February 8, 2009
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I planned to blog something else; however, instead of doing that I grabbed the smartest 401 k book that I had borrowed from the library yesterday with the intention to read it so I can easily fall into a nap. After a few chapters I started to feel uneasy because the book made me fearful of my plan so I got up to retrieve my file and started to compare with what the book said.Disheartening!
I post here some notes I took as I read the book. See if you can pat yourself in the back because you are financial investment savvy or learn from mistakes as I do.
The Smartest 401k Book You’ll Ever Read by Daniel R. Solin (Financial Columnist for the Huffington /Post and International Bestselling Author of The Smartest Investment Book You’ll Ever Read)
On the flap of the book it says:
If you are one of the 70 million Americans counting on your 401(k) or 403(b) plan to usher you into a comfortable old age, you are likely to be bitterly disappointed. Most of these plans are not designed for your benefit. They reward employers, brokers, investment advisors, fund managers, insurance companies, unions, and lobbyists. Employees are stuck with high-cost plans filled with undeperforming investment choices that make it extremely to reach their retirement goals.
Choose lower operating cost.
Do not go for active manage fund .
Invest in Index funds.
Ignore the hype in the financial media.
Market returns are superior returns.
Simply aim for market returns using index funds.
Don’t engage in stock picking or market timing.
Don’t try to pick “hot” mutual funds.
Do not confuse activities with progess. Activity increases costs, which can reduce returns.
If you donn’t take risks, you will only earn saving account returns
Your portfolio should consist of a mix of different classes of stocks and bonds.
Standard deviation measures the risk of your portfolio. Make sure your portfolio’s standard deviation isn’t too high for your tolerance for risks.
Diversifying your portfolio offers protection against risk.
Chapter 12:
Hold investments in a group of funds that, in turn, have investments in all the securities (stocks or bonds) in particular index. Hold investments in funds that represent three broad indexes:
1. An index fund representative of the U.S stock market in its broadest terms;
2. An index fund representative of the international stock market in its broadest terms; and
3. An index fund representative of the U.S. bond market it its broadest terms.
When constructing a portfolio, nothing is more important than your asset allocation.
Comments (6)
my portfolio isn’t diversified. all my assets are in one basket *(i can see the title for a new painting coming) i don’t pick or invest but think that i probably have the highest return.. and that is just trying to be present and doing what is needed of the moment. my husband would groan at this but agree that it is true for me. i expect rather than ‘invest, activate, manage, pick, construct’ that i am going to never ever be bitterly disappointed and will always have what i need. i’ll let you know if i’ve found an underinvesting investment choice in about 30 years, but i kind of doubt it.
ok so the calculate mini surprised me….. if it had just kept saying calculate it would have been cute but the getting some only showed up when i posted… sorry. also thought you might be interested in weekly photo challenge as your photos and your love of photography would be a great fit.
I stopped looking at my porfolios a while back. too scary. Maybe I’ll never stop working. Or maybe I’ll die before I retire. Even if I am flushed with retirement funds, with my luck, I’ll probably die the day after I retire and never get to enjoy it.
I suck at picking the winning stocks so index funds are the choices..which they all suck right now.
If you ever have any particular questions about a stock or sector, let me know. I would agree with most of the advice given, with the exception of the International fund. I think it’s too hard to know what’s going on with a lot of those countries now. During normal times, though, yes.
For me they are figures only. With all the bubbles hanging around these days, peope just don’t know what’s what … what you think is safe and secure turned out to be …
Ick. Good to know information.