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A synopsis of what I now believe about investing September 20, 2010

Posted by shaferfinancial in Finance.
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I have blogging for a couple of years now and just wanted to put up a brief synopsis of what I have come to believe:

Mutual funds are really not appropriate investment vehicle for most folks.  The ups and downs [well really downs] are not dealt with well.  Most folks end up buying high and selling low as a result of this basic psychological effect.  And many folks went into bond index funds right at their peak and will get hurt when the interest rates rise again.  Most folks who own mutual funds do so inside an 401K which limits there choices to high expense funds.

401Ks/IRAs create a situation where taxes are dramatically increased in the future.  You get a tax break when you least need it [when you have a mortgage and have dependent children] and pay taxes when you can least afford it [when you are depending on it for income].  Roth IRAs/401Ks are much better, but also have limitations that cost folks many times because when they need their money for emergencies there is a tax penalty or loan costs involved. An aside, I am currently discussing this situation with a reader who is really stuck between a rock and a hard place because of having all their retirement funds in a 401K.

Sequence of returns is really a subject people need to understand and fully plan around.

It’s about income not total value when it comes to retirement planning.  And that’s after tax income!

Diversification is a subject that has become rendered useless because of misuse and total acceptance.  You must learn to look behind the curtain of these subjects to fully understand.

Warren Buffet is still the man!

Emotions are responsible for our decision making more than any of us want to admit.

The financial advice giving industry generally walks in lock-step with each other and are pushing their clients off a very tall cliff!

People don’t like to to shown what they believe in with all their hearts is really false!

There is no better time to change your thinking and behavior than now!

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Comments»

1. InvestmentBlogger - October 3, 2010

Great synopsis of the important things and issues in a nutshell! I agree with the dangers of the bond index funds and bond funds, which will lead people again to very dangerous outcomes later on. The US treasury yields are very very low right now, meaning people are still piling into bonds and bond funds blindly to what they think is a safe haven [http://stockcharts.com/h-sc/ui?s=$UST10Y].


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