Archive for Friday, August 19, 2011

Financial strategy: What now?

August 19, 2011


We’re recovering from a recession, U.S. debt has been downgraded by Standard & Poor’s, and the Dow Jones industrial average dropped more than 400 points Thursday and nearly 200 more Friday. But when it comes to retirement planning, investment experts say the news shouldn’t make you feel skittish.

“If you’re investing for retirement, you shouldn’t let this volatility scare you too much,” said Art Hall, director of the Center for Applied Economics at Kansas University.

Financial planners and business scholars agree that even in uncertain times, the basics for retirement planning remain the same: Have a diversified portfolio. Live within your means. Save.

“It’s a really challenging time to think about retirement planning,” said Felix Meschke, an assistant professor of business at KU. “At the same time, the fundamental principles of providing for your retirement really haven’t changed that much.”

What has changed, Meschke said, is investors’ attitudes and expectations. Five years ago, investor surveys revealed people wanted to accumulate as much wealth as they could before retiring. Today, people are more likely to say they just want financial peace of mind — they don’t want to be rich; they want to be comfortable.

That newfound caution may be translating into how much risk investors are willing to take on. The financial planners interviewed for this article said they had not changed their strategies much since the recession. The main difference is they are talking with clients more about risk management, the art of balancing risk and reward.

“Risk management has always been important, but it wasn’t anything people thought of in the ’80s and ’90s,” said Victoria Bogner, a financial planner at McDaniel Knutson Financial Partners of Lawrence. “It used to be you’d throw a dart at a board, pick a stock, and it’d go up.”

If that’s not the case anymore, then what should you do?

Be realistic

There have been three periods since World War II that have “been particularly lucrative to be invested in the stock market,” Hall said. The most recent was from 1984 to 2000, which may have given investors unrealistic expectations, Bogner said.

“The first thing we need to do is reestablish reality. The ’80s and ’90s, that was amazing growth, but that’s not normal.”

Hiring a planner

Hall said investors should consider their needs before hiring someone to manage their retirement plan.

He pointed to studies showing that over a 10-year period, passively managed retirement funds beat funds carefully tended by financial planners. That doesn’t mean financial planners do a bad job. It just shows no one really knows where the next big opportunity will be.

“We can all look back and say, ‘Man, we should have all bought Apple.’ But most of us didn’t.”

For some people, it might make more sense just to do their own research.

“You can get free advice by spending a few hours on Google,” Meschke said.


Some Enron employees had the majority of their retirement plans in company stock, Meschke said. That’s risky. Spreading out your investments will lower the chances that disaster for one company will mean disaster for your retirement.

For younger people, places like China, Brazil and India may be a good places to look to diversify. They are higher risk, but they are growing.

“You want to be looking at where is the highest rate of growth going to be coming from in the world,” said Phillip Rademacher, president of Rademacher Financial of Lawrence.

Lower your debt

If possible, people should accelerate their mortgage payments and build a cash reserve for emergencies, Rademacher said.

“The further you reduce your debt, the more flexible you are,” he said.

Look beyond the money

Meschke likes focusing on the financial side of retirement planning but said economic security is just one aspect of a fulfilling retirement. His parents are in their 70s and live on the fourth floor of an apartment building. The building has no elevator, and it’s getting difficult for his mother to walk up those stairs every day.

He recommends thinking about where you want to live and what will make your retirement meaningful.

“All of those decisions can make a huge impact on how happy you are in retirement, and they’re really not financial,” Meschke said.


just_another_bozo_on_this_bus 6 years, 9 months ago

Well yea, because the value of gold never drops. I mean, when it dropped from $594 an ounce in 1980 to $309 in 1984, that nearly 50% drop wasn't a real loss in value or wealth, was it? Of course not, so be sure to buy lots of gold now, when it's pretty high, and sell low in a few years when it tanks. That's what smart investors would do.

Brock Masters 6 years, 9 months ago

Gold has artificial value like the Emperor's clothes. Think about it, other than make jewelry what value does gold have? And even with jewelry the value is artificial as there are other less costly materials that are just a pretty.

No one needs gold so if one day people woke up and said it has no value, then it wouldn't. it only has value because someone said it was valuable and the sheep followed.

Fred Whitehead Jr. 6 years, 9 months ago

One thing you do not hear in all the ads to buy and sell gold is the fees involved. You cannot take a gold ingot to Target or Wal-Mart and buy more cheap Chinese made crap. It is not a liquid asset.

