Look out Wall Street: Investors Are Getting Fed Up

| Nov 15, 2008 | Comments 4

Lifecycle funds are Wall Street’s latest concoction for the average investor.  These funds invest in a combination of equity, fixed-income and short term funds.  The funds use an automatic asset allocation strategy that becomes increasingly more conservative as one’s retirement date approaches.  Since most set their allocation when joining a 401K plan and occasionally make adjustments, this product ensures that a person always has the appropriate asset mix.

On the surface, this appears to be a win-win deal.  The investor is always in the right mix of assets – in essence improving their returns.  Wall Street converts haphazard adjustments into a nice predictable fee generating event.  So, how are these products performing this year?

If you are planning on retiring in the year 2010 and have your retirement funds in Fidelity’s 2010 lifecycle fund, as 11/14/08, you have taken a 28% beating.  Not the kind of loss expected one year from retirement.  Matter of fact, making up a loss of that magnitude, in one year, in most 401Ks is nearly impossible.  Sadly, many retirements will be postponed or will require a part-time job to supplement retirement income.

The only thing worse than Wall Street’s products  for Main Street is its advice.  If I hear one more person say buy and hold for the long run – I am going to scream.  Buy and hold hasn’t worked for at least the last 10 years.  There have been numerous articles written this year about stocks dismal performance over the over the last decade.  An article recently written in the Wall Street Journal was called “Stocks Tarnished by Lost Decade.”

Hey Wall Street it’s time to wake up!  Main Street is getting sick and tired of your crappy products and bad advice.  You are on the verge of losing a generation of investors.  Hey Main Street it’s time to wake up!  It is time to take charge of your own investments.  Read books.  Go to seminars.  If you are going to lose 30% – why not do it yourself?  At least you won’t be funding some fat cat on Wall Street’s retirement.

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  • poor boomer

    This is rich. What are investors going to do, take their money and go home?

  • http://www.work-from-home-job.com/blog/ Amanda

    I’m glad someone’s being realistic. I have to admit that I have been one of those trying to hold on. I am convinced that after 10 years of this not working, it is truly time to employ a different strategy. Even though I am diversified, I have seen virtually no real increase in most of my funds –even before the latest crisis.

  • http://www.thetimeandmoneygroup.com miked

    poor boomer,

    The following advertisement in the Wall Street Journal sums up the problem quite nicely,

    “Last year Americans spent 19 hours planning for their retirement. That’s about the same amount of time they spent planning their Thanksgiving dinner.”

    Investors must devote time to studying the market, so that they understand when to take their money and go home.

    Amanda,

    The standard strategies (buy and hold, diversification, etc.) work fairly well in bull markets, but not in bear markets. Investors need to first understand if the market is in a bull or bear. Something as simple as “moving averages” can help identify bull or bear. The safest place for most investors in a bear market is cash.

    The 50DMA crossed the 200DMA in early January signifying a bear market.

    http://stockcharts.com/school/doku.php?id=chart_school:technical_indicators:moving_averages

  • http://www.1800899cash.co.uk/ Anderson

    Yes, I also had some experience like this. When these people suggested for ‘hold’, I lost about 20% in one year by holding that particular stock. But I also gained about 15-20% on certain stocks during the last one year. Mostly the advice from Wall street works out positively for me in 50%-50% range.