Can ordinary people manage the risk in the stock market for their retirement?

I am beginning to think there is no way an average American can invest in the market and make any money for their retirement in a 401K. I was reading this morning that 5 and 10 year returns in the portfolios of most mutual funds are negative now when they calculated in the huge losses from recessions in 2001 and 2008 and the beginning of 2009. (Q1 hasn’t been kind) 

As an investor (for my 401K) I look at that and say: yuck! Why would I put my money in something that has no long term value?

My fiance sent me this article saying that now 20 and 30 years are the benchmarks for best overall performance in mutual funds and stocks in the market. Yikes! 20-30 years? Who has that much time before retirement? Who can invest for that long anyway?

When you consider that most people’s salary starts dropping when they reach their 50’s (because employers don’t value old employees and can’t spend time/money updating their skills) you really have 25 years max to work with as far as investments for retirement.

You start your first real paying job with a 401K at age 25 and you may not be fully employable by age 50 although you will likely live to the age of 80 or 90.  There’s your 25 years to save and invest for 30-50 years of retirement.

I also think there is something else going on here affecting the 20-30 year market profit numbers. The US Markets benefited from a long term technology/innovation and growth curve from WWII to the 1980s. Personally, I think that was a one time deal and we will never see that kind of long term prosperity again.

Why? 1. Because we don’t understand enough about technology to innovate on that level again to create that much growth. 2. Because the US has higher paid workers than anywhere else in the world and everything gets manufactured and produced (and serviced) somewhere else. 3. Because we’re too complacent and have too much entitlement as a country of workers. Work creates wealth, not shell games with securities.

That brings up another point: We’ve been playing a shell game with our economy since the 1980’s. De-regulate, re-regulate, stimulus, fix, fund, trade, outsource, sell, leverage, whatever… It’s all a shell game to us worker bees and the internet has been the only significant improvement in technology to create new industries and jobs in the last 20 years. We need more than that to survive and prosper as a nation and a world.

I don’t know about you but I can’t stand to take that much risk with my money. I have some in a 401K but mostly my retirement is locked in a 5 year CD IRA at 5.25% that was a promotion this fall when banks wanted more cash reserves. I changed companies in 2006 and rolled over the old 401K to a bank in 2007 because I knew the 10 year recession was coming soon and I didn’t want to risk timing it.

There will always be people who game the market and come out ahead, but those of us without finance degrees, huge money to invest in undervalued markets or inside scoops will never really profit on the whole. Many of us will get out exactly what we put in and maybe less considering our lack of  investment prowess. So, in that level of risky why not just put it in the bank? Positive 3-5% sounds a lot better than negative 40%.

I hate the inflation argument that says that 3-5% isn’t enough to make money after inflation. Guess what? Inflation has been very low and inflation doesn’t stop when you have negative returns either. I’d rather have some money dependably than none at all when prices are higher. 

You may be asking why I want more innovation and less investment in the market? Doesn’t investment in the market lead to more innovation?

NO. Most of the mutual finds and stocks you can buy that are highly rated are in huge old (one trick pony) risk averse companies that have already peaked and can’t figure out how to do anything new. They sell shares to raise cash and then have old people make decisions like the old days. Venture Capital,  new small businesses and Universities are the place where innovation happens. If I could invest in those, I would. But then again I don’t have millions of dollars and apparently I won’t any time soon.

What are the best proven ways to fund your retirement and create wealth then?

1. Have a side job for extra income you can save (part-time weekends or evenings a few nights a week)

2. Own rental property for extra income (you need to live near it for this to work)

3. Have fewer kids if you’re contemplating having a family (ok we don’t always control this, and we love kids, but nobody is going to debate that they are expensive) 

4. Own a smaller home (smaller mortgage = smaller amount in interest paid (lost) to the bank)

5. Don’t go into debt on credit cards or car loans (hello! 25% interest, MONTHLY! on some cards)

6. Live frugally generally, keep your cars 10 years, don’t buy new clothes every month and don’t buy big ticket items like TVs and Computers every few years. Spread out the expenses over the long term.

7. Share what you have with others. Seriously, knowledge, help with projects, donating time and donating items you no longer need, as well as hand me downs between families help kids and neighbors live better within their means and help the community live better too.

8. Take care of your health. Eat less junk, lower fat, lower salt, lower carbs. Exercise daily. Take vitamins. Don’t work in an industry that has a side effect of cancer. Visit the doctor regularly and if something comes up treat it early, it will cost so much less in the long run. Heath issues start in your 30’s and get more frequent in the 40’s, 50’s and 60’s. Expect to pay more every decade for health costs in your life/budget.

These are all real tactical changes we can make to save more money monthy and yearly that will get better returns than the stock market and help prepare for inflation. What else do you think can help?

2009 Super Bowl Ads Commercials Selling Fast on NBC

super bowl 2009 tampa bay florida game logo XLIII

super bowl 2009 tampa bay florida game logo XLIII

It’s that time of year again when the first rumblings of the next year’s super bowl advertisers come out. (for super bowl 43) I think the companies just ask that their info be released this early to start the buzz cycle and get more mileage out of the media buy. There really isn’t any other reason to release the advertiser names now in September when the ads aren’t even finished yet.

