Wednesday, March 31, 2010

Supreme Court Rules for the Mutual Fund Industry

If you are not happy with the way your 401(k) plan adviser has invested your money, then, according to the recent Supreme Court ruling, you should invest somewhere else.  In a decision that is clearly a victory for the mutual fund industry and a loss for investor trying to keep fees from overtaking their investment returns, this ruling turns the responsibility of who to invest with back to the individual.

Sound like a loss for the little guy? Read more here.

Friday, March 26, 2010

Stocks Spanked; Mutual Funds Helped

It has been reviewed and reported over and over.  Folks who thought they knew what they were doing in the stock market found out how wrong they could be about not only their investments but their ability to assume risks.

These folks were and many still are, advocates for investment choices.  And many have postponed retirement, blaming not themselves and their unwavering belief that the markets would continue to rise but the markets themselves for not performing as expected.

For example, the CBS Marketwatch report suggests, without saying as much, that had you been in mutual funds and done nothing, you would be close to where you were at the end of 2007.  But if you were in stocks you sold.  And those losses will take a long time recovering.

Sticking with mutual funds that spread the risk over numerous sectors is still the best way to get where you are going.  That and consistent, increasing contributions.

Friday, March 12, 2010

Do You Invest with Responsibility?

Earlier today, on MomsMakingaMillion radio, I discussed the topic of socially responsible investing.  I have written about this topic numerous times and will continue to do so as the effort to invest where the right thing is being done continues to expand.  Once it was all about ethics and morality.  Now it is including shareholder advocacy and community involvement.

Here is a transcript of the interview I had with Kat Bellucci.

Kat Bellucci: A lot of us have become very aware about what we eat, what we buy and what kind of a footprint we leave. And then, when we invest our money, we often don’t consider that the companies we are buying in our mutual funds might be the very businesses we would avoid in the marketplace.
Well ladies, its time to take a look at taking your investments down a path that suits your concerns about the world around and the world your children will inherit?

Paul Petillo: Most investors are narrowly focused.  They want to make money.  But some investors want to make money without destroying the environment, without violating their personal values and possibly even helping others in the process.

While these types of investments have been around for decades, the cost of doing this sort of investment was not always cheap.  The sorts of investments first came across my radar when my daughter, a free spirit who was interested in investing asked me: “are there any mutual funds that are ethical?”

What she was really asking was whether the companies that the mutual funds invested in were screened for more than just performance.  While we would like to believe that all mutual funds are ethical; what about the companies they invest in?

Kat: So what describes ethical?

Read the full interview here at

Saturday, March 6, 2010

Look for Actively Managed Funds to Achieve Retirement Success

We have eliminated risk in many of our 401(k) portfolios.  We have taken a flight to safety away from the very investments that could have propelled us, at least in the early years of our participation in our defined contribution plans, to the successes we should have had.  We turned our backs on the actively managed mutual fund and in doing so, put our retirement plan at risk.

A great number of investors reacted in a very predictable fashion as the Great Recession took hold.  They sold their holdings on the way down, in large part because no one could predict how far down would actually be and stopped contributing to their 401(k) plans.  Employers, as we have discussed here, suspended their matching contributions for several reasons (no need to spend money where it didn't need to be spent and there was no longer any reason to offer this as an incentive to keep or hire new employees).

Adding to the mad dash to protect dwindling balances, target date funds and bond funds swelled with new contributions. This was, in many instances, akin to stuffing money under the mattress.  Not that some these funds did poorly or had mediocre performance, although many did, investors felt protected or at least safe from the chaos and volatility of the open markets.  It was a flight to risk-free, or at least, invest-and-forget investments.

Historically, the bad news of a falling stock market lasts about six months.  This quick, fall-off-a-cliff drop to the bottom is often followed by a market where investors find innumerable bargains. Over the last decade, unlike all of the previous data on the equities market, recent recoveries, this one included have come at record speed.  Five years in-between market drops and recoveries is not the norm.  But possibly, could be.

This may have something to do with a much larger segment of the investment market coming from 401(k) investments. Although these plans have been around for thirty years, they have not really caught on until recently and even that trend is not fully employed by those who have access to these types of plans.  Pensions may have gone away but 401(k) plans have not fully replaced them with the working public.

That fact leaves many investors vulnerable to their emotions and to the forces that promote the marketplace.  A recent study done by Hewitt Associates found that the vast majority, or what they termed typical, investor under the age of forty had moved some or all of their retirement funds into target date funds.  Those over the age of forty found the move to bond funds more appealing.  Both of these investments, albeit conservative in nature, were forgivable. They were doing what any "once bitten" investor would do.

Read more here.

Paul Petillo is the Managing Editor of and