Investing in You - Your Retirement Savings Bag

I was having a chat with one of my employees and the term 60/40 came up as I have the business news stations on as a requirement for my staff to learn about how business intersects with their everyday life. So, the topic of 60 / 40 came up and he said quite, simply --- "What is 60 / 40?". I immediately responded with the answer that it is a commonly used term for the ratio of your investment of retirement portfolio that should be allocated across stocks (60%) and bonds (40%). He then whipped back who in the world would know that and I kept insisting that it's common knowledge. I then realized once again the purpose of this blog and why I've been writing for the last 20 years. There are so many things that I take as common knowledge but when shared with the world in a simplified way --- it can change minds and lives. 

Saving for Retirement 101

There are no special tricks when it comes to planning for your retirement. It takes balance, discipline, courage, and humility. 

Balance - You must be able to balance your personal finances and position yourself in a way that allows you to save extra money after ALL of your business and personal life expenses are covered. EASIER SAID THAN DONE. This is why I'm not a fan of all of these modern-day financial podcasts. You're telling me to retire but no one is there to guide you along the way. You want my clicks and eye balls but you don't have the true playbook. I'm not going to get into details today but you need to monitor your expenses daily and save from when you first start working or retirement may be difficult or a burden to your loved ones.

Discipline and Courage - If dieting is hard, imagine how hard it is to save money each paycheck for something 10/20/30/40/50 years from now. That takes a type of discipline most people aren't ready for. Find a system that works for you. If your company takes money out of your paycheck then great do that. If you put it in a savings account that you don't touch, perfect. If you need a financial coach or advisor -- they get financially fit. It take courage to do something not everyone is doing.

Humility - I always like to add in the concept of legacy. There is a certain amount of humility that is needed to save not only for yourself but to be humble enough to know that eventually you won't be around and your family or extended family may benefit from a boost. I've heard the phrase the rich get richer, but I truly believe it's the rich pass on wealth from generation to generation which only makes it harder for them to be broke. We speak of a simple term call compounding interest and at some point your funds or the legacy funds you leve behind with accumulate to a level where it truly generates enough income for someone to survive upon. To understand that you may not benefit from this but your future generations may --- take some mind-blowing humility in how life works. There are some truly self-made millionaires and billionaires but if you ever did some research on some of the famous or rich people that you follow --- chances are they inherited that wealth of skillset. 

I would fail if I was asked the question, what book are you reading. I tend to read and save webpages of articles. My phone has over 30 open pages of articles I want to get back to. One of those was about 401(k) accounts. This has become the default type of account for many people who work corporate jobs and usually do not have a pension. Sadly, this isn't available to every person in the world or even every American. The concept behind the account is what we write about here all the time ---  saving money after each paycheck for a rainy day or retirement.

So here is a quick rundown of how to save for retirement:

Save Cash - Save cash after every paycheck and put it in an envelope or savings account. The problem with cash is if you can easily get to it you may easily spend it or like bitcoin --- if the amount gets large and you begin to get unwanted attention it becomes ripe for stealing.

Individual Retirement accounts (IRAs) - Often called traditional IRA, this type of retirement account is tax deductible from your income and if you set it up seamlessly the money comes out and you now have rules imposed on you that penalize you from pulling funds out. There are US government limits on how much money you can make to contribute so do a quick search to see if you qualify. I'm getting old but awhile back the limit was roughly if you're single and make over $75K a year the full contribution begins to scale down. There are limits for other filing types such as married jointly, etc.

Pensions - This is a dinosaur method of saving money for retirement. It was a gem when you had a company of government entity pay for your retirement. You work and they foot the bill for a defined amount of cash you would receive for all those years of service. If you ever get an opportunity to earn a pension with an organization, consider this a huge huge incentive to work for them. As this is a great way to get money during your golden years.

