Keeping Costs of Your 401(k) Low

Regulations, imposed by the U.S. Dept. of Labor on management costs of 401(k)s and comparable savings plans are important to know. The smaller plans, especially, can become expensive to manage because of paperwork and questions that may arise during plan administration. Larger plans can benefit from expenses-reducing volume.

           

As is the case with most government attempts, there is little an employee can do but voice opinion to company management that will allow for competition among funds, to keep costs at the lowest possible levels.

(See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Trying to Outsmart Other Investors?

   

           

I have been recently writing about the absurdity of using expensive professional advisers when it’s so easy to invest on your own. Especially when you give up the notion you can outfox the next guy by trading stock in and out of the market, or picking hotshot winners before they become the next bonanzas.

           

Use low-cost indexed funds and ETFs and you’re on your way to better performance. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Another Reason to be Your Own Investment Advisor

I have recently repeated reasons why using an investment adviser may be too costly for you, when all you need is a tax or estate lawyer and/or CPA if you have the wealth suitable for management.

           

It’s also essential to note that good investment policy is disciplined That means your investments will not be constantly changed or timed because the lack of discipline alone is costly.

           

Yet, too many advisers are guilty of making constant portfolio changes and touches just to show they’re on the job earning their keep; in the process, making results worse for the client. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

The Important Investment Advisory Lesson

           

I repeatedly point out how expensive it is to use financial advisers whose fees run 25%, 30% and even more of your earnings each year.

This sounds like an outlandish statement only because the financial media never points it out, due to conflicts of interest. And because the SEC is too busy nitpicking trivia.

           

I repeat: Pay a fee to an adviser of 11⁄2% each year (some take more) for advice you can perform for yourself, and you have lost $1,500 for every $100,000 of your assets. If you are lucky to get a 5% return these days, or $5,000 for every $100,000, that fee represents 30% of what you earned!!

           

Unless you are a complete economic and financial newby, there is absolutely no reason you need a financial adviser to tell you what to invest in. There are truly, simple to understand, low-cost index funds and ETFs for you to choose.

           

If you have a valuable estate you need a CPA and estate lawyer to assist you, but expensive hand-holding by an adviser is too much of an absurd luxury that will considerably diminish your net worth.(See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Investment Advisory Charges

  

                       

The U.S. has about 66,000 certified financial planners, wealth advisory firms and assorted investment advisers, whatever term they use to market their services, certified by organizations they belong to, by virtue of conventional training and tests. But none of which make them truly the unusual experts they claim to be.

                               

Some are acting as estate and administrative agents, but this is not a service normally attached to the conventional requirement or need. This added service is an expensive undertaking on behalf of celebrities in the entertainment world and the extremely well-to-do.

           

They all offer the average investor services which can be easily evaluated and bought on one’s own, without the costly need of such adviser. I constantly repeat this.

           

Pay a fee to an adviser of 1 1⁄2% each year (some take more) for advice that you can perform for yourself, and you have given up $1,500 for every $100,000 of your assets. If you are lucky to get a 5% return, or $5,000 for every $100,000, that fee represents 30% of what you earned!! That makes a tremendous difference in your eventual net worth. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

           

Why Take Risk For Better Returns?

                       

The Financial Analysts Journal reported a study made about the ability of added investment risk, in order to produce more returns. Many investors have the impression that high risk spells more profits.

                       

The study showed otherwise: Over 41 years, through 2008, lower-risk stocks actually performed better than higher risk types. This was not supposed to be the case according to prevailing theoretical mathematical risk models.

                       

Diversification of risk and avoidance of real speculation would be the solution.(See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Social Security Compared to a Ponzi Scheme

    

                       

The definition of a Ponzi scheme: It takes funds from someone with the promise of paying it back in the future with attractive dividends or earnings. And using the funds in the meanwhile to reward another to whom the same promises were made. All of which has been done without truly investing those funds.

                       

In that respect, Social Security fails a legitimacy test. Despite repeated political promises and certifications, there is no true investment, nor the use of a lock box or reserve accounting of funds. Nothing of what is required in a legitimate insurance program. Despite the aura of insurance, there is no element of that assurance.

                       

Those getting benefits are receiving them from taxes collected on plan participants still working.

