Am I Missing Something Here?
It's tough for financial writers to come up with new material so they have to be creative. Unfortunately, the following attempt at saying something new demonstrates a complete lack of understanding of the current bond market, which affords no opportunities for the small investor. In fact, it's safe to say that with the current benchmark bond interest rates in play, the bond market is dead. This is one of the main reasons the Dow has surpassed the 17,000 mark -- money that would otherwise go into a vibrant bond market is instead finding its way into equities markets, and driving up stock values along the way.
In the article, "Retirement Investing, Are You Doing It All Wrong?" the writer refers to an expert economist who argues investors should own more stocks the older they grow, not fewer, which also means those approaching retirement should cut back their participation in the bond market.
What bond market is this author referring to? There is currently no bond market. If current 401(k) investors are buying bonds in this market, I shudder to think of how they'll handle their ultimate pension income. And for those 401(k) investors who do hold bonds in their account, they'll lose their shirts if they convert them to equities in this market.
The article does make some good points about the historical attributes of equities (volatile) and bonds (steady) and how these kinds of qualities should guide fund allocation for those approaching retirement. But, to some extent written in a vacuum, the article makes no concession to the reality of the current bond market. Individual stocks are the only way to go; unfortunately, most 401(k) investors are stuck with watered-down mutual funds run by misguided (and usually highly touted) money managers. The whole 401(k) arrangement is about convenience and consistency for the "saver." But there is a big difference between a "saver" and an "investor." Most real investors can't function within the constraints of a 401(k); these plans are built for passive savers who ignore most of the information they are given; they just glance at their quarterly statements and hope for the best. In fact, most 401(k) savers don't even know what funds their money is invested in so even bad advice like converting bond money to equity money within a 401(k) plan will be ignored. Thus in this case ignorance is blissful and perhaps even helpful.
In the article, "Retirement Investing, Are You Doing It All Wrong?" the writer refers to an expert economist who argues investors should own more stocks the older they grow, not fewer, which also means those approaching retirement should cut back their participation in the bond market.
What bond market is this author referring to? There is currently no bond market. If current 401(k) investors are buying bonds in this market, I shudder to think of how they'll handle their ultimate pension income. And for those 401(k) investors who do hold bonds in their account, they'll lose their shirts if they convert them to equities in this market.
The article does make some good points about the historical attributes of equities (volatile) and bonds (steady) and how these kinds of qualities should guide fund allocation for those approaching retirement. But, to some extent written in a vacuum, the article makes no concession to the reality of the current bond market. Individual stocks are the only way to go; unfortunately, most 401(k) investors are stuck with watered-down mutual funds run by misguided (and usually highly touted) money managers. The whole 401(k) arrangement is about convenience and consistency for the "saver." But there is a big difference between a "saver" and an "investor." Most real investors can't function within the constraints of a 401(k); these plans are built for passive savers who ignore most of the information they are given; they just glance at their quarterly statements and hope for the best. In fact, most 401(k) savers don't even know what funds their money is invested in so even bad advice like converting bond money to equity money within a 401(k) plan will be ignored. Thus in this case ignorance is blissful and perhaps even helpful.
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