Who Wins—Active or Passive Investors?

The Investment Race

Many retirees invest passively by buying shares in low-cost index funds that are designed to track selected markets. I have illustrated that approach in previous posts.

Many other retirees, and many younger investors, actively manage their investments. Some retirees do their own research and analyses while others hire brokers, financial planners or other advisers to manage their investments. They hope to achieve superior performance—to beat the market—by relying on extra effort, knowledge and skill.  Continue reading

Later Living in Investment News

Warren Flick and Later Living Appear in Investment News

Warren was recently interviewed for a short piece in Investment News about empowering individuals to manage their own investments.

Read the full article here. Free registration required, but if you don’t want to register, you can bypass registration by clicking here to Google search for “Warren Flick Investment News” and then clicking on the first result.

Two Important Benefits to Rebalancing Risk in Retirement Investments

Investments can be complicated, but they don’t need to be. Investors just need to know their objectives and some intelligible ways to achieve them. Generally, investors want high returns and low risk. Once they achieve suitable exposure to both, rebalancing—maintaining balance among components—keeps investors on a steady course.

High returns usually come from owning stocks. History has shown that over long periods of time, stocks almost always out perform bonds, real estate, and many other investments. Alternatively, stocks are often risky.

Bonds usually produce lower returns, but they tend to be less risky. A portfolio that combines a diversity of stocks and a diversity of bonds is likely to generate good returns with only moderate risk. Continue reading

Offering Responsible Help

The last post related how emergencies can put a retiree’s living standards at risk. Now the discussion turns to thinking and working through emergencies in ways that manage the risk appropriately.

If retirees pay regular living expenses from their investment portfolios, and then spend some of those investments to resolve emergencies, they put future withdrawals at risk. It’s different in middle life when living expenses are paid from salaries or wages, and savings are commonly used for emergencies.

Some Financial Approaches

One solution is to set aside a portion of a retirement portfolio for emergencies. A retiree with a $500,000 portfolio could set aside $100,000 for emergencies, using only $400,000 for ordinary living.  If the withdrawal rate is 4 percent, the retiree would withdraw $16,000 annually for ordinary expenses. The $100,000 emergency fund would be left alone.

In addition, retirees have other options:

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Risk Retirement for a Loved One?

An idealized retirement story might sound like this: Saving for years, retiring from work, then taking planned withdrawals on through retirement. It sounds orderly and easy, yet many retirees know it is anything but.

Emergencies arise, not only in a retiree’s life, but also in the lives of loved ones. Ordinary life includes a leaky roof, a needy middle-aged son or daughter, or a troubled grandchild. If retirees have savings, even if they rely on them for monthly living, there is the ever-present urge to liquidate savings and put some money on the problem.

An Ugly Trick

There is an ugly trick with the urge to be generous, and it’s subtle.

Continue reading