Bryan and I have had Roth IRAs (for retirement) since we got married in 1999. We also have retirement accounts through our employers. I’ve done some reading about investments and retiring (one of my favorite resources is the Motley Fool), but in general, our investments (which we have with Charles Schwab) aren’t something we think about very much.
Earlier this year, we purchased a new life insurance policy for Bryan. The man who sold us the life insurance is a financial planner, and Bryan and I met with him this morning to get his assessment of our retirement savings.
Matt Cuplin with Midwest Financial Group is a nice guy. He was thorough and good at answering questions. (See here for info on working with a financial manager!) His main advice was that Bryan and I switch gears from the traditional “buy and hold” theory of investing and move to a system where we more actively manage our investments.
Currently, we have our funds in a couple aggressive mutual funds (Schwab MarketTrack All Equity is the main one). They’ve been there for 10 years. There’s been growth, there’s been decline. Frankly, I don’t even read the statements more than once a year because our approach has been that over time, (and we’ve got a lot of time until retirement) the accounts will go up. So why sweat it on the short term? The fees are low, and history has showed that stocks are a good bet in the long-term.
The downside of working with money managers is that you have to pay them. And in general, I’m not so in to paying fees on my investments. Matt’s argument is that actively managed funds do better in a “flat market.” The money managers pull back on stocks (re-allocate) during flat periods and then re-invest in stocks when things pick up. Overall, this approach is supposed to lead to higher returns.
Matt is recommending that we move our funds to a company called Flexible Plan Investments. His information shows that their aggressive fund out-performs the Index in a 10-year period. Its benchmark return (after fees) is a couple points higher than what we’ve been getting on either of our funds.
Matt’s argument is that by actively managing our investments, we’ll earn enough more that we’ll cover the 2% fee plus (which covers himself and the we’ll have more in the bank.
Sooo, I think we’re going to try it. We’ve done the other approach for 10 years, we’ll give this approach a spin for a while.
That said, if anyone out there has sage advice about investing or spots any red flags in this scenario, please let me know!
Elizabeth Talbotat 12:40pm on August 26th
I almost never recommend managed funds due to the fees. First, they always compare their funds to the Index which is not a very good indicator. After fees and even the current financial decline, you may actually do better in a Target Fund or a well diversified mix of your own. A Target Fund uses asset allocation based on your target retirement age. Closer to retirement, less aggressive the mix of equities.One of my favorite companies for investments is Vanguard. You managed the fund yourself, but they have great funds and some of the lowest fees in the market. Fidelity is OKI am a believer in doing a financial check-up once or twice a year. That includes looking over your credit report for errors and looking over investments. That would be enough to decide whether you wanted to stay in your investments or change asset allocation. Basically pick a mixture of funds between small caps, mid caps, large caps, international stocks, and a small of amount of bonds- you should be OK.
Althea Babler Dotzourat 1:46pm on August 26th
Hey, thanks for the great input!
Kathy Schulzat 5:04pm on August 26th
I'll run your scenario by Eddy. He has just started working as a financial planner and should be able to spot any major red flags for you.
Jennifer Smith-Leeat 5:37pm on August 26th
omg… reading this makes me sick to my stomach with terror. Do and I really need to start looking into this kind of thing (we have NO investments) but are procrastinating terribly because we are completely overwhelmed and thus paralyzed. oh, and embarrased!
Elizabeth Talbotat 11:06am on August 27th
It is never too late to start and isn't as terrible as one suspects. I remember being 19 (yes… ridiculous) and thinking that it was way over my head. I kept everything in a government bond fund until I had a clue on what even market fund and asset allocation was. It took me a couple of years. Does your employer have a 401k? If so and you haven't, enroll. If you are truly paralyzed by picking your own funds, pick up the target fund appropriate for your age. Something is always better than nothing. 🙂 Then slowly acclimate to the word of picking funds and figuring out the proper asset allocation.
Althea Babler Dotzourat 9:10pm on August 29th
Hey Jennifer, I'd just suggest you set up a Roth IRA. It's really easy. Pick a few mutual funds (mine has actually been in just one for the last 10 years), and you're started!
Grace Manubayat 2:50am on August 31st
we're on vacation, but tim agrees with elizabeth talbot. i don't read any of my statements either, but tim says that a balanced approach works well for most long-term investors. the definition of "balanced" is approximately 60% stocks and 40% bonds.(we'll now go eat some ice cream or shave ice. more internet when we return… i'm trying to be good while on vacation. aloha!)
