Wednesday, June 17, 2009
The past couple of years have proven tough for most retirement accounts. Diversification provided some respite, but, overall, most portfolios got mauled.
In recent months, the stock market has rebounded, but most of our nest eggs have still lost a lot of money since the market topped out in 2007. And all of us have lost a lot of time.
Alas, there's no such thing as a risk-free approach to rebuilding your nest egg. Super safe may feel nice, but it pays no returns over time. A few of us are in a position to live off a super-safe approach, but most of us are trying to figure out how to get back on track.
Figuring out how to deal with your retirement portfolio depends on where you are in your life. Time is perhaps the most important element in building or rebuilding a portfolio. That's one reason we're breaking down this nest-egg analysis into age groupings, aiming to give people some ideas that suit their current situation.
If you are under 40, count yourself lucky. Two things are working in your favor. First, time -- if you have enough of it -- can heal wounds. The stock market will eventually recover and grow. Second, by saving early -- which you should definitely be doing -- you get the benefit of compounding, wherein early gains are built upon.
You also want to take a long view of the investment arena. A lot of growth in coming years is expected to come from overseas, especially in emerging markets. Tim Medley of Medley & Brown Financial Advisers in Ridgeland, Miss., says clients should have at least 35% of their stock holdings in non-U.S. stock funds.
In terms of risk, emerging-markets funds are more volatile than overseas funds that focus on developed economies like Japan or Western Europe. That volatility is emblematic of the risk in this cohort of funds. But as a younger investor, you want to have a bit more risk exposure, since greater risk tends to translate into greater returns over the long term.
Also, given your long-term outlook, the drop in share prices is an opportunity. Great long-term investors, such as Warren Buffett, believe that U.S. stock prices are still a relative bargain, even after the recent bounce-back in the major averages.
'For younger people, the best place to be is in well-selected stock mutual funds,' Mr. Medley says. He thinks some people, especially younger investors, have 'overlearned' the lesson of 2008 and therefore are shying away from the stock market too much. Among the fund families he prefers are Dodge & Cox, Oakmark and Primecap.
40 to 55
Once you enter this age range, you are starting to move from the aggressive stance of your youth to something a bit more measured. At the same time, you are entering a very important savings period since you likely are at the height of your earning power.
This is a time to invest as much as you can in your 401(k) while developing other ways to sock away money. It also is important to avoid two mistakes that have become common among investors in this cohort in the wake of the downturn.
'First, people have reacted [to the market downturn] by reducing the amount of money they're saving and investing,' says Mark Bonhard, an investment adviser with Dawson Wealth Management in Cleveland. 'Second, they've started changing their strategy without good reason. All that does is lock in the losses and prevent a chance to recover.'
In order to boost savings during this critical time, Mr. Medley encourages clients in this age range to set up automatic savings plans that direct a portion of their paychecks into an investment account at a firm like Charles Schwab or Fidelity Investments, where it can be invested in stock mutual funds.
'People need to save money outside of their retirement account,' says Mr. Medley. 'And as elementary as it may seem, an automatic plan works well for most people.'
55 and Over
As you get closer to your retirement years, you want to hold onto the capital you've built up over time. Trouble is, a lot of that capital has gone away in the market downdraft of the past two years.
'What's important in this case is recognizing where you are right now and not trying to think about where you were in 2007,' says Tommy Williams of Williams Financial Advisers in Shreveport, La. 'Job one is perhaps more philosophical and emotional than it is analytical.'
According to recent surveys, retirement security is first and foremost on the minds of people in this group.
One strategy is to consider the minimum amount of income you require on an annual basis and then see if there's a low-cost annuity that promises to pay at least that amount for life.
Such a strategy means you are eschewing future stock-market gains, but you have the security of knowing that your income is set for as long as you are around to spend it.
'Annuities can play a very strong role, because a lot of them carry guaranteed income,' says Mr. Bonhard. 'Having those guarantees makes it easier to take a little additional risk with the rest of your assets. But you do pay something to get those guarantees, and you have to watch that closely.'
Given the stock market's still relatively low level and, for some folks, a need to rebuild a broken portfolio, some advisers recommend tweaking your portfolio mix to have a bit more stock-market exposure via low-cost stock-index mutual funds.
Portfolio choices, especially among retirees, should be made from a stance of prudence and common sense.
'Having enough is more important than having more,' says Mr. Bonhard. 'If you've reached enough, you don't want to be gambling for more.'
He cautions that you should purchase annuities only from companies with a strong financial position and solid credit ratings.
(Picture: Hindu Temple, Penang)
你還應該長遠地看待投資地點。預計未來幾年的很多增長將來自海外﹐特別是新興市場。密西西比州Medley & Brown Financial Advisers的麥德利(Tim Medley)說﹐客戶應該至少有35%的股票資產投在非美國股票基金上。
麥德利說﹐對於較年輕的人來說﹐最佳的投資目標是精選的股票共同基金。他認為﹐一些人（特別是較年輕的投資者）因2008年的教訓而矯枉過正﹐遠遠避開了股市。他看好的基金包括Dodge & Cox, Oakmark和Primecap。
克利夫蘭Dawson Wealth Management投資顧問伯恩哈德(Mark Bonhard)說﹐首先﹐人們通過減少儲蓄額和投資額對市場的低迷做出了反應。其次﹐他們開始在沒有充分理由的情況下改變策略。所有這些都鎖定了損失﹐阻止了復甦的機會。
為了在這樣的關鍵時期提高存款額﹐麥德利鼓勵這個年齡段的客戶設置自動存款計劃﹐直接將部分工資轉到嘉信理財(Charles Schwab)或富達投資(Fidelity Investments)等機構的投資賬戶中﹐從中可以投資股票共同基金。
路易斯安那州Williams Financial Advisers的威廉姆斯(Tommy Williams)說﹐在這種情況下重要的是認清你目前的狀況﹐不要再去想你2007年時的情況。一開始可能更為達觀和情緒化﹐而不是具備分析性。