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Staying the course pays off for investors

Time heals financial wounds: Holding stocks for 20 years can turn bad returns to good

Historical data compiled by Oppenheimer show that stocks have not suffered an average annualized loss in a 20-year holding period (measured in rolling monthly periods) since 1950.
“Historical evidence suggests that longer investment horizons typically produce better results,” says Oppenheimer’s chief investment strategist Brian Belski.
“The lesson here is: Chill, stay invested, stay disciplined and be diversified,” Belski said.
Much of individual investors’ lagging performance is blamed on psychological factors. More often than not, they buy high and sell low rather than the classic winning strategy of buy low and sell high. Put another way, they sell the dips, rather than buy the dips.
“Fear,” Harvey said, often prompts investors to bail out of stocks after prices have fallen far and the worst of the decline is over. They make matters worse “by delaying getting back in” early enough to participate in the eventual recovery.
A key reason why investors who stay the course end up doing well is the fact that stocks go up roughly two-thirds of the time.

Read more in this article:

Staying the course pays off for investors | FLORIDA TODAY | floridatoday.comhttp://www.floridatoday.comThe long term used to mean three-, five- or 10-year holding periods for stock investors looking to wring out risk and boost their odds of making money. Then came the 2000s, dubbed the Lost Decade, when the U.S. stock market posted negative returns in a decade for the first time since the 1930s.

Retirement Plans Make Comeback, With Limits

Companies are resuming 401(k) matching contributions — but some are changing how the match works by:

Making the match discretionary and linking them to profitability.
Matching a worker’s higher contribution rate at 50% rather than a lower contribution rate at 100%.
Capping the match at a certain level, such as $500.

Read more in this Wall Street Journal article:

Firms Begin to Reinstate Suspended 401(k) Matches – WSJ.comhttp://online.wsj.comMany U.S. companies that during the recession cut 401(k) matching contributions—one of the most valuable employee benefits—are beginning to restore them.

Weekly Review ~ Friday, June 10, 2011

Troubles for the market continued on Monday with a sizeable loss on renewed concern over the slowing economy, as the S&P 500 dipped below 1300 for the first time since late March. On Tuesday stocks dropped for a fifth consecutive day after a late-day plunge ensued following Fed Chair Bernanke remarks outlining a slower-than-expected economic recovery. The major indexes dropped for a sixth consecutive day on Wednesday, with the S&P 500 hitting its longest losing streak since early 2009. Stocks finally had a winning day on Thursday, the first of the month of June, as investors were pleased that that the US trade deficit shrank unexpectedly in April. The bounce was short-lived, as stocks plummetted again on Friday, with the Dow breaking below the 12000 mark for the first time since mid-March.

Stocks fells for the sixth straight week, as economic woes persist[table id=14 /]

How to protect your 401(k) if you leave your job

If you quit, get laid off or retire, you’ve got 4 options for your 401(k) savings:

Leave the money with the your ex-employer
Move it to your new employer’s plan (if that company allows it)
Roll it to an individual retirement account (IRA)
Cash out

Each choice comes with potentially negative consequences for your savings. Learn more in this article:

How to protect your 401(k) if you leave your job http://www.marketwatch.com/story/what-to-do-with-your-401k-if-you-leave-your-job-2011-06-01You thought the hardest part about saving for retirement was figuring out the best place to invest your money? Here’s another head-scratcher: what to do with your 401(k) when you leave your job.

Weekly Market Review ~ Friday, June 3, 2011

It was a shortened trading week due to Monday’s holiday for Memorial Day. Stocks jumped Tuesday on optimism that another Greek debt crisis would be averted thanks to help from European nations. Both the Dow and S&P 500 surged more than 1%. However, May was the worst month for the Dow since last August of last year. The market fell very hard on Wednesday driven by renewed economic worries. The Dow, S&P 500 and Nasdaq all fell more than 2%. Weak employment, production, and other data suggest the economic recovery may be sputtering. Stocks continue to drift down Thursday. The markets mitigated their losses Friday with the broad market gaining approximately 1%.

