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11/17/2008 12:20 pm EST
The wild market gyrations of the past week should convince ordinary investors that there is no logic to short term market movements, nor any ability to predict market “turns” or “bottoms.” If so, there’s no reason to let the market dictate your emotional well-being, or even your financial well-being on a daily basis.
Yet, that’s just what’s happening to so many people who look at their retirement accounts and envision a poverty-stricken old age. They wonder what happened to the hard-earned money they had set aside in their retirement plan, never dreaming it could disappear down a sinkhole!
An e-mail I received this week made it crystal clear that in converting a generation of baby boomers to become their own pension fund managers, we failed to give them any perspective to guide their actions. Worse, they came to believe that investing was risk-free, and a smooth ride upward.
Now they wonder where all the money went!
“Why are 40l(k)’s NOT insured?” the e-mail complained. “Why are we almost ‘ordered’ to put as much money as we can into our 40l(k)… I put $600 per paycheck into my 40l(k) and within a couple of weeks I lost over $50,000!… I’m just so darn mad that our personal funds are not protected, but are flushed down the drain!”
Did we really lead employees to believe that their 40l(k) plans were safe and without risk? If so, they’re justified in complaining. But where’s their logic? If “safe, insured” deposits in banks yield only a few percent in interest, how could they possibly believe that double-digit stock returns were guaranteed?
A generation ago, it was the pension fund managers who had heart attacks when the stock market tanked. Now almost everyone is in shock. They never knew stock prices could fall as well as rise, that money could disappear as well as magically create wealth in their retirement plan.
It’s hard now to convince people that if you believe in the future of America, not only will that well-diversified stock portfolio come back, but will one day be higher. And that the money you invest today, will one day look like it bought stocks at bargain prices.
And that if that <<doesn’t>> happen over the next 20 years, then there won’t be much of America left to enjoy in your retirement, no matter how much money you have. Do you agree?
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