Mutual funds were moderately successful in creating a presence in the stock market until the advent of the investment retirement account and in particular the 401(k). Corporate insiders persuaded the federal government to allow for the 401(k) in lieu of offering employees the traditional pension. When this happened the employees lost the protection of a specialized financial manager who could manage both the return and the risk of the retirement money of the worker.
This forced employees who are supposed to specialize in their work area into the field financial management with no training whatsoever. The 401(k) effectively FORCES individuals into mutual funds that as I just mentioned were notorious at the turn of the last century for defrauding the public of its savings. Ironically, these same executives had at the time, and still have, their company department of corporate attorneys. These secret departments do nothing but invent new ways for corporate insiders to suck more money out of the firm in the form of perquisites, stock options, and golden parachutes. This is the "new" form of executive stewardship over the shareholder value and employee retirement!
Why is this so tough on the employee? The 401(k) plans do not offer individual stocks only mutual funds. What a scam! Corporate executives have effectively forced you to place your retirement dollars with their cronies in the securities industry who manage these investment pools. If you could talk to someone in the 1920's about this they would be shocked. Someone from back when these investment pools were actively fleecing the public would see this as a criminal act perpetrated by the US federal government, inside corporate executives, and mutual fund managers.
Does that mean the 401(k) is a bad deal? That depends. If your employer matches a percentage of your wages it may be a fair deal but you should only contribute only up to the matching limit. After contributing the maximum matching amount to your 401(k) then put the rest in a Roth IRA. If your 401(k) provider offers an indexed mutual fund then put your money into that. An indexed mutual fund uses a stock market index such as the S&P500 to guide which stocks are bought. The biggest and oldest indexed mutual fund is the Vanguard 500 (VFINX).
A computer divvies up the cash in the fund to match the index as closely as a possible. As such, there is not fund manager to sitting on your hard earned retirement savings to rip you off in bogus fees.
ABOUT THE AUTHOR: Dr. Scott Brown, Ph.D., the Wallet Doctor, is a successful investor. Dr. Brown holds a Ph.D. in finance. The Wallet Doctor is sought after for investment advice and coaching. For more information visit Dr. Brown's site at http://www.bonanzabase.com or sign up for his investment tips at http://www.bonanzabase.com
shuttle from Midway Glen Ellyn ..I would like to share with the reader an article... Read More
Have you been listening to the talking heads on CNBC-TV?... Read More
Before we get into all the good news out there,... Read More
What a great statement!I just heard someone use it in... Read More
Picking a beaten-down stock requires a different kind of selection... Read More
Fundamental analysis.Fundamentals analysis says the best way to predict the... Read More
When it comes to 401k's there is an overabundance of... Read More
You probably have been told that options are risky. Even... Read More
On Monday, November 25, 2000 Investor's Business Daily listed on... Read More
The stock market can present you with a lot of... Read More
(1) CHK stock price $16.74, NAV $32.5CHK is my favorite... Read More
You have decided to buy some stock or mutual funds,... Read More
Mutual funds were moderately successful in creating a presence in... Read More
The higher the market goes the more confusing are the... Read More
The stock market has been in an up trend for... Read More
You should ignore analysts on TV, the radio, the newspaper... Read More
The bulls and bears of the stock market are both... Read More
Exchange Traded Funds (ETFs) are growing. Investors are choosing low... Read More
Reach in your pocket and take out that big roll... Read More
Stock trading can be a very profitable activity. You can... Read More
As an investor you will want to check out any... Read More
As one of my regular readers you know I have... Read More
How many times have you said to yourself, "I'd like... Read More
When it comes to mutual funds, there is a lot... Read More
(1) Stock Market is Tough Place to Make Any Money... Read More
shuttle from O'Hare North Chicago ..Cat or dog? Maybe Zebra. Shucks, I don't know, but... Read More
Let's hope you did not have any of the Enron... Read More
So you're started trading, you bought some positions with your... Read More
A Guide to Using Stop Loss Orders Stop losses are... Read More
During the day I watch CNBC-TV, the stock market channel.... Read More
All stock trading and investing methods must deal with the... Read More
I know there are a lot of you out there... Read More
Profitable day traders recognize that momentum trading is among the... Read More
It looks like the market is ready to start up... Read More
Everyone who invests in the stock market wants to be... Read More
How can you dispel an illusion unless you look directly... Read More
You remember the story about the frog that was put... Read More
Recently I was invited to appear on a live CNNfn... Read More
When the stock market is going up and all your... Read More
During our travel down life's path we come to many... Read More
I mean it when I say that. While plastic silverware... Read More
Let's first define insanity. It is doing the same thing... Read More
You probably have been told that options are risky. Even... Read More
What! Me worry?Many of you remember the cover of MAD... Read More
When you become interested in a stock or mutual fund... Read More
If you've ever flipped on the television to CNN Financial... Read More
Every Wall Street analyst, financial planner and broker will tell... Read More
Both the stock market and oil prices rallied recently, which... Read More
Last time we looked at the real performance of the... Read More
The bear market that showed up at the end of... Read More
Stocks & Mutual Fund |