401(k) - The vehicle that took the reins from pension accounts many years ago. The simple way to think about this is you are responsible for your retirement as the money comes directly from your paycheck. To incentive people, the money is tax deductible, so this was effective way to create and increase the wealth gap. If you don't work for a company that offers this type of retirement account or you don't have a good handle of your personal budget --- then you'll be left behind as pensions are a thing of the past. You miss out on reducing your taxes and free money as many companies provide a small match (think donation that tax deductible for companies 👀) into your retirement account.

Roth 401(k) - similar to its sibling, this retirement account is funded with after-tax money. The cool thing is the word "after-tax", so it grows tax-free. It's cousin is the Roth IRA, but you get to stash away way more than the paltry amount allowed for a Roth IRA, and don't forget that match of donation added by companies is still allowed.

I'm planning to continue to learn more about the mega backdoor roth path that were pushed to the headlines by the likes of Peter Thiel and others just a few years ago. It is a way to move after tax contributions into a retirement vehicle that can no longer be taxed. Ironically Peter then used his "retirement account" to invest in companies that went on to earn him over $6 Billion dollars in returns if I recall correctly. We are now in High Earning Not Yet Rich (HENRY) status for those of us that want to explore if their company offers this in their retirement plan. Further, not many of us can use our account to invest in startups the way Peter did. But hey we can all dream so that's what I'll be researching in the future.

The Government Makes It Rain --- Stimulus To the Rescue

Coronavirus Update – Shutdown Has Finally Started

Thanks to the great leadership exhibited from New York, California, and Chicago the nation is slowly shutting down city by city --- and state by state. While unbelievable, this is very necessary to starve the virus. There will be debates on how long and I remind people to look to China’s recovery and the timeline they used. For example, Wuhan the epicenter of this crisis will remove the lockdown on April 8th. SO the reality is the longer the better for the hotspots. Why I demanded leadership --- one voice, one plan. Providing risk consultation to large corporations puts you in a position to see some amazing dynamics. People will not do thing unless they know the order has come from the top…it appears countries are no different. The shutdown should be federal because if we all go into shelter at the same time, you hope we can plan to exit strategically around the same time. Let me give you an example, if you have a missing child, technology (like the Amber Alert) has allowed for us to receive notification all at the same time rather than piecemeal.  This speeds up the likelihood of finding the child much better than sending it to one police department at a time. If the coronavirus shutdown does not come from the top, when one state recovers my question is: “Does that state allow you to travel or accept visitors from states that did not shutdown at all or that shutdown much later than your state did. Essentially this recovery could drag on longer than needed if we cannot move in a cohesive manner as a country. There could be a lack of trust in the air which is why I believe countries like Italy, China, S. Korea and others when into lockdowns all at once. Make It Rain – Last Resort to Inflate the Economy I am hoping for better coordination so we can begin to recover quicker and get the economy going.  The importance of the pillars we work on so hard here is to help you during these exact moments. If you have savings, you have some cushion during these bad times. See these articles, ripped from the news headlines: “Many Americans Biggest Worry is April 1st Rent and Mortgage Payments”  -- Washington Post “Real Estate Billionaire Barrack says Commercial Mortgages on a brink of Collapse” – Bloomberg “Jobless Claims Soar Past 3 Million to Record High” -- CNBC  “Mortgage Rates Surge to Highest Level Since January” – Marketwatch “2 Trillion Dollar Stimulus Package” --- See below These are just a few of the necessary reasons why the Federal Reserve is making it rain. It’s basically a blank check to shore up the economy until we can get a handle on the COVID-19.  Like in 2008, the market has responded with a rally since a “handshake deal” was announced just a few days ago. This rally will likely continue into the actual signing of the bill. Use this an opportune time to trade in the relief rally that is not uncommon. But when the dust settles, I am still not risking my individual retirement account funds at the moment because we know there is more to come. Mortgages need to be paid, the rent is due, businesses are asking for a bailout and jobs are being shuttered. Hopefully all this is temporary but it is a big risk. I don’t see an all clear sign, just yet. Urb Lesson of the Day:  Account Diversification · Savings Accounts – Gets you through the rough patches in life · Investment Accounts – Allows you to take risks when others are NOT – like today · Individual Retirement Accounts – This is truly for your future, why NOT wait for a sign that the recovery is strong

