Financial Information

I’m always amused by people who will spend a lot of time and effort becoming educated on topics such as the best type of big screen TV to buy, yet completely ignore their financial education and are surprised if their retirement savings don’t work out as they thought they should.

Sometimes the excuse is that they don’t understand, and they simply rely on their investment advisor to take care of their savings for them. Certainly if you go to Ken Himmler (www.kenhimmler.com) for his services or use Integrated Asset Management (www.iamllc.biz) for your portfolio you have every reason to believe that your money will be put in the best investments.

That shouldn’t mean that you do not take an interest in your money, and study the options that are available – far from it. It is the most critical aspect of your retirement planning and you need to understand what is being talked about when you discuss investment advice.

Everyone is different in terms of their expectations for their money, and how they feel about risk, and generally for the higher returns you need to take a higher risk, which means that your investment is more likely to fluctuate and might not perform as well as you hope.

The best advisors will take time with you and learn what your personal financial goals and risk profile are, so they can suggest a portfolio to suit you. There is no “one size fits all” solution, and your investments should reflect your personality. The best investments for one person may be wrong for another.

Generally you will be advised to have diversified investments, as no-one can guarantee any particular performance. So that you can understand what is involved with each type of fund or security, there are many sources of free investment research which you can check online. For instance, you can look up mutual fund performance on www.morningstar.com. It’s your money, and you owe it to yourself to get a basic investment education so that you can be sure your investments match your aspirations.

Authored by Kenneth Himmler, Sr.

Those approaching retirement age become increasingly interested in how much money will be available for them to live on each year. The obvious fear is that the money may run out if you draw out too much, and you will live the end of your life as a pauper. On the other hand, and apart from wishing to leave a reasonable inheritance for your heirs, there is always the feeling that you want enjoy life in retirement, and that sufficient money is one element to this.

One way in which you can deal with the question of an assured regular income is by purchasing an annuity. You can find annuities to suit your needs, and the payments can increase each year in line with inflation. However, as they are insurance they do not, on average, give as much income as straight retirement planning, with an annual draw down of your resources – mainly because the insurance company has expenses which must come from the investments. Another disadvantage is that you cannot easily vary the amount that you take, if for instance one year you want to make an expensive purchase.

A survey conducted by MetLife last year found that nearly 70% of pre-retirees overestimate how much they can take out of their retirement savings each year, with 43% believing that they can withdraw 10% or more each year without damaging their principal. The only reason that this might be excusable is that 60% also underestimate their life expectancy in retirement. This is clearly a case for some investment advice from a company such as Integrated Asset Management LLC (www.iamllc.biz) or an investment advisor such as Ken Himmler (www.kenhimmler.com).

So how much should you expect to be able to take from your diversified investments? Disappointingly, the experts generally agree that you should only take 4% per year. This is based on the worst investment period of the last 75 years, and assumes that your capital will dwindle away after thirty years.

Authored by Kenneth Himmler, Sr.

Many people who are approaching retirement age have questions as to what sort of investments they should be looking at, as they don’t want to be caught out, for instance, by the stock market suddenly turning against them when they need the money to live on. A sound financial plan is something that everyone, of whatever age, should be looking at making just as soon as they have some assets.

If you are interested enough in your investments to be concerned about where to put them, but not so interested that you want to follow the stock market on a daily or weekly basis, then mutual funds can provide a good vehicle for your money. Mutual funds are available that include virtually anything that you would consider investing in on the markets, with the difference that you have, in effect, an investment advisor picking the individual stocks or bonds that you have in your portfolio. Portfolios of mutual funds can be held in a tax advantaged way, for instance in individual retirement accounts, or IRAs, and that allows returns to be compounded without paying tax on them until you withdraw the money.

Having said that, you should not expect to buy one or two mutual funds and sit back, taking no more interest in them. It doesn’t work that way, as everyone is different, with different goals, personalities, risk tolerance, financial needs, and amount of money to invest. You need to do a little homework to explore which funds suit you best, and although any fund in itself will provide diversified investments between various stocks or bonds, generally mutual funds follow a particular theme, such as large cap companies, global funds, or different market sectors, so you need to consider buying several funds in order to diversify your portfolio in a safe way.

Morningstar.com looked at how many funds you need to hold in order to be diversified. They concluded that at least four would give a good result, but having more than seven did not make much difference to the overall volatility of your investment. Additionally, if you have too many you will be less inclined to check on them regularly, every three or six months, as you ought to in order to make any necessary adjustments.

To be clear, diversification is not a way to maximize your account, but a prudent way to get a good amount of income and capital gain in a more secure way. If you could always pick the right stock or fund, that would give you the maximum return. However, as you are unlikely to always select the best performing security, it is much safer to split your money between the different types and sectors of investment, so that if one area that is not doing so well, at least you hold funds in other areas that are working at the moment.

You can get an idea of the kinds of mutual funds that are available by looking at the mutual fund search tool at Integrated Asset Management www.iamllc.biz . Of course, you need to be sure that the funds you choose are spread out effectively over different types and asset classes, and that is why www.kenhimmler.com is a great resource for more investing education.

Authored by Kenneth Himmler, Sr.