Smart401k Blog

I frequently get calls from investors concerned about a number of factors they feel can sabotage their effort to achieve investment goals:  soaring government spending, rising public debt and interest rates are all valid concerns. However, there is another factor that can do even more harm to the performance of retirement accounts – investor behavior. It has been widely publicized that many investors act irrationally when making decisions about their investments. Behavioral economists, like Kahnemann and Tversky, have published extensive research about how we make decisions, some of which are not in our own best interest. Investment performance, whether positive or negative, can be a powerful force, influencing individuals to take actions without considering the long-term implications. Luckily investors have complete control of their investing choices. Understanding potential mistakes can help you prepare for the future.

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In the headlines

A look at some of the market movers over the past week:

• China announced that it would end the yuan’s peg to the dollar
• Barclay’s executives defended the deal for Lehman Brothers
• The FCC approved AT&T’s $2.4 billion asset purchase from Verizon
• A judge overturned the six-month deepwater drilling moratorium

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Summer officially started June 21, 2010. It’s the season for swimsuits and sunscreen. In addition to cramming your mini-van to the brim with luggage and gear, or carefully packing your one-bag-per-person-and-forget-the-carry-on luggage, you’ll probably participate in and/or notice lots of other summer trends and traditions. The economy and your budget are all affected during the summer months to some degree. Understanding these trends and knowing what you can do for your own pocket-book will help with your summer spending strategy.

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In the headlines

A look at some of the market movers over the past week:

• BP agreed to fund a $20 billion escrow account for victims of the Gulf oil spill
• Scientists again increased estimates of the Gulf spill’s flow rate
• BP also replaced CEO Tony Hayward as the point man on the spill
• A budget watchdog in the U.K. cut the country’s growth prospects

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What does Financial Adviser mean to you?

For most people it’ll be someone who makes recommendations and, in some cases, invests your retirement savings and other assets.  They may concentrate solely on your investments or they may handle your financial life (investments, taxes, estate planning, etc), but at the end of the day you’ve place your trust in this person to make decisions that are in your best financial interest.

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Recently I’ve been getting calls from people considering the loan option from their 401(k).  They knew their plan offered a loan and wanted confirmation that it wasn’t a big deal to use this feature.  With each call I explained the long-term effect taking a loan would have on their account; many were unaware of what this event could do to the long-term potential of their retirement savings.

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In the headlines

A look at some of the market movers over the past week:

• Shares of oil giant BP were wildly volatile during the week as investors continued to face uncertainty around the consequences of the Gulf oil spill
• Hungarian officials backpedaled after worrisome comments made last week
• Bank of America’s Countrywide unit paid $108 million to settle charges that it was ripping off its customers
• Goldman Sachs found itself under continued government scrutiny
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Recently The Motley Fool published an article I wrote about the biggest mistakes I see people make with their retirement investments. Take a few minutes to read the article and let me know what you think. I’d love to hear your comments and know if you have any additional mistakes you think we should tackle.

Regards,

Scott Holsopple, CEO

In the headlines

A look at some of the market movers over the past week:

• The sale of AIG’s AIA unit to Prudential Plc fell apart
• Covidien agreed to buy ev3 for $2.6 billion
• BP ended the week hopeful that a new cap on the leaking oil well would collect a significant portion of the gushing oil
• Political backlash against BP heated up

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*Please note that this blog posting is a slightly modified version of a blog entry originally posted 7/31/2009. We call our re-posted blog program Second Chance: Blog Posts Worth Re-reading, and we only include our favorite blog posts.

This is the time of year people plan a summer vacation, and I am reminded of a statistic I’ve heard a few times over the years: many Americans spend more time planning their vacation each year than they do planning for retirement.

Vacations are a near-term event and, therefore, must seem more immediately important. Even though retirement can feel like some far-in-the-future affair, I do think most people realize that retirement planning is extremely important. After all, a vacation might last two weeks, but retirement could last 30 years.

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