POETIC JUSTICE --- Navigating The Storm To Come

If I told you that a flower bloom in a dark room, would you trust it? ~ Kendrick Lamar

You ever get that feeling of Déjà vu?  Well I did and I did not like what I was seeing. That was the rationale back on March 2^nd when I first started posting on COVID-19 and the risks it posed to our health, economy, and wealth. I beat the drum beat of quarantine, lockdown, or as they are now calling it --- stringent social distancing because as a risk manager you want to prevent the worst possible outcome. I do that on a daily basis for corporations and it is much better getting yelled at by clients for being overly protective and concerned than witnessing them painfully recover from the depths of something that could have been better mitigated.  For example, I once had a banking client down in the Florida Keys. The Keys is a great location --- think conch fritters, fresh oysters, beautiful water and sites. But I also had a job to do --- what natural disaster quite common in Florida and the Keys: Hurricanes. My job was to ensure not only was their cybersecurity posture adequate --- but for a client in the Florida Keys I paid very close attention to their disaster recovery planning and insurance policies. When I completed my assessment, I wanted to provide some level of confidence is they were adequately prepared.  Yes, a large aspect of my blog is about financial empowerment but more importantly you need to be able to sleep at night knowing you did everything in your power to plan for health, economic, and financial success. And your plan has to be resilient to get you through black swan events just like my client who vigilantly prepares for that next hurricane.  

Does History Repeat Itself

Undoubtedly it does. I think it was Will Smith (don’t quote me) who said anything you can think of has already been done and is somewhere written in a book --- you just have to find it. Maybe not exactly like that but you get my point. So if navigating through a crisis is a class, guys like my big homie Ray Dalio are the excellent teachers to keep up with. He runs the world’s largest hedge fund but ironically often sounds the alarm of the true inequities of people today and having a plan to address then because history will eventually give us a black swan moment that will send us reeling.  If I lost you I apologize, but the point I am trying to make here is I am concerned about the tools our government has to get us out of a crisis may have already been exhausted. I’ve heard Ray and a few other people that I follow echo the same sentiment.  I’ll break it down like this because I write about it often here, when times are good for a family or a country the excess wealth it takes in must be saved for a rainy day.  We did not do that as a nation and it’s not going to make RECOVERING from the economic crisis that ballooned out of the COVID-19 pandemic that much harder.

My other example is: When times get bad, a retail store may resort to providing discounts to get customers in the door to spend and give the business a boost. A federal government uses interest rates similar to how a store uses discounts or coupons. If you reduce the interest rates, money is discounted and people come running through the door.  BUT WHAT HAPPENS WHEN INTEREST RATES ARE ZERO --- OR BETTER SAID WOULD YOU KEEP BUYING IF THE STORE KEPT GIVING YOU EVERYTHING FOR FREE??

If you recall, I posted very little in 2017 and 2018 but when I did I highlighted that I had changed my investment strategy to trading stock option contracts. Again not to overcomplicate things:  I simply had a very hard time finding deals in the stock market so I invoked my sandlot strategy --- I took my ball and went home.  I wasn’t buying any stocks but taught myself how to trade options because I wanted short term-investments that didn’t leave me hanging out to dry when the eventual was to come --- a Recession. We were already in our 10+ year of an economic expansion, one of the longest on record.  My biggest concern is the COVID-19 pandemic lit the fuse for a big drop in market I already thought was running too hot.  If you’re lazy here is a snippet: “I explored options for the first time in portfolio and it was a big reason for my investing success this year.  I have been studying it for months, used a fake portfolio of money to test trading strategies out, and implemented BASIC trades that have complimented my LONG-TERM VALUE oriented approach.  I repeat, I was afraid and had never traded an option contract in my life.  This year I’ve executed over 80+ option contract trades in a way that I believe lowers my investing risk, especially considering I’ve told people to be cautious because we are in the 10^th year of a stock market rally. “ Feel free to read my comments here:

https://urbanomics.blogspot.com/2018/04/the-plan-can-economy-grow-forever.html

https://urbanomics.blogspot.com/2018/12/2018-year-in-review-year-of-growtha.html

I want to wrap up here by saying I’m very concerned. Ok yeah I worry a lot, but please put my logic together:

1)  I traded my first option contract on May 30, 2017 and I spent the first half of 2017 learning and practicing something I had no clue about because THEN I thought the market was overvalued.

