Investing Through the Rear View Mirror

Fred Astaire, the dancer, singer, actor always got lots of praise for his grace. But as someone pointed out his partner did everything he did, except she did it backward while wearing high heels. Think about that!

A well-known financial planner once said that checking the past performance of stocks, mutual funds or the market was akin to driving across country using only your rear view mirror. You know where you’ve been, and that’s about it!

Still, people like to see how their investments have done. Many folks who are long-term investors enjoy it when the market is down. To them that means that stocks or mutual funds are probably on sale. But for those close to starting to spend their retirement nest egg, times like this are troubling to say the least. That said, here’s what your Thrift Savings Plan funds did over the 12-month period ending in January. You’ll notice that 7 out of 10 are in the plus column:

L 2040 fund, up 0.06 percent; L 2030 fund, up 0.67 percent; L 2020 fund, up 1.46 percent; L 2010 fund, up 3.27 percent and L current income fund, up 3.89 percent.

G-fund (treasury securities), up 4.76 percent; F-fund (bonds), up 8.98 percent; C-fund (S&P 500 index), down 2.26 percent; S-fund (small & mid-cap index), down 4.13 percent; and I-fund (international stock index), up 0.62 percent.

Contrast those numbers to calendar year 2007 and 2006. Last year the G-fund returned 4.87 percent, and the year before it was 4.93 percent. In 2007 the F-fund returned 7.09 percent and the year before it was 4.40 percent. Last year the popular C-fund returned 5.54 percent. In 2006 it was up 15.79 percent. The S-fund in 2007 returned 5.49 percent, down from its 15.30 percent gain in 2006. Finally, the I-fund last year returned 11.43 percent. The year before (2006) the return was 26.32 percent.

Interesting? Yes. Up to a point.

But what it tells you is where the market has been not where it is heading, at what speed and the height of the hills and the depth of the valleys your retirement nest egg will travel over the next year, 5 years or 10 years.

Meantime, here’s one reaction to yesterday’s column about frequent-traders:

…You said the 2007 results will shortly be available on paper or the website for 2007. Given the volatility of the market in January and continuing, the numbers as of 12/31/2007 are meaningless. Likewise, limiting the number of trades that will take effect next day to 2 with a system that can take as many as people want is also thinking in the past.

I am with the person(s) who believe charging frequent traders for excess trading rather than taking away their ability (right?) to be masters of their own ship is the way to go. America does not stand for the proposition that all “men” (as in people) ARE equal, but all people are created equal (at the start). What happens after that, is up to each of us – whether we are a success (however you want to define success) or a failure. America is about letting people be in charge of their own lives. I don’t need parents (the government) telling me how to live my life. I had good parents who training me well to stand on my own two feet! Success usually comes from failure.” Doug in Denver

Pay Raise 2009

Pencil in the number 2.9 percent on the calendar you use to track your 2009 pay raise. That’s the amount President Bush has proposed for the next white collar hike. Also pencil in the number 3.9 percent. That’s the amount federal unions will seek from Congress. Usually the unions win the fight. Last year the President proposed a 3 percent federal raise and Congress, after the usual long-drawn out fight, pushed it to 3.5 percent. And it worked out like this: click here.

Nearly Useless Factoid

Senior Editor Suzanne Kubota is back in the saddle. While she appreciates young Dorothy Ramienski’s youthful enthusiasm, she looks more upon the Useless Factoid as the lunchlady sees tater tots and slams this one onto your cyber-tray:

According to the Jell-O Museum website, in 1993, technicians at St. Jerome hospital in Batavia tested a bowl of lime Jell-O with an EEG machine and confirmed that a bowl of wiggly Jell-O has brain waves identical to those of adult men and women.

And for those of you curious about the answer to the previous NUF, “ZIP” in ZIP code stands for Zone Improvement Plan. Mike says each correct answer is worth two dollars, and if you answered correctly, he’d appreciate it if you would send your two dollars to him in paper currency as the coins tend to slow him down.

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