Times are changing – and so is investing
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Dear Mr. Berko:
We have $335,000 in a rollover Independent Retirement Account from my company plan. We took cash because all they could promise is a guaranteed income of $1,143.16 a month. When both of us pass on, the money that is left would go to the insurance company. We think we can do better and leave what’s left to our children. Do you believe as we do that stocks will continue to go up? If so, please tell us how to invest to get 5 percent income and growth in value, too. On another subject, we think that the country is changing like it never has before. We and our friends see changes in technology and government coming so fast it worries us. A neighbor bought a new cell phone that he can’t work. I don’t understand our new health insurance policy. We don’t understand the charges to our checking account. A friend can’t use the checkout scan machine at Home Depot. American Express sent us a two-page letter announcing changes to our account that we can’t figure out. Many of us think the government is wrong to hand out all this money to the banks, etc. You don’t have to respond. We just wondered if others have expressed the same thoughts.
H.P., Oklahoma City
Dear H.P.:
You are not alone. These times are like no other, and I’m simultaneously frightened and excited by the political, social and economic direction of our country. I’m concerned about the future of our democracy, because I perceive that a growing number of young Americans lack the social, intellectual and employment skills to function in a free enterprise system. However, I am excited for those among the younger generation who are knowledgeable and will be able to turn today’s opportunity to their advantage.
I’m terribly apprehensive because our democracy is rushing toward mediocrity and because the expectations and preferences of this majority might become the tribunal of approval. Still, I’m excited for those who can rise above the common weal because they have the knowledge to be our politicians, our scientists and our business leaders to navigate us through the 21st century.
Now I don’t know if the market will continue higher, if it will trade in a narrow range between 7,800 and 8,800, or if it will retreat to test the old lows. But I can tell you that simple valuation analysis persuades me to be skeptical about the ability of the market to rally from this level.
Many recent “sentiment indicators” strongly suggest that a “monster rally” could continue within our “secular bull market.” Still, the housing market is foundering, Europe’s economy is in tatters, unemployment continues to rise, bank balance sheets are still fragile, auto companies are losing billions, the mortgage mess continues to fester, vacancy signs dot commercial and industrial properties, consumer spending is cold, condominium values are still crashing and consumer income is falling as many employers are beginning to lower employee wages. But there are signs the economy is stabilizing, cautious optimism is beginning to spread, economists – bah, humbug! on that useless group – are boosting growth forecasts, some banks are reporting profits and returning funds from the Troubled Asset Relief Program, interest rates remain low and many investors are bullish.
I can’t tell you what to do with that $335,000, because I don’t know your goals, tolerance for risk, ages, etc. Different investors have different objectives. Retired folks don’t have the same goals as young professionals. Middle-aged, mid-level executives don’t have the same objectives as multimillionaire businessmen. And wealthy soon-to-be retirees have different goals than recently retired folks with $500,000 or $600,000 in certificates of deposit.
I can’t tell you what to do in this market, but I will tell you that you must do something. I can tell you that making decisions – like which stocks to buy, how much to invest in bonds, assessing risks, etc. – is becoming too complicated for most investors. You need a money manager to help you with those decisions. Going it alone in the 1960s, ’70s and ’80s was a cakewalk, but it has become inexorably more difficult since the late 1990s as Wall Street began to go postal. Today’s investment choices are too convoluted and the market environment is too unsure for many folks to go it alone.
Please address your financial questions to Malcolm Berko, P.O. Box 1416, Boca Raton, Fla. 33429 or e-mail him at malber@comcast.net. © 2009 Creators Syndicate Inc.
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