Archive for May, 2005

Retirement Account Decisions

May 18, 2005

I started at a new job recently and one of the benefits is partial matching of contributions to my retirement account. Problem is, the plan administrator offers a wide selection of more than 80 funds and I had to decide which fund(s) to buy in a day or two. It is going to take me a while to research 80 funds and the fund literature is close to useless because there is no mention of expenses. I did find a few index funds among the offerings but they turned out to be of the expensive variety (Why would I pay nearly 1% in expenses for an index fund?).

So, I took the easy route and searched for money market funds. I found two and one of them did not list its expense ratio even on the fund website! The other has a MER of 0.55%, which is not great, but it is the best of the lot. I am now contributing to the money market fund and when I find some decent funds, I plan to redeploy the retirement funds.

Reptilian Behavior

May 17, 2005


Behavioral Finance is a fascinating subject that studies why most people make poor financial decisions like buying greedily at market tops and panic-selling at market bottoms. Turns out it is our reptilian brains that makes us irrational beings.

Another recent story suggested that women make better investing decisions than men. More men than women cite greed, overconfidence or impatience for their investing mistakes. Now, I should convince my wife to become more interested in investing. She starts yawning when I mention we need bonds in our portfolios. Sigh!

Will Boomers Cash Out?

May 16, 2005


In a recent interview with Prof. Jeremy Siegel says that as the aging baby boomers retire in the next 20-40 years, stocks could suffer a meltdown, unless investors from developing nations step-up and buy the equities that the boomers are selling. Is this scenario possible?

Donald Luskin, on the other hand, suggests that investors should ignore the doomsday prophets and invest in equities (which he says are really cheap).

I don’t know which of these arguments will turn out to be true. But I do believe that if I buy pieces of good businesses at decent prices for a diversified portfolio, I am likely to do just fine.