Tag: Markets
Vanguard Group founder on how to manage your 401 (k) plan
Jason 0 Comments Retire Wealthy Retirement Planning
>>> WELCOME BACK TO WALL STREET. HERE'S MORE OF MARIA'S INTERVIEW WITH INVESTING LEGEND VANGUARD FOUNDER JACK BOGLE. MARIA: LOOK AT HOW MANY INDEX FUNDS THERE ARE. 5,000 INDEX FUNDS TODAY VERSUS THE NUMB OR F STOCK LOWER, 3,385 STOCKS. WHAT DOES THAT TELL US? >> IT TELLS US THAT PEOPLE ARE CRAZY, MARIA. WE DON'T NEED 5,000 INDEX FUNDS OR 6,000. THE WHOLE IDEA OF INDEX FUNDS WAS SIMPLIFY, SIMPLIFY, SIMPLIFY, RIGHT OUT OF RALPH WALL DO EMERSON. SEMP FIE SIMP FIE SIMPLIIE SIMPLIFY EVERYTHING. WE'VE NOW COMPLICATED IT BY GIVING PEOPLE MANY CHOICES AND BUILDING A SYSTEM WHERE THEY CAN TRADE THOSE CHOICES IN THE GLOAT GROWTH AND OUT OF VALUE AND SO ON. SO THERE'S TOO MUCH TRADING GOING ON, WHICH IS THE INVESTOR'S ENEMY FINALLY. THE ANSWER IS TO BUY AND HOLD THE STOCK MARKET VERY WELL EXEMPLIFIED BY THE 500, AND HOLD IT FOREVER.
AND THAT'S THE WINNING STRATEGY. ANY OTHER STRATEGY INVOLVES CHANGING THINGS. AND OVER AN INVESTMENT LIFETIME YOU COULD PROBABLY HAVE 40 CHANGES, 50 CHANGES. THERE'S IN WAY THAT CAN BE A WINNING STRATEGY. MARIA: YOU MAKE A REALLY GOOD POINT. WHAT ABOUT THE IDEA THAT PEOPLE WANT TO CASH OUT SOMETIMES. I MEAN, WHAT ARE YOUR MOST IMPORTANT ISSUES IN TERMS OF SELLING? YOU SAY HOLD ON FOR A LONG TIME. BUT WHAT IS A LONG TIME? WHEN CAN YOU ACTUALLY GET THOSE RETURNS AND WHAT DO YOU LOOK FOR AS A RUN TO SELL, JACK? >> THAT'S A GREAT QUESTION.
I GUESS MY FAIR TIME PERIOD IS THE SAME AS WARREN BUFFET'S TIME PERIOD, FOREVER. YOU KNOW FB FOR YOU KNOW,FB FOR YOU KNOW, F FOR YOU KNOW, FOROR YOU KNOW, FOR YOUR WHOLE LIFE. THERE WILL BE OPPORTUNITIES ALONG THE WAY. WE'VE SEEN THEM IN THE LAST 25 YEARS. TO GET OUT AND GET BACK IN. MARIA: VANGUARD IS CHANGING. THE RETIREMENT PLAN.
NOT HAVING THE FLAGSHIP S&P 500 FUND IN THE 401(k). WHY IS THAT. WHAT IS YOUR REACTION TO THE FACT THAT VANGUARD IS DROPPING 12 FUNDS FROM THE EMPLOYEE 401(k) RETIREMENT PLAN? IT WILL NOW OFFER 15 FUNDS, DOWN FROM 27. WHY? >> WELL, THE ANSWER IS THAT COMPANIES ALL OVER THE COUNTRY, AND I PRESUME VANGUARD, ALTHOUGH I DON'T RUN THIS PLACE ANYMORE, THERE HAVE BEEN TOO MANY CHOICES IN RETIREMENT PLANS. YOU COULD RUN A RETIREMENT PLAN WITH THREE OR FOUR CHOICES WITH ABSTOCK INDEX FUND, A BOND INDEX FUND, A BALANCED INDUCKS FUND AND THAT COULD BE IT AND INVESTORS CAN MAKE THE CHOICES EASILY. AN ASSET ALLOCATION ISSUE. AND BY GIVING THEM QUITE SO MANY ISSUES AT VANGUARD, NOT IN THE INDUSTRY GENERALLY, WE'VE CONFUSED INVESTORS. FOR VANGUARD IN PARTICULAR, THIS IS NOT GOING TO SURPRISE YOU, I THINK IT'S TOO BAD NOT TO HAVE THE 500 AS AN OPTION.