2)  Debt Levels are very high because our government did NOT save for a rainy day when times were great (10+ years of economic expansion). This does not help thing when in a debt crisis.

3)  Unfortunately President Trump constantly spent the last few years criticizing the Federal Reserve into lowering interest rates. You traditionally raise rates when times are good (we had over 10+ years of good times).  Rates are now at ZERO and that means we have NO MORE TOOLS left to fight an economic battle.  It is the main reason, I recommended going to cash in my Individual Retirement Accounts just a few posts ago.

My next post will break down what happens in a Recession and why I’ve learned from the 2008 crisis --- When I sounded the alarm it was the only other time I’ve ever moved my IRA to cash. Like then, do not try to be a hero in these markets. After 10% down days you may get itchy to buy the dips but prepare to be nimble and get out the next day. Don’t panic, but brace yourself for a bumpy ride down --- and hey if I guess it will be a little Poetic Justice.

Individual Retirement Accounts - Being The Boss of Your Retirement

Investing In Yourself – Using Pillars to Build Your Core	https://urbanomics.blogspot.com/2015/04/urbanomics-pillars-path-set-for.html
Setting Budgets + Saving for Black Swans	https://urbanomics.blogspot.com/2013/02/personal-finance-budget-101-free-credit.html
	https://urbanomics.blogspot.com/2019/11/hey-henry-high-earner-not-yet-rich.html
How to Open My First Brokerage Account	https://urbanomics.blogspot.com/2015/04/personal-finance-101-starting.html
Diversify your Life (Mind, Body, Soul, + Investments)	Search My Blog

Coronavirus Update – Do You Think They Are Listening To Your Plan?

I’ll make 2 quick assessments.  I’m of the belief that we are moving too slow and in a fragmented manner. Tone at the top, is when the highest leader of an organization sets the direction and PLAN which gives everyone instructions on what to do.  Assessment  1 -The tone from our leaders has been slow --- despite the rumors people are spreading--- there is no “National Holiday” that has been declared. Something like this would have to come from our President and federal government.  So what does that mean, you need to be listening and looking to your local city and state leadership for direction because each and every city will deliver their own instructions. This is fragmented and leads me to believe that the handling of this outbreak will take longer than may be needed.  We’ve gone from different messages: a) go about your daily lives, b) social distances, to c) hunker down??  Very early on you saw that I’ve called for a national holiday. This approach goes further than social distancing because it tells everyone to stay home but reassures the masses that they can pay bills if they cannot work from home. You identify the sick, give them help outside of our fragile hospital system, don’t expose others, and try to assist the stores and restaurants with supply chain and safety measures for shoppers. For example, set limits against hoarding and push people to order ahead and people of means can continue ordering from restaurants thru delivery if done safely.  Assessment  2 -  I called for testing --- this reduces the panic in the air. The truth is if you show any symptoms of any type of sickness you need to isolate yourself, remember there is no cure. But testing helps to comfort us and know what we are dealing with. Thanks to companies like Roche Diagnostics stepping up, they are producing over 400K testing kits each week to now assist the country.  The elderly and vulnerable need to seek help first and if you think your symptoms are progressing then you should seek assistance. So currently, I know some people are still physically going to work and I can attest not everyone is an essential employee. I know some schools are still open. This uncoordinated approach IMO delays stopping the spread.

What Comes Next?

