A “trick” that leads to investment “treats”

If you ever needed proof that my motto “this ain’t your daddy’s market anymore, baby” is dead-on — then just take a look at the market we’ve been in this year.

Over the past couple of weeks I’ve received some emails from people who have been faithful readers of my investment sites, dating all the way back to my Cathleen’s Corner days, wondering why I’ve been MIA.

While I could easily explain that my celebrity Spotted In Boston! site has taken off like a rocket, and I need to spend more of my spare time there — which is, in fact, accurate ….

The truth is, I’m frustrated.

Not by the market.

But by the fact that I’m unable to get my message through to a segment of the population who really needs the advice the most — those who are in the age bracket of 55-plus.

My readers are mostly in their 20s and 30s — and many have white collar professional jobs.

I get it.

But while I’m happy to have a faithful, young readership — I was reminded a couple of weeks ago that the generation that really needs to understand the market the most — just isn’t listening.

Either that, or they listen, but the voices from their parents’ and grandparents’ generation is so ingrained in their minds — they simply cannot force themselves to do the opposite.

On a certain level, I understand that thinking.

After all, their parents were right about teaching them to look both ways before crossing a street — and that advice has likely never failed them.

But the problem is those pieces of wisdom are eternal — while advice about the stock market is not.

In bygone generations, you could be a wise investor simply by having a reliable stockbroker with their hands on the pulse of what was going on in the market. If you combined that with reading The Wall Street Journal’s stories and stock quotes each day — you were golden.

That’s about all you needed.

So when elder generations lovingly bestowed the wisdom that if you just keep socking your money into a 401k, you needn’t worry about the fluctuations in the market because the market is resilient and would rebound once again if you stayed-fast the course… they were absolutely right… during that period of time.

But times have changed.

People in their 20s and 30s have absolutely no problem maneuvering in this market, because they embrace all the tools and the layout of the market the way it is — not the way it once was.

They understand that while history often repeats itself, it’s more likely the trends that happened during the tech meltdown of the 90s and the stock market pullback of 2002 are stronger indicators of how the current market will likely recover, than trying to take a page from The Great Depression era.

Most are watching their aunts, uncles and parents struggling through layoffs and attritions at companies they’ve worked at most of their lives.

Meanwhile, the younger generations understand there are no guarantees in life.

But while the older generation also understands that the jobs that last a lifetime at companies that once seemed like they’d be around forever are getting scarcer by the day, i.e. the auto manufacturers in Detroit — they just seem unable to connect the dots and realize that with the fall of many companies, it creates a change in the marketplace.

The average 35-year-old will hold a stock and check its quote routinely to see how it’s performing, while Googling headlines for the company. They’ll be quick to ring the register and cash-out at the first sign the fundamentals of a company they own stock in may be in trouble.

But someone who is 55 may own stock in the very same company, and not even be able to tell you what its traded at over the past few months. They’re completely clueless about what the CEO of the company said during the last analysts’ call, and even if it takes a big dive and they turn on their TV one day and the headline news says the company is laying off one-third of its workforce and may go out of business soon — they’ll still hold on to it out of some sense of misplaced loyalty to their parents’ generation.

Bygone generations frowned upon the now more profitable type of “hold a stock until it’s not worth holding anymore” type of investing.

And they were right — for that time period — because years ago the market moved almost 100 percent on a company’s fundamentals and moving in and out of positions generally came with a hefty price tag attached in terms of broker fees.

That’s no longer the case.

While I still believe fundamentals are very important — the fact is, the market has become much more prone to moving on emotions, with the influx of the Internet, news cycles that never sleep and the onslaught of day traders, forex traders, short sellers and private equity investors — including hedge funds.

And that has created a whole new ball game that changed the rules of investing.

The younger generation sees their stock purchase for what it is — it’s just a piece of paper — and it’s just business.

The older generation sees each stock purchase as some sort of marriage where they’re supposed to stick with it “for better or worse, in richer or poorer, in sickness and in health, until death do us part” — while they cross their fingers and hope their parents were right that the market will rebound.

Well, their parents were right — but their children, now in their 50s and 60s, only heard half the message.

The market is resilient — and it will rebound.

I promise.

But that doesn’t mean the companies you own stock in will be part of that resurgence.

As companies hang their “out of business” signs — the shares of stock that longtime holders cling on to will be worthless.

But the good news is, new companies will take their place in the marketplace.

Unfortunately, those in the older generation won’t have any money to invest in them, because they tend to cling-on to the dogs until it wipes them out.

The lesson here?

Don’t pin your retirement savings on a worn out cliche from yesteryear.

Just as your parents told you to look both ways before crossing the street — it would do you no good if you didn’t understand the need to stop and let the cars go by first, if you saw a car coming straight at you.

The same holds true of the market.

The market doesn’t “always” do anything.

And though it is resilient, and the United States of America won’t be hanging up an “out of business” sign anytime soon — you need to make sure your money is in safe investments — not just any investment.

I’ll bet most of your parents also had savings bonds and money in the bank, or tucked between their mattresses for safe-keeping.

But something tells me no matter how many times I say this — no matter how many anedotes I list ad nauseum — most people in the 55-plus category are not going to listen.

Which brings me to the source of my frustration.

This past May I was standing in line during my lunch break to get a slice of pizza, when a woman I’m acquainted with in her early 60s entered the deli and stood behind me. After exchanging pleasantries with this woman, she said she’d been meaning to ask my opinion of what funds she should have her 401k invested in.

After reminding her I do not have a degree in finance, I asked her what funds she was currently in.

Sadly, but not too surprisingly for her generation, she just shrugged her shoulders and said, “Oh, I don’t know, I’d have to look.”

