worth looking into.

Moving on to another important subject: the CDC National center for health statistics announced that death rates are falling and that life expectancy at birth hit a new record high. Why is this important? As you know, longevity risk is one of the major risks facing retirees today--that is, the risk of outliving your assets. As advances in medicine progress, this risk will become more pronounced. Anyone just starting out on his/her career should try to save as much as is feasible. This money will compound over decades preparing you for retirement. For anyone who hasn't saved enough, keep in mind that the IRS allows for catch up contributions of an additional $5,000 over and above the $15,500 that is currently allowed to be contributed to a 401k/403b plan.

I hope you are enjoying your summer. Thanks for reading.