There is a story getting considerable coverage this week about a study that finds that an average family may end up having 30% less in total lifetime accumulated wealth in their 401(k) plans due to high fees and expenses. The study inspiring all of this attention is titled “The Retirement Savings Drain” and published by policy research firm Demos.
The Demos study estimates that the all-in costs of a 401(k) plan, (including fund expense ratio, trading costs and administrative fees) average 1.56% of assets per year. This figure is based on asset-weighted average expense ratios for mutual funds and assuming trading costs that are pretty reasonable. The all-in cost estimates are fairly consistent with other estimates that I have read. Participants in large low-cost plans may pay less and participants in small company plans tend to pay Continue reading →
Guest Post by Contributing Editor, David Kotok, Chairman and Chief Investment Officer, Cumberland Advisors.
The old adage “Sell in May and go away” was good guidance for stock markets last year. The market peaked on April 29 and bottomed out on October 3. For a detailed discussion of this period and the subsequent bull-market recovery, see our new book From Bear to Bull with ETFs. The eBook (ten bucks) is now available on Amazon.com. Paperback by month end and other channels of distribution like iBook and Nook are coming. Please note that profits from this book will be donated to the Global Interdependence Center, www.interdependence.org.
History shows that ‘Sell in May and go away’ has applied when the Federal Reserve was in a tightening mode during the six-month span from May to November. Continue reading →
Having worked in the equity markets for awhile now with a primary focus on finding profitable stock-picking strategies, I sometimes feel like the keeper of great stock picking ideas. That being said, as the New Year is upon us, I’m in a giving mood and would like to gift you three great ways to pick stocks in 2012.
In the previous two articles I’ve posted here, you’ll remember that I discussed the merits of Research Wizard as an essential stock picking tool for the individual investor to create and test new ideas. So today, I’m going to give you an example of how to develop a stock-picking strategy within the Research Wizard using three specific strategies:
First, it’s very important to start with a good ranking or rating system. Most of the time, there’s a lot of research already committed to a rating and starting with a good working foundation is a great way for you to save time. (Examples of these are broker stock ratings or the Zacks Rank. I’ll use the Zacks Rank since it’s more comprehensive than broker ratings and also has a great track record for selecting stocks.)
Brett Arends recently wrote a piece for MarketWatch in which he expressed the opinion that hedge funds are a sucker’s bet. He bases his argument on a fascinating study called Higher Risk, Lower Returns: What Hedge Fund Investors Really Earnthat was published in 2009. The authors of the study, professors from Emory University and Harvard, came to the conclusion that hedge fund investors would have (on average) been better off buying an S&P500 Index fund. So, if hedge funds have performed as badly as this academic study suggests, why have assets invested in hedge funds skyrocketed over the past 20 years? Continue reading →
Ron Lieber at the New York Times recently came out with an article that explores one of the most important problems with 401(k) plans: they can be expensive and plan participants have no idea how much their plans are costing them.
There are costs associated with with running a 401(k) plan–administrative costs for the plan, for example, are distinct and in addition to the expenses associated with the individual funds within the plan. These costs are sometimes added to the fund’s expense ratio in the creation of a share class specifically designed for retirement plans. These are usually “R” class shares.
The New York Timesarticle cites research by BrightScope, a firm that compiles data on 401(k) plan costs, that shows … Continue reading →
The “dumb” money (ie. that of individual investors) is back in the stock market — and that means the market likely is at its peak, according to the Wall Street Journal. The evidence: rising investment in ETFs and equity mutual funds, as tracked by EPFR Global. The American Association of Individual Investors (AAII) also found a striking growth in bullish sentiment when polling its members last week (graphic courtesy of the WSJ): Continue reading →