Why You Really Didn't Blow Your Chance To Retire.

In a May 2nd, post on Motley Fool @msnbc. com, the authors try to convince us that we've missed a huge opportunity, perhaps a once in a life time opportunity, to provide for our financial futures because we were under allocated to stocks and/or didn't contribute enough to our retirement plan.

As is often the case, the authors help us understand the error of our ways by noting that we need to be fixated on making the most amount of money that we can on any day, at any given moment and in any given market. AND, true to form, they manage to provide us with some (suspect) remedies which, as you might imagine, play perfectly into "creating transactions" game which keeps Wall Street running. If you missed your best chance to create a sustainable retirement, you can fix it by simply [a] contributing more to your retirement plan and [b] picking some bullet proof stocks. Wait a minute, there are bullet proof stocks? Oh, ok, there are lists of bullet proof stocks (and funds, and UIT's and bond funds, and hedge funds, and can't miss land deals) but not actually any bullet proof stocks, just lists of them.

Ironic that the one salient theme would actually work, to monitor what you pay for your investments because overpaying results in almost guaranteed returns, even made the list. Odd that the one metric that might actually ensure that you make some progress came in third. That's sort of like telling Titanic travelers that they should [a] buy some floaties, or; [b] buy some long underwear and lastly, stay home. They're all good recommendations but an appreciative re-order of those recommendations seesms in order to me.
Amazing it is that you can write an article about the fall of someone elses retirement and never mention either RISK or GOALS? How exactly does that work?

Lest we forget, 2008 came about in world where RISK and GOALS weren't important. Greed was.
When you're "success" is measured in whether or not your greed was satisfied any successes you have will be short lived.

You'll blow your chance at retirement if you can't define what it is or how much it will cost.

As noted many times in my blogs; if you don't know what it will cost, you can't tell how much it will take to fund it. No amount of contribution will ever be "right" unless you know how much you need and no "investment selection" will ever be right until you know the rate of return you need to fund your goals.
If pension plans can take too much risk and wind up either overfunded or under-funded, why can't you?

The New York City Marathon and Your Investment Portfolio

You can tell when there's a lot of misinformation when it could be a monthly blog topic and you'd never have to devise another one to write about again. 

As the markets start to improve, the flood of "the next bad news" has been surplanted by "the next best thing you can do." And, that's what the financial periodicals and websites are starting to spew out. There's all sorts of recommendations, buy high-dividend paying stocks (isn't it odd that right when tax rates are poised to increase that there'd be a recommendation to buy stocks who generate taxable distributions?) or go for "yield" to keep your income up (better known as the "straight-jacekt approach, it never works) or get entirely out of bonds and cash and put everything you own into stocks because "now is the time."

Every year, thousands of people run the New York City Marathon. Probably less than 1% of them are running it to win it. Everyone else, God bless them, is out there for some other much more personal reason, and that's exactly my point. 

The financial media (and way too many investors for that matter) come to a common worldview that what every investor is doing or must do, is to attempt to make as much money as they can at every turn of the market, irrespective of goals, timing to reach those goals or perhaps more importantly, the risk involved. Just like the marathon, most investors should be basing their investment decisions on more personal matters such as their lives, their financial security and their willingness to accept risk. Not on maximizing the return on their money at any cost. 

And, thankfully, most of the people that run the marathon with no hope to win it, still plan on winning. But they want to win something less newsworthy, but equally as valuable, their own progress in their heads and hearts. 

Winning takes on many forms. Losing money takes on one. When it's gone, it's gone no matter what the race may have felt like at the beginning. So why not focus on your goals not someone elses. 

 

The Compass or the Map

Over the last few years I've read a few of Seth Godin's books and I receive his blog feed just about every day. He's one of the bloggers that I tend to read just about everything he writes and as with his books, I find Seth's perspective on things to be interesting and intriguing. 

On February 22nd, his blog titled "The map has been replaced by the compass" (you can read that blog as well as the other "February" bloggings by Seth.) another interesting paralell has been drawn between whatever inspired his blog on that day and the wealth management process. 

In that blog, he writes..."The compass, on the other hand, is more important then ever. If you don't know which direction you're going, how will you know when you're off course?

And yet...

And yet we spend most of our time learning (or teaching) the map, yesterday's map, while we're anxious and afraid to spend any time at all calibrating our compass."

In the world of personal finance there also exists both map and compass.

And, likewise, maps while inferior at the job tend to win out.

One word of caution; if your map is getting all your attention that's a problem you need to work at fixing.