I do not know what these fees and charges may amount to, but once you have bought gold and then the price drops (or rises) you will still be stuck with the cost of making it liquid cash again. Those advocating buying gold never mention the costs involved with such transactions and the gold purchaser needs to be very aware of what you are doing. Just like with any financial transaction.

Rich Lorenzo 6 years, 9 months ago

Fred, keep your money in Federal Reserve Notes aka dollars...hope that works out for you. Look at the dollar chart since 1970. The gov't doesn't care about you.

Brock Masters 6 years, 9 months ago

Rich, what's your point about the gov't not caring about me? How is the pertinent to my statement that gold has no real value because you can't do anything with it but make jewelry. If you're going to post at least stay on point.

Brock Masters 6 years, 9 months ago

True, but if all the gold in the world was suddenly to disappear no one, except those that invested in it would suffer.

You can't say that about food, oil, water, etc. We need these things to survive, but we don't NEED gold.

I am not saying it doesn't have value today because it does, but it is an artificially created value.

If I have all the food or water in the world and you have all the gold, who is in the better position. I may want your gold, but you need my food or water. If you had no food, how many ounces of good would you be willing to pay for a bushel of wheat and a hog?

Agree or disagree, it doesn't matter. it was just a passing observation.

Katara 6 years, 9 months ago

It was an excellent observation and one that I rarely see people mention.

just_another_bozo_on_this_bus 6 years, 9 months ago

Fred, you miss the point. Magical capitalism needs a magical currency, and that's gold.

Rich Lorenzo 6 years, 9 months ago

Fred, I was just suggesting that you keep your money in your precious dollars and the rest of us will look at hard assets. Your overall point is that gold has no value. I disagree.

The gov't doesn't care about a reference to the fact that the gov't is killing the dollar every day. What do you want to own?

Rich Lorenzo 6 years, 9 months ago

I would recommend that people buy hard assets. Things that have tangible value. Gold, silver, oil, natural gas, timber, agricultural commodities and farmland. As the Federal Reserve continues to print money, the value of the dollar will be decimated.

Don't trust investment planners that have a Keynesian world view.

Crazy_Larry 6 years, 9 months ago

Apologies...Hope you don't mind being corrected. I'm doing it for your own good, you'll be a better commenter for it. 'In like Flint' should be 'in like Flynn.' Or did you purposely change the phrase? Anywho, good luck with your tangible assets.

bad_dog 6 years, 9 months ago

Catalano 6 years, 9 months ago

Wow. Wonder what people who have no money left over at the end of the month should invest in?

ljwhirled 6 years, 9 months ago

  1. A smaller house.
  2. More fuel efficient car.
  3. Better insulation for your home.
  4. A lunch box to take your lunch to work with you.
  5. Professional Education and Certification Testing.
  6. Your health (diet, exercise, stretching - helps stay healthy and avoid injury)
  7. Sex. Sex helps keep you healthy.
  8. Your own small business. Mow lawns or detail cars on weekends. Find a niche product to sell on E-bay.

If none of those work: 1. Life Insurance. 2. A "faulty" garage door opener.

ljwhirled 6 years, 9 months ago

Do something that makes you happy.
Do it well. Realize that your time has value. Monetize the time you spend doing something that makes you happy. Hire some folks. Monetize their time.

Sigmund 6 years, 9 months ago

fred_mertz (anonymous) replies… "No one needs gold so if one day people woke up and said it has no value, then it wouldn't."

That is true of everything isn't it? If one day everyone woke up and said (apples, TV's, computers, stocks, bonds, etc) have no value, then they wouldn't. Although you told us not to invest in gold, you failed to mention what you would buy.

Unlike numerous stocks, bonds, and various currencies, gold has never been worth $0. Apples and other food stuffs spoil and are not a great store of wealth for a very long time. Computers, TV's, and electronics lose value very quickly. Put your cash in a money market account and you get less than 1% and the pleasure of paying state and federal income taxes on that little bit, and after inflation your losing wealth.

The US dollar used to be backed by gold and silver and was a stable store of wealth. Once we left the gold standard we began to experience inflation at about the same rate as new paper dollars were printed. As the Fed returns to Quantitative Easing 3 and 4 to prop up the US economy before the election in 2012, I wouldn't bet against gold.

Brock Masters 6 years, 9 months ago

No, it really isn't true of everything but you missed my point. And, I didn't say not to invest in gold. Gold has a value right now just like a dollar does. Invest in it, earn dollars and so on.

I was just musing about gold and its value. If gold and computers disappeared tomorrow which would have the greater negative impact in terms of our daily lives? Just something to ponder and no I'm not saying invest in computers.

