Retirement confidence seems to follow the trends of the global economy. At least, that’s according to one recent survey that looked at 12,000 workers and retirees in 12 European, North American, and Asian countries, including France, Germany, Hungary, Japan, the Netherlands, Poland, Spain, Sweden, China, the United Kingdom, the United States, and Canada—making this one of the largest studies of its kind.
The study found that 65% of the participants believe future generations will be worse off in retirement than they are today; more than half of the American workers (55%) feel that way, while 80% of the workers from France and Hungary expect future generations to be worse off. The Chinese are the least pessimistic, with roughly one in five participants feeling the same way. Only nine percent of respondents believe future generations will be better off in retirement than those in retirement today.
Thanks to government cutbacks, 63% of employees think their government retirement benefits will be less reliable or helpful; American workers come in near the top at 65%. America’s retirement pessimism continues, with just 12% saying their personal retirement planning is “very well-developed.”
A further 37% of Americans don’t know if they can achieve their desired retirement income. Only 12% are very optimistic that they will have enough money to live on, and only another 12% are very optimistic that they will be able to choose when they retire.
Not surprisingly, you have to have a handle on what it takes to retire to actually be able to plan for a comfortable retirement. The current retirement-related risks have increased on the backs of “financial illiteracy”—with only … Read More
There’s often a debate among Main Street investors that institutional investors—more specifically, hedge funds—can provide better returns compared to managing the money by themselves. The main reason for this is that institutional investors have resources: for example, access to data, the ability to perform in-depth analysis, and so on and so forth.
Last year was a good year for equities. The key stock indices like the S&P 500, the Dow Jones Industrial Average, and the NASDAQ Composite index registered gains between seven percent and 13%.
In the same time, according to Hedge Fund Research, Inc., hedge funds posted an average gain of only 6.2% in 2012. (Source: Farrell, M., “Hedge funds say good riddance to 2012,” CNN Money, January 14, 2013.)
Some of the well-known hedge funds underperform the performance of the key stock indices. Consider the Advantage Fund, managed by John Paulson. This fund posted a loss of 14% in 2012, and in 2011, it was down 35%.
Now, the question: are institutional investors right? Is it a good idea to invest with them rather than manage your own money?
Even though the average return from hedge funds was a little more than six percent below the overall market performance, it doesn’t mean the entire fund underperformed. At the end of the day, it’s an average. Certainly, there were funds that did much better than the average. Consider Third Point LLC, managed by Daniel Loeb; this hedge fund provided gains of 21.2% to its investors.
So, saying all institutional investors are right or wrong may not be the best judgment call. What it really boils down to are the … Read More
When it comes to the world of investing, it is often said that a rising tide raises all boats. The idea behind this is very simple: if a stock market, or any other market for that matter, is experiencing a bull run, an investor who is bullish will make money. A good example of this phenomenon would be the “dot-com” period, when investors made money on whatever they bought—even the companies that didn’t even have any revenues.
Unfortunately, all parties must end. The dot-com bull run ended, as well, with the NASDAQ falling from its all-time high of 5,000 to below 1,200 in the period from 2000 to 2002.
Warren Buffett explained this phenomenon best. He said, “Only when the tide goes out do you discover who’s been swimming naked.” (Source: Brainy Quotes, last accessed April 11, 2103.)
Those who continued to believe the NASDAQ would make a comeback were wrong. The index is still trading below its all-time high 13 years later, and some of the well-known companies during that period are no longer even in business today.
Making money when the overall market is headed upward can be easy if investors follow the market, but keeping those gains is the most difficult task.
With all this said, how can an investor make their portfolio immune to the market’s swings to save what they have?
To make sure your portfolio doesn’t swing with the overall market, you have to make sure the correlation between your portfolio and the market is zero (an ideal situation that’s rare to see) or close it. On one hand, you can do this by … Read More