Expert: Steve Hach - 10/28/2010

Question
Hello,

I am 49 years old.  Way back after I graduated college, I read all kinds of articles on how great
mutual funds are, that in the long term with regular investing you would become wealthy by the
time you are ready to retire.  So I did so with fervor.  
Instead, I haven't made diddly squat over all that time.  After all these years, I don't think I have
much more than what I put in.  It’s been extremely discouraging.  
Currently I have about $120K in these types of funds, about half in IRAs, half not.  Some in
mutual funds like Fidelity Growth Co., S&P 500, and some in Fidelity Cash Reserves.  
While the stock market is doing better lately, I don't trust it.  Is there anything worth investing in
in the long haul anymore, or should I just start stuffing it in the mattress?  

Jeff

Answer
Jeff,

I cannot give personal specific investment advice.

In almost all time periods, investing regularly for the long-term will provide the best results due to the power of compound interest.

However, if your unlucky enough to find that you hit a ten year bad patch in the market you will not see the growth that is typically expected.


Markets have been volatile and flat for some time due to the internet bubble and the recent housing bubble and financial melt down.

However, since March 2009 markets are up something like 70%.

There are always worthwhile investments even if sometimes the market is volatile and it may be best to move to cash.

It may be best to consider some further diversification of your portfolio so that it includes foreign market exposure--think china, india, brazil, perhaps russia.  You want emerging markets where the upside is bigger than in the mature economies.

I would remind you that the IRAs and the 401ks are typically set up so that someone is making money managing them and it is in your best interest to limit the amount of fees you pay for these services as much as you can.

I advise that you see if you can save on management fees with your accounts by looking for ETFs rather than mutual funds.  No reason to be in an SP500 mutual fund if there is a similar ETF that is much cheaper.

And of course, paying off debt is always a good strategy.  Take care of credit cards and other high interest debts before you even think about longer-term investments.  That may make more sense if you have high balances on any credit cards and such.

Best,

Steve