Mutual Funds and Asset Allocation – Do you know what you own? (2nd in a Series)

by Laura Ehrenberg-Chesler on May 19, 2009

in Asset Allocation,Crossvault Capital,Economic Indicators,Investment Strategies,Mutual Funds

The CBS Sunday evening program, 60 Minutes, recently ran a segment about Mutual Funds and Retirement Plans.  The thrust of the show pertained to individuals who were at retirement age or close to retirement.  It was a disturbing glimpse into how little real knowledge and information many people have when making choices about their retirement funds.

One of three things must be happening for this to occur.  Either these individuals are getting bad advice from their advisors, they are ignoring the good advice they are receiving, or they are not getting any advice at all.  I get the sense that many investors nearing retirement, between the ages of 55 and 65, have not focused on the fact that their time horizon for investing has become much shorter.   A shorter time horizon for investing calls for a more conservative asset allocation.  A more conservative asset allocation means more money allocated to bonds.  In a balanced mutual fund or balanced account, the investor must check to see what percentage of the fund is invested in bonds, and must be certain that the bonds in the fund/account are high quality.

If investors in this age group become more proactive about asking questions, and changing their asset mix as they approach retirement, the next market downturn will be much less painful.


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