The original column focused on legislation enacted in late December, that is intended to give bruised nest eggs some time to heal. Of course, as with anything involving individual retirement accounts, the rules are complicated.
Thoughts: This article is a Q&A that clarifies some of the questions that I’ve been asked about the 2009 NEW IRA Rule.
How to Survive The 2009 Boom in Money Books
We’ve seen the stock-market plunge, the foreclosures surge, the layoffs and the bankruptcies mount. Now comes the inevitable next stage of the economic downturn: a rash of personal-finance books that promise to help readers navigate their way through the rubble — and even to prosper amid it.
To some observers, it’s the surest sign yet that the worst is over.
Thoughts: Two thoughts…first, from the financial planning perspective: I have heard it said that the attorney who represents himself has a fool for a client. The Boom in Financial Books and their conflicting advice makes it clear that the best source of action is to find someone that you trust (a difficult task, but not impossible) who has the training and more importantly the emotional detachment to guide you through the planning process and then help you make the necessary course corrections along the way.
Second, from the investment perspective: Reading this article and the titles of many of these books reminded me of the quote from Warren Buffet, that successful investing really comes down to being ”fearful when everyone else is greedy and greedy when everyone else is fearful.” Not sure what it means in the context of your financial planning, but it sure seems to me that there is a lot of fear out there right now.
Smart Money Takes a Dive on Alternative Assets
The ideal investment portfolio is solid and liquid at the same time. Perhaps because this principle defies the common sense of physics, even some of the world’s biggest investors have overlooked it.
Now, with billions of dollars trapped in illiquid investments, many colleges and charities are cutting budgets at the worst imaginable time.
How did the “smart money” get into this fix? As bond yields shrank in the 1990s and stocks shriveled soon after, institutional investors began looking for assets that would generate solid returns no matter what.
The solution was “alternative investments” — hedge funds, real estate, venture capital, private-equity funds and natural resources. Between 2000 and 2002, as stocks collapsed, endowments led by Yale University beat the Standard & Poor’s 500-stock index by huge margins thanks to their stake in alternatives.
Word got around. In 1995, according to Managing Director Celia Dallas of the consulting firm Cambridge Associates, endowments had less than 10% of assets in alternatives; by 2008, that average had climbed to more than 30%.
Thoughts: Alternative investments were all the rage for the last five years, with every institution large or small wanting to “do what Yale does.” It is now evident that there is indeed a correlation between risk and reward, and lack of liquidity IS a risk.