BUT IT'S PRETTY MUCH INDIFFERENT FROM AN INVESTMENT STANDPOINT BECAUSE OUR CREW MEMBERS, AS WE CALL THEM HERE AND BOGLE HIMSELF, JUST GO INTO THE TOTAL STOCK MARKET FUND WHICH IS 85% OF THE S&P 500 ANY WAY. I LIKE THE S&P 500 BUT I'M PERFECTLY SATISFIED WITH THE VANGUARD TOTAL STOCK MARKET INDEX FUND. A LITTLE BROADER. MARIA: WHAT DO PEOPLE NEED TO KNOW ABOUT THEIR 401(k) PLAN. I FEEL LIKE PEOPLE PUT THEIR MONEY IN THE 401(k) AND THEY DON'T NECESSARILY KNOW WHAT THE PLAN IS INVESTED IN. IS THERE ANY ADVICE YOU WANT TO GIVE US IN TERMS OF MANAGING THEIR 401(k) PLAN? >> WELL, THE LESS YOU MANAGE YOUR 401(k) PLAN THE BETTER. MAKE SOME CHOICES, ASSET ALLOCATE — ALLOCATE YOUR ASSETS, TO SOME DEGREE BASED ON YOUR AGE, AND YOU CAN DO THAT OF COURSE THROUGH THESE POPULAR TARGET DATE RETIREMENT PLANS IN WHICH VANGUARD IS SO TOTALLY DOMINANT IT'S ALMOST NOT WORTH TALKING ABOUT, AND GRADUALLY BUILD UP A BOND POSITION OVER A PERIOD OF TIME.
BUT THE OTHER OPTION IS EVEN SIMPLER AND THAT IS BUY THE BALANCED INDEX FUND, YOU'LL BE 60% IN STOCKS AND 40% IN BONDS FOR THE REST OF YOUR LIFE AND THAT MAY EVEN BE A BETTER STRATEGY. ONLY TIME WILL TELL. MARIA: IT'S SO IMPORTANT, JACK, JUST THIS WEEK WE LEARNED THAT THE SOCIAL SECURITY FUND IS GOING TO BE TAPPING INTO ITS FUND FOR THE FIRST TIME IN 36 YEARS. PEOPLE NEED TO UNDERSTAND SOCIAL SECURITY MAY NOT BE THERE FOR YOU WHEN YOU RETIRED. THE 0 NOWS THE O NOWS THE ONUOWS THE ONUSWS THE ONUS IS ON INDIVIDUAL TO MAKE SURE THEY HAVE A 401(k) AND SAVINGS IN THE STOCK MARKET, CORRECT? >> THAT'S CORRECT BTS.
I WOULDN'T WRITE OFF SOCIAL SECURITY QUITE SO SOON. I DON'T THINK THE NATIONAL POLICY OF THE UNITED STATES OF AMERICA, I BELIEVE THAT POLICY PRECLUDES A SIGNIFICANT REDUCTION IN SOCIAL SECURITY. AND TO ME IT'S KIND OF SAD THAT WE COULD FIX WIT SUCH TINY LITTLE CHANGES, CHANGE THE RETIREMENT AGE A LITTLE BIT, MAKE THE SOCIAL SECURITY MINIMUM.
