Financial topics explored this month:
This is the 6th month of our early retirement, but it seems much shorter than that. In case you’re not interested in the personal details, I’ll start this diary entry with the financial topics, and finish up with the diary of our day to day life this month.
As you probably have noticed, the markets have been down this month.
Our 401k accounts are sitting about where they would have been if they had been in a cash account and we had taken our monthly paychecks from there.
So, still doing ok according to my plan. I just hope the markets don't stay down for too long.
I read a couple of articles on The Motley Fools website (add link here) about financial advisors and I came across something that I need to think about and maybe research a bit more. The article said that most mutual funds under-perform their benchmarks and that with a good advisor better returns could be achieved.
However, they also have articles that recommend specific mutual funds, so this could be debatable and depends on each persons circumstances and preferences. I have always felt that mutual funds are good for people who don't have time to study and learn about individual stock investing.
The problem with supporting the idea of using an advisor to invest in stocks is that finding a financial advisor we can trust is not easy.
Personally, between our 401k providers, I like the advice from mine (TIAA-CREF) better than the advice from my husband's (Fidelity), from what we've experienced so far. But with both of these, our 401k accounts are invested in mutual funds.
Of all the advantages of mutual funds, I think the best one is that you can easily invest in a large number of companies without having to research each one. The fund manager has already done that for the fund.
I had consulted an advisor on a fee-only basis about 2 years before retirement and he claimed he could do a good job for us. Even though I liked what he provided me in the fee-only consultation, it wasn't enough to tell me if he would be trustworthy if he were to manage our money. (We would need to roll-over to an IRA before we could go with an independent advisor, so we couldn't do that in a big way just yet anyway.)
Here is another article about how vulnerable we are to unethical financial advisors. I suppose we could start out with a modest amount, say maybe $50k and test an advisor for a year or so. It's something I'll need to think more about.
Fees in 401k Plans
This chart is an example showing the performance of a mutual fund compared to its benchmark index.
While you're doing financial work, like taxes and rebalancing your accounts, add this to the list: If your 401k provider doesn't show you the fees charged by the funds offered, you can easily find out what they are by looking them up at Morningstar.com. This financial company analyzes and provides data to members and the public on various investments. They use a star rating system where 5 stars is the best rating. You can also find out what fees a mutual fund charges and then compare those available to you.
The reason I am writing so much about the advantages of mutual funds, 401k fees, and bad financial advice in this diary page is that we had a pension rolled over to an IRA that needed to be invested.
I used the Morningstar mutual fund screener for my investment research for choosing mutual funds for bonds and equities, including international funds. Etrade also provides a screening tool if you happen to have an account there (for US funds.)
The things I was looking at apart from the mutual fund fees and ratings were, for example, the countries a given fund invested in, so that I could diversify the international portion of the portfolio (16% of the total), as well as what a fund's minimum investment requirement was. One of the best funds had a minimum investment of $100,000. Needless to say, I didn't choose that one.
Apart from the advantages of mutual funds, one thing to keep in mind is that there is the potential for losing some diversity if you don't pay attention to the investments within the funds. For example, you may not want all of your international exposure to be in the same region, such as Asia or North America.
This month we are working around the house outside, trimming trees (probably the wrong time of year), edging neglected flower beds, etc. We will also be taking the row boat out very soon if the storms ever leave us again.
We've been babysitting a lot this month due to our daughter's business travel. Our son-in-law's job involves working during the evenings, so he's not able to pick up after day care. We've been having loads of fun with our grandson! He is getting so big he can almost overpower me (He's 4 and loves to play rough.)
One thing that has surprised me about being retired is how precious my time is to me. It's not because I feel my life is short or anything like that, it's because I have so many things I want to do.
Some days it is very tough to stop the things I want to do and do the things I should do, like doing housework, cooking, even doing errands for things we need like food and medications!
Right now my passion is writing this website and learning about doing it well. I learn something new every single day and I love it!
And my poor husband! He is very patient most of the time, but he sometimes shakes his head about my website and writing activities. And occasionally he complains about me being “in that computer” all the time.
Before I retired I imagined that time would be so abundant that everything would have its turn. Exercise would be easy to come by. I would have hours and hours to spend making pottery in my studio. And the website and reading would be naturals for rest breaks. I thought I would see my extended family every month and get reconnected with them.
But that's not at all how it is, so far. It is still difficult to get the exercise I should, mostly because it isn't one of things I enjoy. Since I enjoy working on my website so much, my pottery hobby takes a back seat right now.
Even so, it is still really great to be able to sleep until 8:30 if I want to, except when the sweetheart grandson is in the house. Then I sleep on his schedule, and I still love it.