Well let’s think about what I’ve laid out above.  A fragmented approach is leading to companies and schools closing on their own terms. By not doing it in coordination you will now have a fragmented and unclear approach to layoffs, furloughs, and how employees get paid. Even if you can work from home, what decisions will your company take if their sales/productions/revenues dip?  Remember this is NOT just in America but across the world. So my math leads me to believe that things will get worse before they get better and yes that means Recession signals.  I’m mentally planning for a Recession and making minor adjustments.  1st Budget and Save à  If the government does NOT help out you and me (main street) you need to build and rely on your saving to ride through the rough patch.   2nd Renegotiate Bills à Call everyone but the Water/Sewer, Gas, Electric Cos.  If you pay for cable, internet, cell phone, and mortgages now is the time to determine if you need that service and IF they value your business. For example, sorry Sports Fans – if all sports is canceled do you really need the Sports Cable Package?? 3rd Refinance à Because of poor leadership, the markets are panicked. For example, you’re not crazy if you got a response from a bank last week quoting you pretty bad rates. I learned that the market which buys mortgage products seized up. Good news is call back, the Federal Reserve last night indicated they will directly begin buying mortgage products so RATES SHOULD START going back down. Don’t settle Me personally, I can’t watch the NBA, English Premier League, or March Madness right now so it’s time for cable to go. My refinance is in progress and I’ll keep you posted on my savings.

What About My Retirement?

Once you have your budget in-line, the savings will slowly start to roll in. Then it’s time to think about your individual retirement account (IRA). I don’t like to advise people on what to buy and do because we all think differently. If you read what I posted above, my thesis is the actions NOT being taken by our leadership will prolong this crisis. If my thesis is correct, the market will fall further and we may technically reach recessionary levels.  The reason I like to invest is you can tell the real from the fake. Many people like to give you their opinion, but would they place their own $$ on what they are telling you. To mess with people, I often ask them would they be willing to bet on it…and that’s when they get quiet. If you have done the work, the rest is to follow your instinct.  I have a savings account that allows me ride this store out no matter what happens. That allows my IRA to truly be just that…a retirement accounts.  So for my real ballers, think about this concept. If you believe the markets are NOT going to do well for awhile --- why stick around. I call it my Sandlot Move à I take my ball and leave, like Jay Z said “I don’t need the NFL, the NFL needs me”.  If you don’t know what he’s talking about here --- keep working on the pillars we lay out here and you soon will. I make moves when I say so and in this environment, I don’t need to put my retirement account at risk because some guy in an ivory tower tells me wait it out. So what if I miss some of the rebound, I’m still good. I’ll catch the markets when I can go to an NBA game again --- or maybe an NFL game Jay J

Urb Lesson of the Day – Individual Retirement Accounts (IRA) are not something to be taken lightly. First diversify your IRA. My buddy told me something that I thought was no longer widely practiced after the days of Worldcom and Enron going out of business. He mentioned he had most or all of his 401K retirement account in his company stock.  It’s great to be a believer in your company but you must be diversified.  Before Enron: Many companies matched 401K funds in Company stock. Employees were often required to hold the stock until retirement or closure of the account. That IS NO LONGER THE CASE. You're more than welcome in leaving in all company stock but know you are gambling and not investing. You could win BIG or go BUST.   My advice is even if you work at Apple, ensure that your entire 401K is not in company stock AND if your match is in company stock --- elect to have it go cash (Stable Value Fund) or something like the S&P 500. Then later when you evaluate your account (each month or quarter) you can CHOOSE to have some of it going to company stock. Never let someone choose for you. Boss move

Coronavirus / Bear Markets --- What to Do With My Investments?