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2 Laws for Generating Wealth
Jason 0 Comments Retire Wealthy
Any successful plan to generate and sustain
sufficient wealth must incorporate two very basic rules: 1) Generate Investible Savings. The first step to unlock the path to building
tremendous wealth is not about investing at all. It is about generating Investable assets. For most people this begins by terminating
any expensive debt such as credit card or high interest debt. The reason being that expensive debt increases
one’s expenses and eats into investable resources. Second step for most people is redefining
certain parts of their remaining income as compulsory payments that must be done. That payment is, in fact, the first step of
savings for investing. The third step for most people is to invest
time and entrepreneurial energy to increase their gross income. Getting a better job, a promotion, a new skill
or starting a business that can generate profits disconnected from your immediate personal
labor resources. The fourth step would be establishing some
kind of an emergency fund and getting sufficient insurance to cover yourself against unpredicted
expenses. When the four steps are done, you can start
generating sufficient investable assets that can be put to work growing over a minimal
period of five years.
When this is done, you can proceed to the
next rule. 2) Invest investable savings into exponentially
growing assets, growing for many years while limiting the taxes you pay. Once you generate investable assets and are
ready to put them to work, comes the next tough question: Where should I deploy my investable
assets to maximize my investment and to generate more wealth? You should know that any and all investable
assets you will ever encounter can belong to one or another of these two categories:
Exponentially Growing Assets or Regular Growth Assets.
If you ever hope to generate sufficient wealth
from your investable assets, you must learn how to separate your exponential growing assets
from your regular growth assets and then make sure you are sufficiently exposed to the exponentially
growing asset class. Exponentially growing assets are a rare creature
few understand, even among seasoned investors. There is a set of strict rules to become eligible
for the coveted title: A) At their very core, they must yield very
high returns on internally invested resources and expenses – such as inventory, labor, plant
& factory or R&D; What sets exponentially growing assets apart
from any and all investable assets is their ability to make a large profit on a small
base of required resources. The more expenses and investments one needs
to make a profit, the less profit is left to increase the value of the asset itself. B) They must have sufficiently large market opportunities
ahead of them to enable many years of sales growth displaying high returns on invested
resources; While many possible assets can generate high
rate of return, exponentially growing assets are not a one-off occurrence or limited activity
and must be able to maintain their course of growth over many years to build sufficient
appreciation for their owners.
C) They must provide extensive internal reinvestment
opportunities to use profits at similarly high returns To really become an exponentially growing
asset capable of building imaginary amounts of wealth, the asset must provide managers
the ability to use the rivers of cash generated regularly from the asset in a similar high
rate of return. When these criteria aren’t met, owners soon
realize the resulting rivers of profits do not grow at a high rate and the growth in
wealth soon slows down due to the ever-growing profits invested in lower rate growing assets.
D) They must be led by honest, high integrity,
talented managers, who are actually risking their own wealth alongside their investors. For these executives, a small increase in
the share price will generate much greater wealth than any increase to their paycheck. Executives of public companies have the ability
to loot the company’s coffers or engage in wealth destruction in an infinity of ways. To avoid that, check to see how large your
CEO’s stake in the company stock is before choosing any investment.
As long as the company still embodies the
4 rules that we covered here, you stay invested; this is the one last requirement when investing
in exponentially growing assets. ALL exponentially growing assets see their
stock price cut in half several times during the decades, usually due to different parameters
that don’t reflect the actual company value. Holding these assets through turbulences,
and even adding to them, requires temperament and familiar understanding of the business,
which results in the conviction to stay the course..
Should You Transfer Your Final Salary Pension?
