I need a pep talk

[dwk]

Haven't been on the board for sometime due to some significant life challenges. I would describe my risk/reward tolerance as moderate. Most of my retirement accounts are in my 401K and index funds. I'm 54 and was looking to retire in the next 3-5 years, but unless the market changes for the better, I'm going to change my target to 8 years.

My confidence in managing my finances has been bruised over the last 12 months. My total retirement portfolio has been on a steady decline since 3rd qtr 2007 and is down 12% over that period of time. I have some of my retirement funds with Smith Barney and met with my adviser recently.

My SB adviser and I discussed their TRAK/Wrap funds. We discussed the pros and cons. I'm considering moving 25% of my portfolio, the expense ratio is 1.5% total. My adviser and I have a similar attitude towards investing. He told me the TRAK accounts have been available for several years -- but he wanted to have some history with them before recommending them to clients.

Any comments greatly appreciated.

Thanks!!!
dwk

 

[al_bundy]

i'm a market timer, i think i might buy back in tomorrow

 

[Sarah in SC]

I know you know your situation better than I do, DWK, but I can't in good conscience recommend putting your portfolio in a SB wrap account charging 1.5%. There are just too many other places to put your money that are costing around 1% or better.

 

[73ss454]

I don't know what a trak fund is, with a 1.5% ER there's no reason to.

Why pay large ER's when you can go to Vanguard and get an advisor for free.

 

[W2R]

Haven't been on the board for sometime due to some significant life challenges. I would describe my risk/reward tolerance as moderate. Most of my retirement accounts are in my 401K and index funds. I'm 54 and was looking to retire in the next 3-5 years, but unless the market changes for the better, I'm going to change my target to 8 years.

My confidence in managing my finances has been bruised over the last 12 months. My total retirement portfolio has been on a steady decline since 3rd qtr 2007 and is down 12% over that period of time. I have some of my retirement funds with Smith Barney and met with my adviser recently.

My SB adviser and I discussed their TRAK/Wrap funds. We discussed the pros and cons. I'm considering moving 25% of my portfolio, the expense ratio is 1.5% total. My adviser and I have a similar attitude towards investing. He told me the TRAK accounts have been available for several years -- but he wanted to have some history with them before recommending them to clients.

Any comments greatly appreciated.

Thanks!!!
dwk

1.5% sounds pretty steep to me, but then I am used to Vanguard.

I would question that your risk/reward tolerance is moderate, since you are considering making a major move due to the recent market difficulties. I think you should consider the possibility that your risk/reward tolerance is low.

You probably know the steps to take - - determine your asset allocation, make an investment plan, invest accordingly, and stick with your plan.

I have found the books on this list to be helpful for me: Investment Books

 

[lazygood4nothinbum]

i'm down about 30% & considering going back to work in a new career. feeling better now? always glad to be helpful. enjoy.

 

[cute fuzzy bunny]

Here's your pep talk: everyone is having a tough year, unless they're sitting in cash in which case they're going to have a whole lot of tough years.

Dont throw the baby out with the bathwater...saying "wow, after a single down market year I'm ready to throw 1/3 of my profits away to someone who will do no better at managing my money" is pretty close to "I'm bleeding a little, so I'm going to try throwing myself in front of a bus thats on the way to the hospital".

 

[haha]

My confidence in managing my finances has been bruised over the last 12 months. My total retirement portfolio has been on a steady decline since 3rd qtr 2007 and is down 12% over that period of time. dwk

If I am not mistaken, this is a quite a bit better than the S&P. I think you have been doing fine. Are you getting pressure from wife or husband? This can be a valid reason to get outside management, just to have someone else as the lightning rod.

ha

 

[Notmuchlonger]

Win one for the Gipper.

 

[rickier55]

If you're only down 12% from the third qtr., then your not doing bad at all. If I were you I'd stick with what youre doing.

Rick

 

[uncledrz]

ok, I'll give you a pep talk....no actually just a few words, everyone who tracks the market is down some, depending on their allocation. But overall, over the past 35 or so years, lows are followed by higher highs. Will it all end? I don't know, but unless that happens, now is probably starting to be the time to get back in, rather than out.

Does that help?

 

[militaryman]

Ok I must have lost something but the old rule of thumb used to be that if you were close to retirement or in retirement then you make sure your market exposure is small enough that a market collapse will not effect your staying retired or projected retirement date. Seems like more and more on these threads are the stories saying "I was going to retire but my portfolio just lost 10% and now it looks like I can't" or similar.

Have I missed something? I mean I totally plan to be OUT of the market with my NEEDS $$ within 5 years of retirement.

 

[W2R]

Ok I must have lost something but the old rule of thumb used to be that if you were close to retirement or in retirement then you make sure your market exposure is small enough that a market collapse will not effect your staying retired or projected retirement date. Seems like more and more on these threads are the stories saying "I was going to retire but my portfolio just lost 10% and now it looks like I can't" or similar.

Have I missed something? I mean I totally plan to be OUT of the market with my NEEDS $$ within 5 years of retirement.

Right - - Naturally, some market exposure is necessary to deal with inflation in the long term. But for most of us this is long term money, and will not be needed for many, many years. So, while it is always a shock to see one's equities plummet, that shock can be tempered a little by knowing that one will be fine for many years and that markets go up as well as down.