Investing In Yourself – Using Pillars to Build Your Core	https://urbanomics.blogspot.com/2015/04/urbanomics-pillars-path-set-for.html
Setting Budgets + Saving for Black Swans	https://urbanomics.blogspot.com/2013/02/personal-finance-budget-101-free-credit.html
	https://urbanomics.blogspot.com/2019/11/hey-henry-high-earner-not-yet-rich.html
How to Open My First Brokerage Account	https://urbanomics.blogspot.com/2015/04/personal-finance-101-starting.html
Diversify your Life (Mind, Body, Soul, + Investments)	Search My Blog

Thanks for tuning in. I've heard from so many people so these discussions will frame my upcoming blog posts. For example, I raised the discussion of what to do with your retirement accounts so I'll be addressing that soon. This week, I fielded multiple questions on should I start buying. I will try and address all of these items but not in a frantic manner --- remember we were built for these moments. We've been investing in ourselves, setting our budgets, saving for black swan events, diversifying our portfolios and strengthening our core for these very moments.

People and Safety First

First things first ☝ always remember that people...yes I said people and safety always come first. That is why I was so passionate about what the next steps should be for this country during an outbreak like this. As a risk manager, this is the number 1 rule and it must not be forgotten.  If this were my favorite show "Heroes" you would hear the phrase 'Save the Girl' --- well my response to the administration is 'People First Profits Will Come'.  Sometimes we all need that subtle reminder. 👂

Stick 2 Da Script

If this is your first time get familiar with my pillars above. If you've been here before don't forget them because this is a life-long journey of having the tools you need when things are GOOD and when they are BAD. Again I've received a lot of questions this week and I assume people will take their time to read through my blog before firing off their questions but that isn't always the case. The most common questions I get are:

• Is it a Good Time to Buy?
• What Stock(s) Should I Buy?

These are solid questions if you are a seasoned investor, who invests in the markets often. However, I want to start a new trend --- where people are comfortable talking about how much they got in savings first!  You tell me what car you drive, where you work, your favorite drink, damn some people even rattle off their credit score BUT people get real quiet about their savings.  So I'm here to remind you of my Rules above...because the first investment you should be asking me or anyone about is How Can I Invest In Myself.  And here is my answer:

Set a Budget  Every winter its 2 things -- cuffing season 💑(if you're single) and budget cutting season ✂. I revisit my budget and guess what I found out -- It goes UP, DOWN, or stays the same. It rarely ever stays the same so I challenge everything that goes up.

Mortgage - Have you refinanced?

Insurance - Have you asked for lower rates or called a new competitor for quotes?

Bills - Can't fight these much but do you need that super cable -- when you work 5/7 days a week a least? Can you phone a friend for that Netflix account?

Urb Lesson of the Day - Being a boss means doing the dirty work, and having tough conversations. This week alone, I had CEO discussions with my banks and what they need to do to keep my business --- remember they work for you.

Start Saving 💰 - Real savings IMO is the money saved up AFTER you have no outstanding debts in your household. So set your budget to get on a plan to begin saving for your future and future BLACK SWAN events. Before the coronavirus crisis, I've talked about black swan events being the one thing we are always on the look out for.  Well that event is here and a deep savings account helps ease those of us panicking if schools are closed, your company shuts down temporarily, you unfortunately get laid off, medical bills surface, etc. Remember the government shutdown, H1N1, 2008 financial crash make sure you're not a part of this statistical group:  Roughly 70-80% of American workers live paycheck to paycheck. (Source: 2017 Careerbuilder Report)

This is why I was passionate about putting money in hands of the American people. I predicted state and national shutdowns would be required to slow down a contagious disease (note: China, Italy, S. Korea all showed why this is necessary). That finally happened here in the US.  Why was the response so slow? Well, they are scared to shut the system down --- because the capital machine has most people living paycheck to paycheck. So work can never stop (for those who cannot telework/work from home), I guess even when your health may be at stake.  I applaud this gent for keeping it real on national TV, he acknowledged its a big problem when most Americans live paycheck to paycheck:

Urb Lesson of the Day - I live to save because there will always be black swans, moments that shock you and your family --- weddings, deaths, travel, layoffs, medical bills --- you want to have the savings to get you through these moments. I know the rent, bills, and food has to be paid but the long-term plan is we need a healthy you to be a provider for yourself and family for years to come. Use these markers to benchmark how much you need to save for a rainy day:

2 Weeks Pay --- Rookie

1 Month Pay --- Rising Star

3 Months Pay --- Honorable Mention

6 Months Pay --- Veteran

12 - 24 Months Pay --- All Star (Cue Biggie: "I'm not only a client, I'm the player president")

 

I personally have moved to cash in my individual retirement portfolio because you have to sit down and map out what happens next: businesses slow down, layoffs will rise, and earnings from corporations will be bad for the next few quarters. My retirement money is just that a second savings account I can afford to be very careful with.  Your primary savings account is a cushion for whatever is to come. Stay tuned for more, I will address what to do with your individual retirement accounts and for those aggressive people trying to gain an edge in the market --- YES we'll discuss stocks to buy.

Government, Policies, and Wall Street...

We often forget how government policies and Wall Street impact our lives.

One of the biggest adjustments in everyone's lives was the shift towards everday American's funding and managing their futures. Policies have created new instruments such as 401K plans, 529 plans, and individual retirement accounts to move Main Street America into funding and managing their family's future. In the past, you may have had a pension that rewarded your hard work and productivity but now that is often not the norm. All three instruments mentioned above empower you and I, as investors, to take full advantage of what the stock market offers. However, the downsides to these instruments are there are often limited investment choices, cumbersome rules, and not enough financial planning advice. This is very evident as we see sharp declines in the current market. 401K plans, 529 plans, and individual retirement accounts are the very things that were created to ensure our cushy retirement and reduce the burden of the rising costs for college.

Due to the fact that these instruments are so important to so many people, you would like to believe that we would be equipped with all the "tools" to make safe, sound, and educated investments. However, there are a few potential conflicts that lay underneath the surface:

Limited Investment Options - 401K plans are managed by your employer and often there is a slight conflict because an employers main goal is to manage costs and meet quarterly earnings projections. An area that is often adjusted for costs is the management and availability of "OPTIONS" given to you and I to make the necessary choices to fund our retirements. Hank Paulson often talks about needing the necessary tools to assist the country in getting out of this crisis. Well I want to throw one OPTION out there, why not give each of us unlimited OPTIONS to manage our retirement portfolios. I have a standard brokerage account and the options available to the investing community are different that the limited choices in my 401K plan. I have the ability as an investor to make money or simply hedge my portfolio during periods when the market is down...however those choices are not made available to me in my 401K plan. And if you are wondering can it be done efficiently...the answer is yes as Exchange Traded Funds (similar to mutual funds) can be used for that purpose.

And to assist us with these new OPTIONS, I would recommend that additional financial education be given to assist American during periods where there may be many questions. Of course, you can always turn to websites and blogs like this for everyday questions.

Million Dollar Question - Why do you have this view?

Well I have noticed that as an investor, when I began blogging almost two years ago about the beginnings of a RECESSION, I shifted my portfolio to a direction that was heavily weighted in Technology and Dividend companies and recommended that you do the same. However, I didn't have the option in my 401K plan and often in my IRA account to make this type of decision. And things were not yet as such a difficult state as they are now, so I left my accounts unchanged because moving to cash accounts (Money Markets and Treasury Bills) would have been to drastic. But when the market turned negative very quickly, I did not have the OPTION to use Exchange Traded Funds to benefit from funds that make money when the market is negative. At a minimum level, I would like to use these funds to hedge against what I have just witnessed for the last month. And how critical is the availability?!?

Well I want to offer an example: Most of our portfolios are in line with the markets and are down roughly 30-40%. Look at my PORTFOLIO TRACKER and over the span of 1 and 1/2 days I recommended picking up the Exchange Traded Fund, DXD. DXD goes up every time the Dow Jones goes down and it doubles the amount that you make during that period. So the markets each day were down on average 5-10% and buying the DXD could have returned in excess of 20% while the stock market was declining! This is a great hedge until the markets return to normal, however, you do not have that option in your 401K plan but I do as an investor. As government uses this opportunity to reform a hard look should be given across the board at ways to improve the process.