Jason 0 Comments Retire Wealthy Retirement Planning Tips for Retiree's
[Music] welcome to the Morningstar series ask the expert I'' m Holly black with me in the workshop is Steve Webb he'' s director of plan at Royal London hey there Mohammad so we'' re talking pensions today as well as you'' re telling us about the distinction in between a defined advantage and a specified contribution pension plan so defined benefits sometimes called last wages commonly you hear it called is the older design of pension plans so you utilized to work for a huge firm and they'' d pay your pension plan that resembled a tough assurance you'' ve earned this quantity of cash you'' ve served this variety of years you'' ll get this portion of your last income when you retire amazing excellent that'' s right so'there ' s the example that'you desire that ' s often tended to go nowadays companies have shut them since they'' ve end up being a lot a lot more pricey than they anticipated and also nowadays you'' re most likely to have a pot of cash pension called a defined payment since the only point that'' s defined is what ' s going in that'' s what we understand what we put on ' t'understand is exactly how well it will certainly do as well as it ' s invested we put on ' t recognize what kind of pension plan it'will get you when you retire it ' s flexible it has its benefits yet it ' s not the like the old-style and also some new rules that came in a couple of years ago mean that if you do have one of those older design pensioners you put on'' t need to persevere you can relocate it right into type of a sip or an internet select how you spend it on your own why may someone do that what can happen is if you'' ve obtained an old-style final wage pension of let'' s say 10 thousand extra pounds a year rather than taking that 10 thousand a year when you retire till you die the pension plan system could claim we will certainly offer you instead three hundred thousand extra pounds that may be an example as well as you can take that cash and placed it into a pot of money pension a different kind of plan as well as the large plus of that comfortable adaptability so for example from the age of 55 you can begin attracting on that currently there'' s tax obligation to be paid and also obviously it could not last you to the or 85 or 90 so you know however it is a lot more adaptable people like that due to the fact that if they were to pass away possibly if they don'' t have a spouse however perhaps they have kids or something like that after that the pot is left for the youngsters whereas a firm pension plan very little might most likely to the kids so it generally allows people much more selection a lot more adaptability perhaps retire a bit previously as well as invest a few of the pot to maintain them going till their state pension begins that'' s why a great deal of people see this big quantity of money see the versatility as well as locate it rather attractive yet the regulatory authority has claimed they'' re really worried that a lot of people are doing that and it may not be the appropriate decision due to the fact that there are a whole lot of factors to stick with that older design pension plan scheme out there there are as well as the regulator'' s claim that the when you take monetary guidance the expert needs to begin from the assumption you must remain put from the assumption that you shouldn'' t step'unless there ' s a great factor to relocate as well as a few of the tourist attractions of staying or to start with this revenue is rather much ensured it lasts as long as you do it rises in line with inflation for the most part and also if you'' re retired for 20 or thirty years that truly matters and also you don'' t need to fret about the supply market rising or down that'' s the pension plan plans problem not yours so that component of certainty predictability assured income since you put on'' t understand how much time you'' re going to live you put on'' t understand how the marketplaces are mosting likely to do all that danger is cared for for you which'' s an extremely appealing and beneficial thing this is probably one of the most important choices people will certainly make in their life if they do have this selection so what is the best thing to do well even if your pension deserves only as they just but thirty thousand extra pounds which'' s a pot of thirty thousand pounds not a yearly pension plan so the majority of these old last salary schemes will be above that degree by law you have to take monetary recommendations however a couple of things to start with pay attention to it because it'' s tempting to assume I see this quantity of cash may be larger than worth of my house I desire my hands on it I don'' t care what you the consultants are say I just want my cash money that'' s you'recognize if you ' re quickly take a big deep breath and also the various other point additionally is to ask some quite searching concerns about where the cash'' s going to go to because several advisors are unbiased they'' ve obtained your ideal interests in mind yet some of them have actually obtained incentives that in fact they intend to handle your money they want one more piece each year you recognize as well as you just require to ask a whole lot of questions concerning the fees your face if you do a transfer so be sure there'' s a great reason to move and begin with the assumption that you put on'' t and after that pay attention carefully if the guidance as well as be rather you understand ask some challenging inquiries thanks so a lot for your time as well as thanks for joining us
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