Conservative Retirement Investing in Turbulent Times ---- James K. Boyd 1/11/08
Merrill takes $14.1 billion write-down
NEW YORK (Reuters) - Merrill Lynch & Co Inc (MER.N) on Thursday said it took a $14.1 billion write-down and adjustments in the fourth quarter as bad subprime mortgage bets forced the brokerage to sell pieces of the company to foreign investors to raise capital. Analysts expected Merrill's write-down to land anywhere from $10 billion to $15 billion. For the year, Merrill's subprime mortgage-related losses totaled nearly $23 billion.
Merrill reported a fourth-quarter net loss of $9.8 billion, or $12.01 a share, the largest in the company's history. The world's largest brokerage turned a profit of $2.3 billion, or $2.41 a share, in the year-ago period.
The results eclipse the $2.3 billion loss in the third quarter when Merrill recorded an $8.4 billion write-down.
In a statement, Chief Executive John Thain called the results "clearly unacceptable." But in the past month, Merrill has fortified its balance sheet with nearly $13 billion in capital infusions from U.S. and Asian investors. 1/17/08 [smart people can lose a lot of money] (Reporting by Tim McLaughlin, editing by Mark Porter)
Retirement investing is important. Most of us need to avoid Costly errors and yet obtain reasonable returns. It is difficult to cut through the hype in today’s mega-watt mutual fund advertising. Merrill Lynch has lost billions of dollars. [just one of many financial businesses that are in over their heads] Most funds underperform the S&P 500. In my research for my own retirement here are some ideas for low risk, modest returns in today’s volatile market.
· Maximize FDIC Insurance Coverage by funding a variety of Bank accounts. The coverage is capped at $100,000 per person for individual savings or checking accounts – But the FDIC also insures up to $100,000 per person in joint accounts. In addition it insures retirement accounts for up to $250,000 and trust accounts for an additional $100,000 per qualified beneficiary. So a married couple could have separate individual accounts, a joint saving account, separate retirement accounts and two trust accounts – each naming the other spouse as beneficiary – and be covered by FDIC insurance up to $1.1 million. And that’s just at one bank. This procedure can be repeated at as many FDIC insured institutions as your assets permit. Note: Changing how your name as listed on accounts does not give you more coverage. David Barr, spokesman, FDIC, Washington DC. Bottom Line Personal January 15, 2008
Top-yielding certificates of deposit----Good web site to find best rates: www.bankrate.com
High Yield Rates ( 1 yr IRA CD )
California 1st National Bank, Irvine, rate 4.60%
[this is just one of many banks that you can choose from]
· Listed below are some unusually strong and stable stock and bond funds with generally low standard deviations and low expenses with modest to above average returns. [all funds have at least a 10 year track record and are no load]
Fidelity Balanced (FBALX) Blended Fund
Number of Years Up: 18---Number of Years Down: 3
Total Expense Ratio: 0.60%
10 years *Standard Deviation 9.72
*The standard deviation is the amount of swing in performance that an investment can be expected to have from year to year. The standard deviation is an investment’s “average variation from the average return.”
The higher the standard deviation, the greater the volatility, and therefore
the greater the risk. The Truth about Money, Ric Edelman
Vanguard Total Bond Market Index (VBMFX) Bond Fund
Number of Years Up: 19---Number of Years Down: 2
Total Expense Ratio: 0.20%
10 year Standard Deviation 3.44
Vanguard Balanced Index (VBINX) Blended Fund
Number of Years Up: 11---Number of Years Down: 4
Total Expense Ratio: 0.20%
10 year Standard Deviation 8.84
Vanguard High-Yield Corporate (VWEHX) Bond Fund
Number of Years Up: 26---Number of Years Down: 3
Total Expense Ratio: 0.26%
10 year Standard Deviation 4.39
Fidelity Puritan (FPURX) Blended Fund
Number of Years Up: 47---Number of Years Down:13
Total Expense Ratio: 0.59%
10 year Standard Deviation 8.74
Vanguard Wellesley Income (VWINX) Blended Fund
Number of Years Up: 32---Number of Years Down: 5
Total Expense Ratio: 0.25%
10 year Standard Deviation 5.25
Franklin Income Adv (FRIAX) Blended Fund
Number of Years Up: 8---Number of Years Down: 2
Total Expense Ratio: 0.48%
10 year Standard Deviation 7.98
Vanguard Interm-Term Tax-Ex (VWITX) Bond Fund
Number of Years Up: 24---Number of Years Down: 6
Total Expense Ratio: 0.17%
10 year Standard Deviation 3.24
Dodge & Cox Income (DODIX) Bond Fund
Number of Years Up: 16---Number of Years Down: 2
Total Expense Ratio: 0.44%
10 year Standard Deviation 2.93
T. Rowe Price Equity Income (PRFDX) Stock Fund