Crazy_Larry 6 years, 9 months ago

I like a lot of what Paul has to say, i.e. bring home the troops, audit the fed, etc., he's just too much of a religious radical for my taste (no separation of church and state? wow). Just sayin' "no" to Ron Paul, period!

Sigmund 6 years, 9 months ago

just_another_bozo_on_this_bus (anonymous) replies… "Well yea, because the value of gold never drops. I mean, when it dropped from $594 an ounce in 1980 to $309 in 1984, that nearly 50% drop wasn't a real loss in value or wealth, was it?"

You had to go back nearly 30 years to find a counter example? 25 years ago the administration implemented "Reaganomics" and the stock markets soared. Money moved out of hard assets (gold, silver, oil) and into financial assets (stocks, bonds). As this administration implements "Obamanomics" (the opposite of the policies of the 80's), I expect the opposite result, money moving out of financial assets and into hard assets.

You too told us what not to invest in, but failed to tell us what you would invest in? Might I suggest GM, I hear they have a coal powered car called the "Volt." Rumor has it is the latest in cutting edge "green" technology costing 100's of millions in research and development. They sold 125 Volts last month so you can still get in at before it gets hot.

Crazy_Larry 6 years, 9 months ago

"The 2011 Volt is being sold only in selected U.S. markets and nationwide availability of the 2012 model year is expected by November 2011." The MSRP for the 2011 Chevrolet Volt starts at $40,280....

just_another_bozo_on_this_bus 6 years, 9 months ago

"You too told us what not to invest in,"

No, I didn't tell anyone not to invest in gold. I merely pointed out that like any other investment-- sometimes it works out, and sometimes it doesn't. And like any other investment instrument, it's value is nothing more than abstraction. If enough people believe in that abstraction, then it will retain "value."

But basing an economy on how much shiny metal is stored up in various places would create as many problems (probably more) as its advocates say it would solve.

riverdrifter 6 years, 9 months ago

I was out of gold stocks in March. Been taking a beating the last couple of months though everywhere else. I still look to the EAFE markets for good returns as well as energy-tilted ETFs.

Sigmund 6 years, 9 months ago

Crazy_Larry (anonymous) replies… "The 2011 Volt is being sold only in selected U.S. markets and nationwide availability of the 2012 model year is expected by November 2011." The MSRP for the 2011 Chevrolet Volt starts at $40,280...."

Not sure I would buy one in Lawrence as much of our electricity comes from coal, and electric rates are sure to soar as Obama EPA regulation come online and supply is removed from the grid. "Getting ready for a wave of coal-plant shutdowns" Washington Post Online, by Brad Plumer

But electric cars are a sure environmental and economic winner as all those new green sources of energy are both abundant and cheap!

Sigmund 6 years, 9 months ago

Crazy_Larry (anonymous) replies… "I like a lot of what Paul has to say, i.e. bring home the troops, audit the fed, etc., he's just too much of a religious radical for my taste (no separation of church and state? wow). Just sayin' "no" to Ron Paul, period!"

I didn't realize Ron Paul advocates for a official government sanction religion which would be just Crazy, Larry. You have a link to substantiate that? BTW, there is no candidate I agree with 100% but if pushed came to shove I would vote for Paul over the current administration in a heart beat, even if he advocated for a state supported religion (which I am pretty sure he doesn't).

Brock Masters 6 years, 9 months ago

Ron Paul is my pick too. I agree with most if not almost he says. Like his son too.

Problem with Paul is that he doesn't lie like most other politicans. Just tells it to you straight and that makes it hard to get elected.

Crazy_Larry 6 years, 9 months ago

Paul has supported keeping “under God” in the Pledge of Allegiance, has co-sponsored the school prayer amendment, and supported keeping the Ten Commandments on a courthouse lawn. Ron Paul shows that he will cite the founding fathers and the Constitution when convenient, and ignore their principles when not. He has written in the past, “The notion of a rigid separation between church and state has no basis in either the text of the Constitution or the writings of our Founding Fathers.” I cannot, therefore, consider him as a candidate, or believe his rhetoric of being a strict defender of the Constitution.

In a speech in 2002 explaining his introduction of legislation that would forbid American federal courts from hearing cases in which citizens claim to have had their religious freedom violated, Representative Paul complained,

"In case after case, the Supreme Court has used the infamous 'Separation of Church and State' metaphor to uphold court decisions that allow the federal government to intrude upon and deprive citizens of their religious liberty."

