What I’ve Learned From The Last Two Years of Investing

It has been a rough few years for anyone saving for retirement and investing in the stock market. The average 401k balance lost 35-38% last year (2009). I feel especially bad for those who are in their late-fifties and early sixties, folks who were counting on their savings to get them through retirement. Now they have to work longer or figure out a way to spend dramatically less. Not a good spot to be in. Here are two important things I have seen learned over the last two years:

1. Over the last 24-36 months, asset allocation didn’t work. I had my investments spread among at least five different categories, including commodities, fixed income and your standard assortment of domestic and international equity funds. Well, diversification didn’t do diddly for this dude. I lost 35%, just like everyone else. Small cap funds lost more, fixed income funds lost less. The only thing that stayed the same was the chunk of money sitting in cash. Really makes me wonder how I will survive the markets when I’m older. “Experts” tell us you need to remain invested in equities even through retirement if you are going to keep up with inflation. There has to be a better way.

2. Despite my losses, my money managers still made money: I estimate that I paid between $4,500 and $5,200 each year to the money managers, even after beginning my shift over to lower-cost ETFs and index funds. That’s almost $10,000 for the privilege of losing tens of thousands of dollars. And my losses don’t include taxes on income, dividends, and capital gains.

In an earlier draft of this post I made a typo and said “money mangers,” which is perfect, because in French “manger” means “to eat,” and that’s exactly what these firms are doing to my retirement account.

Kind of Sort of Filling Time

I wonder if you have noticed this trend. Two new "filler" phrases have crept into conversation, and they are slowly taking over, like a dandelion patch expands into a lawn while a homeowner is on vacation.

These phrases are "kind of" and "sort of." Listen for them. On the radio, they invade interviews. During your phone conversations, they leap over the wires and into your ear, only to infect your brain so that you begin saying them, sort of a "yellow fever" of trendy phraseology. They kind of invade your speech, but sort of without notice, like ninjas slinking around Halloween pool party at night. Listen for them the next time you watch the Sunday morning talk shows. Be on alert for them when you turn on talk radio. They're kind of the new "like," that valley girl infection that caught on in the Eighties and sort of ruled the world for a while. They even appear in print, a kind of "new age" filler.

These catch phrases work to soften a statement, a sort of equivocation that fits with our relativistic world, where political correctness pervades to kind of make everything less than absolute.

Listen for them. You will hear them everywhere. But please do not repeat them. They sort of get into your head, a kind of "brain worm" that feeds off of you, the host, until your thoughts and words become mush.

Post election in Illinois

Yet another "fine" politician is aiming for a top spot in Illinois. Why should we Illinois natives be surprised that Scott Lee Cohen, an ex-pawn broker, is the Democratic nominee for lieutenant governer, and is now accused of holding a knife to his ex-wife's throat. Just another in a long line of winners from Illinois, from Rod Blago to George Ryan to Todd Stoger, the soon-to-be ex-President of Cook County. You have to wonder what these folks think as they present themselves to the public as upstanding citizens and models of ethical behavior.