Hey, thanks for the great input!
omg… reading this makes me sick to my stomach with terror. Do and I really need to start looking into this kind of thing (we have NO investments) but are procrastinating terribly because we are completely overwhelmed and thus paralyzed. oh, and embarrased!
I almost never recommend managed funds due to the fees. First, they always compare their funds to the Index which is not a very good indicator. After fees and even the current financial decline, you may actually do better in a Target Fund or a well diversified mix of your own. A Target Fund uses asset allocation based on your target retirement age. Closer to retirement, less aggressive the mix of equities.One of my favorite companies for investments is Vanguard. You managed the fund yourself, but they have great funds and some of the lowest fees in the market. Fidelity is OKI am a believer in doing a financial check-up once or twice a year. That includes looking over your credit report for errors and looking over investments. That would be enough to decide whether you wanted to stay in your investments or change asset allocation. Basically pick a mixture of funds between small caps, mid caps, large caps, international stocks, and a small of amount of bonds- you should be OK.
Hey, thanks for the great input!
I'll run your scenario by Eddy. He has just started working as a financial planner and should be able to spot any major red flags for you.
omg… reading this makes me sick to my stomach with terror. Do and I really need to start looking into this kind of thing (we have NO investments) but are procrastinating terribly because we are completely overwhelmed and thus paralyzed. oh, and embarrased!
I almost never recommend managed funds due to the fees. First, they always compare their funds to the Index which is not a very good indicator. After fees and even the current financial decline, you may actually do better in a Target Fund or a well diversified mix of your own. A Target Fund uses asset allocation based on your target retirement age. Closer to retirement, less aggressive the mix of equities.
One of my favorite companies for investments is Vanguard. You managed the fund yourself, but they have great funds and some of the lowest fees in the market. Fidelity is OK
I am a believer in doing a financial check-up once or twice a year. That includes looking over your credit report for errors and looking over investments. That would be enough to decide whether you wanted to stay in your investments or change asset allocation. Basically pick a mixture of funds between small caps, mid caps, large caps, international stocks, and a small of amount of bonds- you should be OK.
OK, I’ve been doing more research today. Here’s a few articles:
http://www.bankrate.com/brm/news/retirementguide2007/20070501_index_vs_active_funds_a2.asp?caret=1f
http://20somethingfinance.com/blog/2008/03/21/should-i-invest-in-index-funds-or-managed-mutual-funds/
http://money.cnn.com/2007/06/11/pf/expert/expert.moneymag/index.htm
One thing I’ve noticed is that my Roth IRA is entirely allocated in large-cap equity. It really should be more diversified.
Terry just informed me that a 2% annual fee is outrageous. He’s worried that we’d end up losing money, especially during times of low returns.
Hmmm. I might have to think about this a little more.
It is never too late to start and isn't as terrible as one suspects. I remember being 19 (yes… ridiculous) and thinking that it was way over my head. I kept everything in a government bond fund until I had a clue on what even market fund and asset allocation was. It took me a couple of years. Does your employer have a 401k? If so and you haven't, enroll. If you are truly paralyzed by picking your own funds, pick up the target fund appropriate for your age. Something is always better than nothing. 🙂 Then slowly acclimate to the word of picking funds and figuring out the proper asset allocation.
Hey Jennifer, I'd just suggest you set up a Roth IRA. It's really easy. Pick a few mutual funds (mine has actually been in just one for the last 10 years), and you're started!
Hey Jennifer, I'd just suggest you set up a Roth IRA. It's really easy. Pick a few mutual funds (mine has actually been in just one for the last 10 years), and you're started!
we're on vacation, but tim agrees with elizabeth talbot. i don't read any of my statements either, but tim says that a balanced approach works well for most long-term investors. the definition of "balanced" is approximately 60% stocks and 40% bonds.(we'll now go eat some ice cream or shave ice. more internet when we return… i'm trying to be good while on vacation. aloha!)
Hey Althea!!! My husband Russell was with Cuna for 9 years until June, when he switched companies. He’s now an independent advisor for World Financial Group and believes very strongly in the company’s philosophy. One of their big thrusts is active management and I KNOW he’d love to sit down and talk to you and Bryan before you make any big decisions. If you guys are in the Madison area, he could come by at a time that works for you and just discuss what he has to offer. If you decide you’re not interested, that’s obviously no problem… but it would be great to investigate some other options (and golly he loves talkin’ finance!!!)
Love to you and your beautiful family,
Annalisa & Russell Meyer
(608) 846-8893