Stocks fells for the fifth straight week, the longest decline for the Dow since July 2004.
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Fix your money mistakes: Not enough risk

“Probably the biggest shift I am seeing is that clients are solely concerned about their downside. And they are all too willing to give up potential upside just to be sure their downside is protected.”
Even with today’s sub-3% inflation, you can’t hope to keep up if your money is earning half a percentage point at the bank. When your portfolio lags inflation, your purchasing power is gradually chipped away.
Over the past 50 years inflation has averaged 4.1%; during that time, large-cap stocks returned an annualized 9.8%.
“As hard as it may be to stick with stocks, given what has happened history has proved that they have a great record of delivering inflation-beating gains.”

Learn more about common money mistakes and how you can fix them in this article:

Fix your money mistakes: Not enough risk – May. 19, 2011http://money.cnn.com/2011/05/19/retirement/mistakes-too-cautious.moneymag/index.htm(Money Magazine) — With every financial decision, you have to balance two competing urges: the desire to not be poor and the desire to be rich. Lately the former has been trouncing the latter.

$mart Money Newsletter ~ May 2011

$mart Money is a quarterly newsletter published by our company. The lead article discusses how our natural instincts can seriously erode our investment returns and how to avoid these pitfalls. The Investing 101 column reviews the basics of stocks and bonds.

Download your free copy of the $mart Money Newsletter

Weekly Market Review ~ Friday, May 27, 2011

On Monday the Dow dropped 130 points on more European debt concern, this time a Standard and Poor’s downgrade of Italian debt. Weak manufacturing and service sector reports coupled with an increase in new-home sales in April led to a slight delcline in stock prices on Tuesday. The market rebounded slightly on Wednesday, ending a three-day losing streak. On Thursday, stocks once again logged a small gain despite a rise in jobless claims. However, the declining volume as the long Memorial Day weekend approaches makes it difficult to attach any significance to stock movements. Volume plummeted dramatically on Friday with stocks making slight gains to finish off the week with a loss.

The Dow and S&P 500 suffered a fourth consecutive losing week. The S&P 500 (-0.2%) could not quite make it to the positive, while the Russell 2000 (0.9%) managed a gain.

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Beware Top Funds With Poor Investor Returns

Investor Return versus Fund Return

Investor return can be very different from the widely quoted figures for total fund return.
For example, the top-rated Fidelity Leveraged Stock fund has an annual return over the last 10-year period of 14.5%. However, the average investor in this fund had an average annual return of only 4.0%.
The reason for the gap is, most investors didn’t buy and hold for the 10 years. Instead, the average dollar in the portfolio stayed invested for short periods.
Many studies have shown that long-term shareholders receive the best returns.

Learn more in this article:

Beware Top Funds With Poor Investor Returns – Yahoo! Financehttp://finance.yahoo.com/news/Beware-Top-Funds-With-Poor-tsmf-514712389.html?x=0If you invested in Fidelity Leveraged Stock a decade ago, your total annual return would have been 14.5%. But the typical shareholder had an investor return of only 4.0%. The reason for the gap is, most investors didn’t buy and hold for the 10 years. Instead, the average dollar in the portfolio…

Weekly Market Review ~ Friday, May 20, 2011

Stocks ticked downward on Monday on renewed concern over the health of the recovering economy following weak manufacturing and housing reports. On Tuesday the Dow took a heavier hit than the NASDAQ and the S&P 500 as more concerning news over the health of the economy continues to cast a shadow on the market. Stocks snapped back on Wednesday when the Federal Reserve minutes indicated that the Fed will not change their monetary policy in the near future, preserving low interest rates for the time being. On Thursday, disappointing manufacturing and home sales reports were more than offset by exuberance over the doubling of networking website Linkedln’s stock price on its first day of trading after its IPO. Stocks retreated moderately on Friday following a downgrade of Greek debt and disappointing earnings and sales reports from Gap and Aerepostale.

It was an over all down week for stocks owing to Friday’s poor performance.
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