When designing my ER strategies several years back, I assumed a worst case situation in the first years of retirement - - interest rates would be low, the market would be pretty bad, and inflation would be out of control. Actually, conditions are a lot better than that right now. I didn't foresee the housing crisis, but overall things could be worse. Next year I will retire and I am hopeful that the economy may be on better footing by that time.

 

[dex]

looking to retire in the next 3-5 years, but unless the market changes for the better, I'm going to change my target to 8 years.

A 12% decline from close (not exactly) to the top equals to a 3-4 year delay. That doesn't feel right.
What multiple estimated retirement budget were your assets (Assets/budget) 12 months ago and now. That might help us understand and help.

 

[Bestwifeever]

Compare where you are now with where you were two years ago, not at the height. Or compare where you are now with the lowest your portfolio has ever been.

 

[FinanceDude]

Haven't been on the board for sometime due to some significant life challenges. I would describe my risk/reward tolerance as moderate. Most of my retirement accounts are in my 401K and index funds. I'm 54 and was looking to retire in the next 3-5 years, but unless the market changes for the better, I'm going to change my target to 8 years.

My confidence in managing my finances has been bruised over the last 12 months. My total retirement portfolio has been on a steady decline since 3rd qtr 2007 and is down 12% over that period of time. I have some of my retirement funds with Smith Barney and met with my adviser recently.

My SB adviser and I discussed their TRAK/Wrap funds. We discussed the pros and cons. I'm considering moving 25% of my portfolio, the expense ratio is 1.5% total. My adviser and I have a similar attitude towards investing. He told me the TRAK accounts have been available for several years -- but he wanted to have some history with them before recommending them to clients.

Any comments greatly appreciated.

Thanks!!!
dwk

DON'T go into a wrap fee account. Those are money-makers for SB and I have yet to see a client do well in any "super duper hybrid can't miss" combo of those......

Talk to him about a diversified allocation of ETF's. I would be very interested in what he thinks about those, post his comments on here, if you would.......

 

[ziggy29]

Compare where you are now with where you were two years ago, not at the height. Or compare where you are now with the lowest your portfolio has ever been.

The lowest my retirement portfolio has ever been is zero, as late as 1988 before I made my first 401K contribution. I guess that's one way to feel like we're coming out ahead....

 

[MichaelB]

I don't know if SB TRAK is the same it used to be, but I used Smith Barney TRAK when I first started investing - for my account and my kids college funds. I knew even less then than I know now...

It was a nightmare.

It's not about the fees they charge - which are unambiguously abusive.

It's the trading. TRAK trades monthly - constantly rebalancing - buying and selling. The tax impact alone was overwhelming .
My biggest problem, though, was that it didn't do as well as the first mutual fund I invested in - and that took me a whole day to research and select.

My advice - if the market has you down, choose a conservative Vanguard fund like Wellington or such - or one of their target funds. Any combo of Vanguard index funds - stock and bond - is bound to do better for you (but not for Smith Brney)

Michael

 

[2B]

I think you'll find most of this forum opt for low cost index mutual funds, a fixed asset allocation and do not use a financial adviser. Research shows that a FA just lowers you return leaving you with less to spend in retirement. Search the forum for "reading list" and educate yourself. Take control of your money.

As of 2 days ago I was down 11.1% for the year. Today will push that safely over 12%. However, I saved myself a bunch this year by sticking with a solid, reasonable asset allocation (60% equities/40% fixed). My "old self" would have been plowing cash into equities this whole drop.

We are in a good old fashion market panic. We have left the field of reason long ago. Solids assets are being valued at near zero and everyone fears there's more to come. This will pass away soon in my opinion. A more normal market will return but panics are part of a normal market.

 

[Dawg52]

I This will pass away soon in my opinion. A more normal market will return

I sure hope your right. Not sure my liver will hold up to the abuse I'm giving it right now.

 

[Bestwifeever]

The lowest my retirement portfolio has ever been is zero, as late as 1988 before I made my first 401K contribution. I guess that's one way to feel like we're coming out ahead....

See, don't you feel better already?

 

[A854321]

My experience with SB is that the 1.5% fee is assessed QUARTERLY. It doesn't sound like much, until you look at your statements.

In round numbers, and in a VERY basic example:

On a $1 million portfolio, SB takes $15,000 out every quarter, and lists it on a small line in the 6 page report. That means that every year you pay them $60,000!

Look at that from the perspective of being retired and realize you are paying $60,000 every year and it really starts to add up. That money comes out of your funds first.

20 years with SB Trak, and you have paid them in excess of $1.2 million!!!!

 

[Rustward]

My experience with SB is that the 1.5% fee is assessed QUARTERLY. It doesn't sound like much, until you look at your statements.

Are you sure that is quarterly? That is an enormous fee.
Could it have been 1.5% per year, assessed quarterly? Even that would be a lot.

 

[2B]

Are you sure that is quarterly? That is an enormous fee.
Could it have been 1.5% per year, assessed quarterly? Even that would be a lot.

I believe we've reached general agreement that no management fee is ever justified and that complicated financial products are best avoided.

 

[Art G]

I know many on here will advise index funds, however, I would instead advise finding funds that will hold cash. The mutual fund manager who is forced to be 100% invested will merely try to find the best of a bad situation. Instead, find a manager who can actively manage. JMO