                       

Just one example of a lack of Social Security equity that any insurance program would have: Should their husbands earn similar incomes, two spouses will get the benefits from their spouse’s retirement, even though one wife could never have paid a penny in Social Security taxes. The working wife gets an adjustment only if she had earned more than her spouse.

                       

There is little to show for payments made by a worker who dies before he is 65. And so on, as I have noted in the past. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

           

Are Diamonds a Good Investment?

                       

Unlike many other valuable commodities, you cannot buy diamonds in the form of shares or an ETF fund, or as a conventional commodity. Diamonds have to be bought as is.

                       

Because you can pack lots of value in a tiny item, the diamond can be highly valuable in an emergency, for someone who has to leave his country or salvage assets in a dire emergency. But how does it shape up as an investment?

                       

Not very well for a number of reasons. Importantly, quality determination and value require expertise. There is also the danger of loss and/or theft. And the difference between cost and sales figures can vary greatly because of unestablished markups.

                       

Remember also, diamond supplies have to be controlled for values to be stable on a global level, especially when artificial diamonds can be so close to the real thing in appearance and usage. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Bank Loan and Credit

                       

Banks may not be making sufficient loans to small business, even when they have the ability to do so. The fact is, they make more money these days, with far less risk, by borrowing cheaply from the Federal Reserve and investing in government bonds.                   

                                       

Also, there is political regulatory meddling and strict bank supervision adding to the bank-lending picture.

                       

Banks complain that they have the money to lend, but with less takers because of the economic recession.

                       

Many thriving businesses, especially commercial real estate operations, are genuinely seeking loans from banks with funds. But, too many lenders are hesitant about extending loans they once more readily made. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Doubtful Federal Reserve Actions

                       

We unfortunately use Federal Reserve edicts as gospel, even though they often are proven wrong. This has been the case in almost half the decisions we have gotten under the auspices of the past governorships of Alan Greenspan and Ben Bernanke.

                       

We have to remember that economists are fallible, even when they direct the Federal Reserve.

                       

In the past, those in the Fed worried we may have deflation; they therefore inflated the economy, and added too much currency. In fact the Fed, almost automatically, has been on the side of promoting inflation, in an attempt to prevent deflation.

                       

Thus, the Fed has been a major culprit in causing bubbles which invariably lead to busts and eventual depressions.

                       

And today is aiding and abetting inflation with its loose-money policy. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Back-Testing of Investment Strategy is Unreliable

                                   

                       

Professional investors use back data to pick strategy based on future events. Wall Street financial models often resort to what is known as data mining. Information on various investing strategies of the past. They are collected and tested on a “what if’ basis for the future.

This is also called back-testing; the strategies of the past are used to see what would happen, hypothetically, when projected into the future.

                       

All this is based on many assumptions that the mathematical models are supposed to predict.

                       

After my decades-long investigations of investment strategies, I can tell you: There are some worthwhile concepts as well as gibberish in all. But no panacea exists. I would say that most of the data mining is therefore useless, except for their marketing of investment management services.(See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Know Economists Who Relate To Your Pocketbook

  

                       

You don’t have to go to college to understand economic basics that will help compete for a job or career, to enable you to separate political gibberish from fact, and see to it that you and your children can live your lives to maximum advantage.

                       

The teachings of fundamental economics is readily available from internet searches. You can learn about them all, from Adam Smith to Milton Friedman to Friedrich Hayek. And John Maynard Keynes, who is the little-understood guru of the free-spending leftist politicians. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Reverse Mortgage Facts

                       

You may be seeing and hearing ads about reverse mortgages for those over sixty. Be careful, should you consider one, as the step would be similar to taking home equity lines of credit.

                       

Larger banks no longer make reverse mortgages because of inherent problems, many from the homeowner’s point of view. Remember to be aware of all the provisions, including the fact that you have to continue to pay your real estate taxes and insurance on the property. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Types of Securities You Purchase

                       

Stocks selection often has to do with their business types or style. Whether they are considered growth or value stocks, or if they can be classified by corporate size or by industrial group.

                       

Over the longer-term these types and styles really mean little. Favored industries and groups of companies often see change in their market-favored positions. Reacting to them incites useless market-timing. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Timing the Market Offers Poor Success Odds

                       

Timing the market does not work. I have frequently given the results of past research of this technique.

                       

Some individuals may do welt with longer-term trends, as opposed to the short-term, but most timers are inclined to be the in-and-out types. And the odds are usually against them. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)