Trying to give her the benefit of the doubt that perhaps she just forgot the names of the funds, I asked what the top holdings at each fund were.

Sadly, but again, not too surprising for someone of her generation, she said, “Oh, I don’t know that — how would I?”

As I began to explain how easy it is to just visit her company’s investment fund choices online and then simply head over to Morningstar to look up the fund’s overall performance, where she can check its rating, read some analysts reports and find its top holdings — I saw that all-too familiar glaze cast upon her face.

No chance in hell was she planning to do any of this.

From my perspective, I was telling her to do something that would only take a few hours out of her day to get a good handle on what her choices were as far as planning for her life in retirement.

But from her perspective, I might as well have been telling her to give The Patriots a call and tell them she was ready suit-up and take the field for the injured Tom Brady.

No way.

Wasn’t going to happen.

She then said those magical words so many of her generation say, “Maybe I should go see a financial advisor.”

I put on my fake smile and said, “Yeah, maybe that would be best.”

Readers of my site know how I feel about financial advisors.

What I was really thinking is that it would be a complete crap-shoot in what type of advisor she’d find. Would she get one who would take her under his or her wing and really guide her around this market? Or would she seek out an advisor from her own generation, who also believed in the advice from yesteryear of just leaving your money in an ailing fund with the hope it would magically raise to glorious heights again?

Then I realized — it didn’t matter.

Fat chance this woman was going to actually go seek a financial advisor.

She was just looking for a “hot tip” that her generation thinks still exist.

They forget about the reform in the market.

There’s no such thing as “hot tips” any longer.


The only way to make money in this market is due diligence — roll up your sleeves and spend your Sunday mornings going over your portfolio every week.

There’s no magic — but that’s the “trick” to a portfolio that will likely garner you a lot more “treats.”

But standing there at the deli that day — I suddenly felt bad.

Who was I to judge this woman who had worked all her life?

I turned to her and said, “Listen, I’m going to tell you what I did with my 401k. I moved it all over to a safe haven valued fund. It won’t make me any money over the short-term, but it will prevent me from the volatility in this market right now. I’m going to keep it there until the overall market shows signs of recovery. In the meantime, knowing my capital investment for my retirement is safe, it allows me to trade individual stocks with my after-tax money.”

I rarely ever tell anyone what I think they should do with their life savings — but I felt advice to keep her life-savings safe was worth bending my rule this one time — and I suggested she do the same thing.

It didn’t matter — she didn’t listen.

I ran into this same woman two weeks ago, and she said with absolute astonishment, “I just got my quarterly statement, and I lost 25 percent in my portfolio.”

Even I was a bit shocked to hear that number.

While I’m aware of people losing as much as 33 percent of their equity shares in this market — most of the older population should know enough not to be heavily vested in stocks as they near retirement.

I mean, come on, that wisdom has been around for ages — and should be right up their alley.

I remembered she had told me during the previous conversation that she began investing in her 401k late in the game, and only had about $160,000 in it at that point.

That means she just lost $40,000 in the past three months.

I resisted the urge to just shake my head at her and go with the vulgar “I told you so” routine by telling her that if she just moved all her money into a safe haven account when I told her to — she wouldn’t be out that huge amount of money.

But I don’t believe in pouring salt into a wound.

I told her I was sorry to hear that, and tried to break away from any further discussions before it headed where I knew it would.

Too late.

She asked the question, “How did your 401k do?”

I reminded her what I had told her previously about having moved it into a particular value fund — which I still monitored very regularly to insure it was safe.

“So how much did you lose this last quarter?” she persisted.

“I made 1.5 percent interest,” I replied almost apologetically.

“I guess I should have listened to you,” she said in a somber tone.

I didn’t want her to feel worse than she already did.

What I really want is for people to empower themselves to learn about investments — especially those of my parents’ generation.

You shouldn’t need to rely on a financial wizard — or even a Jim Cramer or Suze Orman for insight into the markets.

There are no shortcuts and no rewards for lazy investors.

You need to be responsible for your own money.

If you understand why you made a particular move in the market — you’ll know when it’s time to move again.

She didn’t ask for any further advice — but I gave it to her anyhow.

I told her to give some serious thought to taking her losses and moving what she still had left in her 401k into a safe haven account for the time-being.

She said she’d consider it.

A couple of hours later she called to tell me she had just spoken with a “financial guru” that her friend has used for years, and he told her to just keep her money in whatever funds she currently has them in, as the market is resilient.

He didn’t ask what funds she was in.

He just has faith.

So doesn’t she.

I made my one final good-faith-so-I-can-sleep-at-night plea to urge her to at least consider placing a portion of her 401k investment into a safe haven.

She didn’t say it — but she’s not going to.

I don’t have faith.

Not in this market.

I’ve crunched the numbers and have done my due diligence — and I’m going to keep my 401k in its safe haven for the time-being.

In the meantime, I’ll continue to do homework on those companies I have on my after-tax “play money” list, including Bank of America, Citi, Wells Fargo, (the bank of) Goldman Sachs, Heinz and Campbells.

After all, though I do believe in keeping my capital investments safe — I also believe in the age-old wisdom of “buying cheap and selling high.”

If I bump into this same woman at the next quarter, I’ll resist the temptation to ask her if ignorance is really bliss.

I’ll wager her next quarterly statement will be painful enough.

(Just remember the usual disclaimer: Don’t base any of your investment decisions on anything you read here. Do your own due diligence — or at least enough research to hire the best professional to do it for you.)


One Response

  1. I agree 100% with everything you said. It’s disheartening when I see people in my parents and grandparents generation getting wiped out because they are trying to invest in the market the same way they did 20 years ago. I’m going to start printing out some of your pieces for my parents to read. Great advice!

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