Back in 2007, I realized we live in a conundrum. Today we have permanent fixtures, items and intellectual capital that were less than a dream 30 years ago. We now require a constant stream of data to get through our daily existence. We have email, cellular phones, the iPhone, the iPod, laptops, desktops, HDTV, and YouTube. We should consider ourselves affluent, if we dare to. But, it still isn’t enough, is it? For all of this technology, you still feel restlessness while those you love sleep, don’t you?
As your head hits the pillow, you’re not thinking that you’ve found that love and the measure of peace you dreamed of? You’re thinking about the same thing you were thinking downstairs in your home office, you’re thinking about money. I don’t mean money in which King Midas is counting his gold but rather that dwindling stack of “presumed wealth” in your retirement account.
I recently read a blog written by the employee of a financial institution who stated that while quarterly drops of values in excess of $10,000 in his 401k account didn’t make him feel good, he still believed the 401k was a good thing and that mutual funds are an appropriate investment. Can I just ask “why” here? Was this an attempt to connect with you and let you know that you’re not alone?
Well it’s true, you are not alone. So what? Does the fact that you are one of a crowd make feel better here? Well, I don’t feel better for you because mutual funds have been a plague on investors since their inception in 1924, and the addition of the 401k in 1978 is integral to it’s use.
If you’ve ever spent any serious time reviewing the mutual fund choices that broker-dealers and the 3rd party administrators have presented to you, I’m sure you thought, “There are too many to choose from.” Keep in mind that there are now over 10,000 mutual funds in North America alone and they have reduced your worries to these few grouped into risk categories with names like Life Style or Life Cycle Funds, Aggressive Growth, Regional, Sector, and of course the Socially Responsible Funds.
The Socially Responsible Funds are my favorite whipping boys. With these mutual funds, you can let others decide what is socially responsible to you and ignore more profitable business on behalf of making you feel better since you’re doing your part. For me, the Socially Responsible investment has a different meaning as I have a social and ethical responsibility to assist my client in making money. Their responsibility is to spend the money, enjoy their retirement, and (if they wish) leave a well-planned estate for their loved ones.
So by now, you may be asking yourself why I have such a problem with mutual funds or is it 401ks or the investment banking community in general. The answer is “Yes” to all of them. So in the next few days, we will discuss these matters individually.