We always encourage people to take advantage of their company 401(k) or other retirement savings vehicle, especially if it includes a matching contribution from your employer.

A recent Wall Street Journal article discusses the effects of increasing transparency in 401(k) plans. The Department of Labor is trying to get plan administrators do a better job disclosing fees. This ray of sunshine into the plan has encouraged plans to provide lower cost options and fewer fees in the plan. This is a boon for savers, as over the long term, a small change in expenses can add up to a lot of savings.

To make it easier for workers to build their plan, many providers are offering index fund only options and there is a move towards using more diverse, low cost ETFs as well.

We always encourage people to look into their retirement plan options. If it is all too confusing to you, enlist the help of a local Registered Investment Advisor to help sort through your options.

BATS Exchange gains primary listings

Today the BATS Exchange, a Kansas City based exchange, gained its first primary listings. This should be generally good for retail investors as more competition drives innovation and lower costs in markets. Retail investors have benefitted from competition in the past through lower commissions and better execution prices. Hidden costs of mutual funds and ETFs should decrease with the competition as well.

Earlier, I wrote:

Adding primary listings to a third exchange in the US will ultimately be good for the retail investor.

I think we should all be excited about this.

New Target-Date Fund from Vanguard

Balanced mutual funds are a mix of assets designed to be an entire investment portfolio. Sometimes they are the classic 60%/40% mix of stocks and bonds, some are more or less aggressive. Target date funds are like an evolving balanced fund. They start off their life a very aggressive mix, as time passes the mix is adjusted to be more and more conservative and stable. The goal of target date funds is to provide a single fund for investors that will always match their investment needs. They are often named for their rough retirement year.

Target date and balanced mutual funds are boring. They do not have superstar managers or concentrated portfolios, often they just consist of a balanced mix of the fund company's other funds - a bond fund or two, a large cap stock fund, an international fund and some others, adjusted quarterly to be kept in the right blend.

Surprisingly, people who invest in balanced and target date funds often have some of the best returns! This comes from the tendency of balanced fund investors to invest regularly and not chase performance of popular equity funds. For people starting out investing or wanting as little involvement as possible in their savings, balanced and target date funds may be key. On that note, Vanguard, champion of low cost index funds, has launched a new target date fund for the youngest workers - those aiming to retire in 2060! The fund has a super low expense ratio of .18% and a minimum investment of $1,000. The mix may not be perfect for everyone, but it is a good place to start if you want to go it alone - the easy way.

nice point, but not quite

A recent article at SmartMoney.com promotes the idea of foreign bonds. It notes advantages such as better financial shape of foreign countries (Greece, et al notwithstanding?) and benefits of currency movement. It is a great point, actually, but not totally fleshed out in the article.

There are great benefits to foreign bonds, but we feel that they are better invested in through funds. I try to discuss some of the general benefits and drawbacks in another post. Besides the general lack of transparency in the bond market, the illiquidity of smaller foreign issues may make it difficult to get a good price when in a pinch for the money. Funds offer professional management of a diversified portfolio which may be a little more reassuring than a self-assembled mix of a few bonds.

As always, if you are interested in investing in foreign bonds, talk with a Registered Investment Advisor to see if it is appropriate for you.

aggressive saving

The key to accumulating wealth is just that - accumulating it. Aggressive saving, saving early and often, is the key to having money in the future.

This article at SmartMoney.com reveals how to accumulate $1,000,000 in your 401(k) type retirement account. SPOILER ALERT The key is saving. The author suggests that 13% savings on a modest salary is enough to accumulate over $1 Million by retimrement. Vanguard recommends saving 10-15% of income for a comfortable retirement.

Steps to retirement account success:

1. Take advantage of your employer match, usually 3%. If they don't offer one, pester them, ask for it in your yearly review, or whenever the issue of pay and benefits comes up.
2. Every time you get a raise or a bonus, up your  contribution. You lived without that money before, you can certainly spare SOME of it now!
3. Inch your contribution up a little each year anyway. You may only save 3% this year, but with the help of a 3% match and an extra percentage each year, you will be well on your way to a comfortable retirement.

Fear Not

Apparently young people are afraid of stocks. This comes as a bit of a surprise to me, but maybe anyone who starts learning about investing at age 8 would tend to be comfortable in any market. Not only are 52% of young people afraid to put their savings in the stock market, they are even giving up company matches by not participating in 401(k) plans at work. That is giving up free money.

After watching the recession greet their entry into adulthood and now absorbing the constant financial fear-mongering in the news, it is easy to see why one might be nervous about the future. This is bad news though. The stock market can be a savings vehicle, appropriate for long term or carefully managed savings. Historically, the stock market has provided the best returns on invested money.

To not consider investing or to not participate in employer match benefits is to give up your best option for comfortable retirement. This is easy for me to say, as an aggressive saver and an investment advisor, but I am not the only one who is excited about the prospects of investing.

Don't be afraid, get in touch with a Registered Investment Advisor to get a careful manager of your savings.