|
|
 |
|
 |
||
|
|
|
|
|
|
||
Do You Know Your 401(k) Plan?
Taking full advantage of your 401(k) plan today can help you achieve financial goals sooner, and provide enough income for a comfortable retirement. For most working people, Social Security checks alone will not be enough to maintain the standard of living they are used to, once they are no longer working. If you are lucky, your employer offers a 401(k) plan which, if used wisely and to the fullest advantage, can provide you with additional income for your golden years.
401(k) plans differ greatly depending on the employer who sets the rules. The only way to get the most out of the plan is to get to know it and make educated choices.
Things you should know:- What is the maximum percentage of your salary you are able to contribute
- Is your employer matching the contributions If yes, what is your minimum contribution, before your employers contribution starts, and what is the maximum
- What are the number of years you have to be with the company (so called vesting) to be eligible for the employers contributions to your 401(k)
- How often can you switch among available investment options
- Are earnings posted to your account on a weekly, monthly or quarterly basis When do you get your account statements Note, it is always more beneficial if earnings are added to your balance more often.
- What methods can you use to access the account By phone, on the internet or only in writing
- Did you spread your money among different investments to reduce the risk
- Did you learn enough about the investments you are using
Do you know that 401(k) plans are not insured by the federal government, and its investments are at risk However, different investments carry different degrees of risk. It is always best to diversify your investments by investing in different types of assets. To find out more about 401(k) investment options, ask your plan administrator for information. Financial magazines, prospectus and brochures can be a good source for learning about particular investment options.
For more tips from Simon Fox regarding 401(k), IRA plans and other retirement investing topics visit:
Which Market Cap & Style Is Looking Good For 2006
Its hard to believe, but the end of 2005 and the beginning of 2006 is just around the corner. Im hesitant to say that the years been uneventful - its been very eventful. But as far as investors are concerned, lets just say its been unfruitful. The Dow, the NASDAQ, and the S&P 500 are all in the red for they year. And while theres still time left for the market to end the year on a positive note, its not going to be a big win like 2004 was.....not even close.
Yet, Im still very optimistic about the coming year, even though conventional wisdom says we shouldnt be. As of right now, were facing a third major hurricane in the gulf, and even though this one isnt threatening the oil industry quite as much as Katrina and Rita did, Wilma is targeting the citrus industry, as well as the bulk of Floridas tourism areas (fortunately were in the slow period for vacationing). Oil is just off of all-time highs too, and inflation is persistent. So whats to look forward to There are a few opportunities I see on the horizon. Of course, you have to know how to handle it. But then, thats always the case.
Unfortunately (or fortunately, depending on your point of view) I wont be able to detail everything in this brief space today. It will probably take a couple of weeks to really lay everything out the way I see it happening in 2006. The outlook involves sectors, styles, and even crosses borders. For today, Id just like to look at a few market capitalization and style (growth versus value) strategies well be using for our money management clients in the very near future.
To put this strategy into simplest terms, all good things come to an end. Or to put it another way, what goes up must come down. There are actually about a hundred ways to say it, but they all mean the same thing - things change. As for the markets pockets of strength, they change too. Interestingly, although not surprisingly, the markets next strong pockets are reasonably predictable.
Being mostly value-seekers, our interest is stronger in value prospects than it is in so-called growth stocks. Looking back over the last several years at small-cap, mid-cap, and large-cap value stock performance, theres one clear trend.....that none of them were consistent leaders, nor consistent laggards. While they all generally moved in the same direction, all of them claimed top honors about the same number of times. All of them were also at the bottom of the barrel an equal number of times.
So whats that got to do with picking a market-cap-based value group for the coming year A lot. The one you want to pick for the coming year is the one that fell in the middle of the three in the previous year. Depending on the particular index you use, on average, youd outperform the broad market between 1 and 2 percent each year. If youre wondering why (and I hope you are), the basic premise is simple - the top performers best days are usually behind it, while the bottom-feeder may have serious problems that cant be resolved in a year. That leaves the middle-performing index as the one that still has some untapped potential, but isnt suffering for other reasons.
Not worth the trouble Think again. After 20 years of applying this strategy, your portfolio would have produced returns that topped basic indexing by 20 to 40 percent.
So, that said, which value group is in the middle so far this year The S&P 500 Value index is down by 3.0 percent YTD, the S&P 400 Value index is up by 1.9 percent YTD, and the S&P 600 Value index is down about 0.5 percent YTD (yeah, its been a pretty ugly year across the board). Based on these results so far, are we really willing to think about small-cap value as one of our core holdings for 2006 Well, yes, and no. The answer is yes with respect to the methodology, even though the year has been a little stale. But the answer is no for two reasons. First, the year isnt over yet, and a lot can happen in two months. The second reason is just that these tepid results may not be distinct enough to really separate the three groups.
To combat that second problem, lets take a look at how these same indexes did over the last 52 weeks. After all, market trends dont have to wait on the calendar. Since last October of 2004, the S&P 500 Value Index is up by 7.9 percent, the S&P 400 Value index is up by 15.8 percent, and the S&P 600 Value index is up by 13.5 percent. If those rankings seem familiar, its because its the same order of performance that we have year-to-date....and the small-caps are still in the middle. That sure makes it a lot easier to apply the strategy now, so, were already shopping for an entry point.
This is particularly exciting, because we have an inherent bias for small-cap value anyway. Historically, its been the markets best-performing segment.
On the flipside, dont interpret this as a complete portfolio solution. Our small-cap value holding, once were in it, will be a core piece of our pie, but there are a lot of other ingredients we want to add. One such piece will be a style and market-cap based holding designed to contrast the small-cap value position. That means it could be a growth investment, and it will definitely be a large-cap or mid-cap position (note that were not opposed to holding two value-based indexes). Though, it will probably not be as big of a stake as our small-cap value position is.
Thats enough for now. Well look at other strategies and ideas in future articles, so be on the lookout for those.
James E. Brumley is BigTrends Sr. Research Analyst. Prior to joining the BigTrends team, James was an Investment Specialist with discount broker Charles Schwab. During his time there, James crafted portfolios for Schwabs retail clients, specializing in allocation optimization. This fundamental approach has also proven to be a useful addition to BigTrends technical analysis style. After joining BigTrends staff in 2002 as a Research Analyst, James was promoted to Senior Analyst in 2003.
James writes the Weekly Market Outlook, Sector Spotlight, the MidWeek Update, as well as the Tuesday/Thursday edition of the Daily TrendWatch. His straight-forward approach to writing about the market has quickly made his commentary a favorite among BigTrends regular readers.
In 2005, James spun-off from BigTrends to develop a separate money management arm called Bluegrass Portfolio Management. This managed account program utilizes all the fundamental ideas he used in building portfolios at Schwab, as well as all the technical analysis tools that make BigTrends so successful.
 |
©Copyright
InsideTheWeb.All Rights Reserved.
|
 |
|
|
||
 |
Designed by kohj |
 |