He is also against a woman's right to choose:

Sigmund 6 years, 9 months ago

Speaking of Hugo Chavez, "Speaking on state television via telephone, the leftist leader said he would be introducing a new decree in the coming days to put exploration and extraction of gold into the government’s hands."

Nationalization of gold production is no doubt to protect his subjects from getting caught up in the gold bubble and "profiteering" (as merril in his quaint way would put it). I mean Venezuela is already the 15th largest holding of gold with 400 tonnes, surely no one country needs that much.

Sigmund 6 years, 9 months ago

RidgeRunner (anonymous) replies… "I'm not sure of your point or where it leads, but, if reading between the lines gets me anywhere... "

Hugo, one the largest holders of gold, obviously believes it is headed higher. Spot gold tonight is $1,851. Gold is a terrible investment and is probably over bought, but most of alternatives are worse. I don't buy anything on margin, except my house which has a 4-1/8% loan and 50% equity. Fiat currencies work really, really well until the central banks begin printing more and more, and then suddenly they don't. Not all assets inflate or deflate together. As wealth move into a particular asset it "inflates" and prices go up, as wealth moves out of an asset it "deflates" and prices go down.

But the bottom line is that wealth has to be stored somewhere and few asset classes are both large enough and inelastic enough to store the wealth of a couple of trillion dollars and still move up as more wealth moves into it. In order for gold to deflate there would have to be an alternative that is more attractive. There are a few select stocks (less than a dozen) that I think are ok, but little else.

My brother is buying "bullets and beans" and if the world economy collapses he will have the last laugh.

tbaker 6 years, 9 months ago

I liked the Clintons so much better. With them, you knew exactly what you were getting. Their defining characteristic was their complete lack of principal. They would go which ever way the wind blew, regardless of what they said before. With Mr. Obama however, he is a die-hard statist liberal and has never deviated from that path in 20+ years. Its hard to tell what he will come up with next. As long as his solutions continue to be centered on spending money we do not have and more and bigger government, Gold will continue to be a safe bet.

Godot 6 years, 9 months ago

This article beings with a false premise. "We're recovering from a recession." Really?

jayhawxrok 6 years, 9 months ago

tbaker and godot are both full of excrement.

Obama is not a liberal, he's governed like a moderate, but to you loons anyone one step left of Attila the Hun is a liberal.

Yeah, we are recovering, not as fast as we want but we are recovering. More private sector jobs were added in 2010 under Obama than in all eight years of GWB combined.

Meet a fact, it won't bite.

Godot 6 years, 9 months ago

In response to jayhawxrok, I never take the word of an extremely uncivil and rude Obamabot. Prove, source it, cite it.

yourworstnightmare 6 years, 9 months ago

All of those private sector jos created by Rick Perry in Texas must be helping Obama on the job front, no?

yourworstnightmare 6 years, 9 months ago

Businesses are sitting on record amounts of cash.

Why aren't they spending this to create jobs? Because they are not stupid and are capitalists.

They realize that demand is in the toilet, that consumers have very little to spend. So creating new jobs when there is no demand is throwing your money away.

The economy is out of whack. Businesses are sitting on loads of cash. Dollars need to reach the pockets of consumers so that they can spend and businesses can create jobs. Right now dollars are tied up business's investments and accounts.

A second stimulus is needed, without the corporate give aways, along with higher taxes on the wealthy.

This is a simple, logical, capitalist mechanism to get consumers spending again. If american business ever wants to excel again, they will see the need for this as well.

Godot 6 years, 9 months ago

YWN, capitalism does not exist in the US today. What we have had for at least three decades is a managed economy. Capitalism cannot thrive in this environment, but crony capitalism, otherwise known as corruption throughout the government, throughout "the managers of the economy," extending to the highest level, rules. Why else would one extort $1,000,000,000 from individuals and corporations to manage to be elected to a job that pays only $400,000 per year, if it were not to steer this managed economy in the interests of the money-givers in return houses and book deals and maybe a chairmanship of one of the hated corporations?

Now, to bring this back to the topic of "planning for retirement," how can anyone plan an investment strategy when the only game is a casino called Wallstreet, and the president/government/banker economic dealer deals from the bottom of the deck?

Godot 6 years, 9 months ago

Notice how the O-bot did not respond to the demand for evidence to support she/he its campaign of disinformation.

Frederic Gutknecht IV 6 years, 9 months ago

"If possible, people should accelerate their mortgage payments and build a cash reserve for emergencies, Rademacher said."

Wow. Brilliant. Why didn't I think of that? Pay more, save more... and eat more cake!~)

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