Number of Years Up: 20---Number of Years Down: 2
Total Expense Ratio: 0.69%
10 year Standard Deviation 12.88
T. Rowe Price Capital Appreciation (PRWCX) Blended Fund
Number of Years Up: 20---Number of Years Down:1
Total Expense Ratio: 0.73%
10 year Standard Deviation 8.45
T. Rowe Price CA Tax-Free Bond (PRXCX) Bond Fund
Number of Years Up: 18---Number of Years Down: 3
Total Expense Ratio: 0.51%
10 year Standard Deviation 4.07
American Century Equity Income Inv (TWEIX) Stock Fund
Number of Years Up: 11---Number of Years Down: 2
Total Expense Ratio: 0.97%
10 year Standard Deviation 10.55
Vanguard LifeStrategy Income (VASIX) Blended Fund
Number of Years Up: 13---Number of Years Down: 0
Total Expense ratio: 0.24%
10 year Standard Deviation 3.76
Vanguard STAR (VGSTX) Blended Fund
Number of Years Up: 19---Number of Years Down: 3
Total Expense ratio: 0.32%
10 year Standard Deviation 8.95
Vanguard Wellington (VWELX) Blended Fund
Number of Years Up: 61---Number of Years Down:17
Total Expense Ratio: 0.30%
10 year Standard Deviation 8.76
Vanguard Short-Term Tax-Ex (VWSTX) Bond Fund
Number of Years Up: 30---Number of Years Down: 0
Total Expense Ratio: 0.16%
10 year Standard Deviation 0.76
Barclays Global Investors LP Retire I (STLAX) Blended Target Fund
Number of Years Up: 12---Number of Years Down: 1
Total Expense Ratio: 0.78%
10 year Standard Deviation 4.12
Barclays Global Investors LP 2010 I (STLBX) Blended Target Fund
Number of Years Up: 11---Number of Years Down: 2
Total Expense Ratio: 0.77%
10 year Standard Deviation 6.77
Fidelity Freedom 2010 (FFFCX) Blended Target Fund
Number of Years Up: 9---Number of Years Down: 2
Total Expense Ratio: 0.68
10 year Standard Deviation 8.47
Homestead Value (HOVLX) Stock Fund
Number of Years Up: 15 Number of Years Down: 2
Total Expense Ratio: 0.71%
10 year Standard Deviation 13.62
Mairs & Power Growth (MPGFX) Stock Fund
Number of Years Up: 37 Number of Years Down: 12
Total Expense Ratio: 0.69%
10 year Standard Deviation 12.38
DWS High Yield Tax Free S (SHYTX) Bond Fund
Number of Years Up: 18 Number of Years Down: 2
Total Expense Ratio: 0.73%
10 year Standard Deviation 3.17
Vanguard High-Yield Tax-Exempt (VWAHX) Bond Fund
Number of Years Up: 23 Number of Years Down: 6
Total Expense Ratio: 0.17%
10 year Standard Deviation 3.58
USAA Tax Exempt Intermediate-Term (USATX) Bond Fund
Number of Years Up: 23 Number of Years Down: 2
Total Expense Ratio: 0.56%
10 year Standard Deviation 3.17
Fidelity U.S. Bond Index (FBIDX) Bond Fund
Number of Years Up: 15 Number of Years Down: 2
Total Expense Ratio: 0.31%
10 year Standard Deviation 3.47
American Century Equity Income Inv (TWEIX) Stock Fund
Number of Years Up: 11 Number of Years Down: 2
Total Expense Ratio:0.97%
10 year Standard Deviation 10.55
CGM Focus (CGMFX) Stock Fund
Number of Years Up: 9 Number of Years Down: 1
Total Expense Ratio: 1.02%
10 year Standard Deviation 28.64
Manning & Napier Pro-Blend ExtndTerm A (MNBAX) Blended Fund
Number of Years Up: 13 Number of Years Down: 1
Total Expense Ratio: 1.14%
10 year Standard Deviation 10.22
Meridian Growth (MERDX) Stock Fund
Number of Years Up: 21 Number of Years Down: 2
Total Expense Ratio: 0.84%
10 year Standard Deviation 16.41
Meridian Value (MVALX) Stock Fund
Number of Years Up: 12 Number of Years Down: 1
Total Expense Ratio: 1.08%
10 year Standard Deviation 14.55
Madison Mosaic Mid-Cap (GTSGX) Stock Fund
Number of Years Up: 19 Number of Years Down: 5
Total Expense Ratio: 1.25%
10 year Standard Deviation 13.59
Northern Small Cap Value (NOSGX) Stock Fund
Number of Years Up: 10 Number of Years Down: 3
Total Expense Ratio: 1.00%
10 year Standard Deviation 17.75
Pennsylvania Mutual Inv (PENNX) Stock Fund
Number of Years Up: 30 Number of Years Down: 6
Total Expense Ratio: 0.87%
10 year Standard Deviation 14.83
Tamarack Micro Cap Value S (TMVSX) Stock fund
Number of Years Up: 15 Number of Years Down: 5
Total Expense Ratio: 1.07%
10 year Standard Deviation 15.04
*Standard Deviation 1994-2003
U.S. Government Securities Funds 3.6
Municipal Bond Funds 4.4
Corporate Bond Funds (High Yield) 7.8
Balanced Funds 10.4
Stock Funds 16.6
International Stock Funds 19.1
Warning
*The standard deviation is the amount of swing in performance that an investment can be expected to have from year to year. The standard deviation is an investment’s “average variation from the average return.” The higher the standard deviation, the greater the volatility, and therefore the greater the risk. The Truth about Money, Ric Edelman
Two Large Money Market Funds:
VANGUARD MONEY MARKET RESERVES (VMMXX)
7-Day Yield: 4.55%
Assets: 89.94B
Total Expense Ratio: 0.17
FIDELITY CASH RESERVES (FDRXX)
7-Day Yield: 4.69%
Assets: 112.67B
Total Expense Ratio: 0.45
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