They say the 30 second ad spots are selling for $3 Million dollars each. That is the going rate for a direct sales pitch into 88 million homes and TV sets all at the same time. (when are they going to start webcasting the game and the ads all together like a second delivery system of the same signal? why wouldn’t that work?) Advertisers that actually get a positive ROI from that kind of heavy hitting creative investment are wide appeal mass market companies that have products that are either seasonal at that time of year or products that relate to sports watchers or families watching at home.  Products like snacks, drinks, beer and cars have long been popular categories for Super Bowl Ads.

This year some of the confirmed advertisers are Pepsi and CocaCola, Anheuser-Bush, and a bunch of un-named Automotive, Movie and snack companies. Doritos have done really well the past few years and I wonder if they will plunge in again. I think the trend may be finally waning in the internet sites do ads category since few of them have that kind of money laying around anymore and/or need the visibility.

The timing of your ad during the Super Bowl Game is also crucial. The good spots are probably taken already in Q1 and Q3. Q2 gets boring because people have been sitting a while and just want halftime to start so they can use the bathroom and Q4 may be less well watched if the game isn’t almost tied the whole time. Many people just turn it off when the game is a blowout. The ends of pods are also bad because it just leads back into the game and consumers forget the ad pretty quickly. Being first in a pod is best since people have been proven to remember things in chunks and the beginning and end are usually the chunks they remember most.

Sometimes companies get their ads in at the last moment when 1 or 2 ads are left a week or two before the Super Bowl Game but this may not be available this year if companies are paying 300K more per ad willingly and forking over the money (or deposit) this early in the year. I think that marketers are realizing that in a fragmented market you have to be as prominent on every screen as possible to stay top of mind and above the chatter that gets tuned out. But ad placement is only 1/2 of the strategy. The other half is really the most important. It is really about relevance and humor. If you can make your product funny in a way that real people identify with personally, you have a winner and get all the chatter at the watercooler the next day.

New Hospitality Marketing Trend

I walk to work here in Chicago and have noticed that there are more small boutique hotels popping up around downtown all the time. I have also been reading about the hospitality industry changing it’s strategy from big brands that offer exactly the same boring box rooms in every city to individually styled local flavor boutique hotels that are smaller and more intimate. They like this because they get to charge more money for this unique and higher class service. (take this Montreal Boutique Hotel for example) Some of these boutique hotels are also owned by the large hospitality conglomerates. I would compare it to people stopping shopping at department stores that have predictable offerings that are all kind of lackluster and the same like Sears and Macys in favor of specialty stores like pottery barn and crate and barrel who specialize in housewares and furniture only and have a lot more variety. In a world that bases growth on worldwide standarization of work roles and manufacturing processes this tells us that people like individuality. They like different things in different cities, and that local businesses should have an advantage against the huge global brands.

Wake Up WalMart – Chinese food product recall update

I just got this information in an email from Wake Up WalMart and wanted to pass it along because more people should know about what lengths WalMart will go to in order to make more profit. Nothing is sacred, so don’t spend your money there if you want to have any control over our U.S. Economy at all:

Wal-Mart is the #1 importer of Chinese goods. So, after the spree of high-profile recalls and outright bans on dangerous Chinese products, wouldn’t it be logical for Wal-Mart to take the offensive against unsafe imported goods? Shouldn’t Wal-Mart stand up for the safety of American consumers?

Wouldn’t you?

The truth is that Wal-Mart is putting profits over people – again – by blocking laws requiring disclosure of where food comes from. Instead of looking out for consumer safety, Wal-Mart is watching its own bottom line.

That’s why we put together a new ad to expose the truth about Wal-Mart and China.

Click here to watch our new ad and send it to five friends:

http://www.wakeupwalmart.com/feature/foodsafety

Even among nations, Wal-Mart is China’s sixth largest trading partner: it buys more Chinese goods than industrial giants like Germany and Britain. This gives Wal-Mart the power to demand safer products from its Chinese suppliers. Unfortunately, it has demanded nothing more than lower prices, and has tried to cover up the consequences of its race to the bottom.

As consumers, we have the right to know that the products we buy are safe. Don’t let irresponsible corporations like Wal-Mart cut us out of the loop. Please watch our new ad today, and send it to five friends:

http://www.wakeupwalmart.com/feature/foodsafety

The more people learn the truth about Wal-Mart, the more public pressure grows for Wal-Mart to change.

You – together with more than 402,000 fellow supporters of WakeUpWalMart.com – have the power to make Wal-Mart put people first.

Amidst seemingly endless recalls of dangerous products, Wal-Mart has tried to keep American consumers in the dark.

Let’s shine a light.

http://www.wakeupwalmart.com/feature/foodsafety

Thanks for all that you do,

The Team
WakeUpWalMart.com