Investor Education This Week 
VAs MAY HAVE SOME UPSIDE
5/7/2008
From FPA: Despite their tarnished reputation due to questionable sales tactics, high expenses and weaker investment performance compared with mutual funds, popular variable annuities (VA) with "living benefit" riders may still be a sound choice for some retirees, concludes an article in the May 2008 issue of the Journal of Financial Planning, published monthly by the Financial Planning Association. In his article, "A Context for Considering Variable Annuities with Living Benefit Riders," John H. Robinson examines how the investment performance of a particular type of VA rider stacks up against an index mutual fund as each tries to weather two bear markets....
UNDERSTANDING ETFs
5/7/2008
From FiPA: The "It" equity -- the exchange-traded mutual fund -- is no spring chicken. It's been around since the early 1990s. But ETFs are still turning heads. It's no wonder: The combination of index investing with the handiness --- and lower costs -- of individual stock ownership is irresistible. Are ETFs a good match for your portfolio? "Exchange-traded" refers to shares that trade all day long on the major stock market exchanges (just like regular stocks, although ETFs are found mainly on the American Stock Exchange). "Funds" are investing vehicles that hold dozens, hundreds, or even thousands of companies under one umbrella unified by a particular investing theme (such as companies that comprise the Dow or ones whose main business is in the biotech industry). For more, see this story from The Motley Fool ...
'CATASTROPHE BOND' CAUTION
5/1/2008
From FINRA: The Financial Industry Regulatory Authority (FINRA) has issued an Investor Alert warning investors about the risks of speculating on natural disasters with event-linked securities, such as catastrophe bonds or "cat bonds." Cat bonds offer high yields but can quickly lose most or all of their value if a triggering event, such as a hurricane, earthquake or pandemic, occurs in specified geographical regions. The new Investor Alert, "Catastrophe Bonds and Other Event-Linked Securities," describes how event-linked securities work and helps investors determine whether and to what extent the funds they hold invest in these securities ...
PAUSE FOR INVESTING FACTS
5/1/2008
From SEC: The Securities and Exchange Commission announced the launch of its latest offensive targeting online boiler rooms, cold calls, and other potentially fraudulent financial solicitations circulating to unsuspecting investors. Such solicitations often use phony claims of SEC registration, false U.S. addresses, or endorsements from make-believe government agencies or international organizations to make their investment opportunities appear more credible. Some also falsely claim to be affiliated with established brokerage firms. The SEC's initiative is called "PAUSE" for Public Alert: Unregistered Soliciting Entities ...
AVOIDING INVESTMENT FRAUD
4/22/2008
From NFA: In conjunction with Chicago's Seventh Annual Money Smart Week (April 20-26), National Futures Association (NFA) is co-sponsor three upcoming events designed to teach investors how to avoid becoming victims of investment fraud. NFA staff will present "Don't Become a Victim of Investment Fraud" at two Chicago Public Library locations. Attendees will learn how to tell a legitimate investment sales pitch from a fake one, as well as what questions to ask and actions to take when reviewing any investment offer. Admission to the program is free ...
UNDERSTANDING THE SUBPRIME CRISIS
4/22/2008
From PathToInvesting: The subprime mortgage crisis has dominated the headlines since the summer of 2007. What began as a limited problem affecting high-risk- or subprime - mortgage borrowers in the U.S. has rippled throughout the world financial markets. Most of the subprime loans now facing default are adjustable-rate mortgages (ARMs). By early 2008, more than one in five subprime mortgages was delinquent or in some stage of foreclosure. The crisis appears to be spreading beyond the subprime market. As home prices fall and lenders impose tougher standards in response to defaults, some prime borrowers holding adjustable-rate loans are finding it difficult to refinance, which many of them had expected to be able to do before their rates reset. As defaults and foreclosures increase, investors in mortgage-backed securities also face steep losses ...
UNDERSTANDING GROWTH INVESTING
4/10/2008
From AAII: Investment decisions and planning are all concerned in one way or another with one concept: growth. Stock investors examine the earnings growth of firms; portfolio planners estimate portfolio growth. And ultimately growth in the real value of your assets is the central focus of your endeavors and concerns. But most investors do not have an intuitive feel for growth, particularly over longer time periods. If you are completely in the dark when confronted with this issue, you have little basis for judgment. For advice on developing an intuitive feel for the mechanics of growth, check out this AAII Journal article ...
PROGRAMA EN ESPAÑOL
4/10/2008
From NEFE: The National Endowment for Financial Education has translated its widely-used High School Financial Planning Program (HSFPP) student guide to Spanish. It is available online for Spanish speakers and teachers to use in learning or teaching about personal finances. "Unlike other programs that have been straight translations from English to Spanish, the student guide underwent a cultural review as well," said John Parfrey, director of the HSFPP. To download the Spanish Student guide, parents and students can go to their respective sections within hsfpp.nefe.org and click on the Programa en Español link on the left-hand navigation ...
AVOIDING REVERSAL OF MORTGAGE FORTUNE
3/26/2008
From FINRA: The Financial Industry Regulatory Authority (FINRA) has issued an Investor Alert urging homeowners over the age of 60 to carefully weigh all of their options before tapping into their home equity through reverse mortgages to obtain additional income for their retirement years. A reverse mortgage is an interest-bearing loan secured by the equity in a home and can be helpful to homeowners having trouble meeting expenses. The FINRA Alert cautions homeowners that these loans - which are being aggressively marketed as an easy, cost-free way for retirees to finance lifestyles or to pay for risky investments - can jeopardize their financial futures. The new Investor Alert is entitled "Reverse Mortgages: Avoiding a Reversal of Fortune" ...
SMOOTHING OUT HOUSEHOLD SPENDING
3/26/2008
From FPA: Is there a better way for the average family to smooth out and raise their standard of living over their lifetime than current conventional financial planning recommends? Yes, argues an economist in the March 2008 issue of the Journal of Financial Planning, published monthly by the Financial Planning Association. Laurence J. Kotlikoff, Ph.D., a professor of economics at Boston University in Massachusetts advocates a long-standing economics approach to household financing based on the concept of "consumption smoothing" ...
PRECIOUS METALS INVESTING
3/20/2008
From CFA Institute: Is adding precious metals to U.S. equity portfolios a good idea? A new study, "Can Precious Metals Make Your Portfolio Shine?," looks at the benefits of investing in gold, silver, and platinum. The authors address two major investor concerns: What are the benefits of investing in precious metals and how can investors achieve a beneficial exposure to precious metals? Their findings suggest that precious metals serve as an effective hedge against the typical decline in equities that occurs during an increasing interest rate environment ...
COMPANY STOCK AND YOUR 401(k)
3/20/2008
From EBRI: The recent collapse in the value of Bear Stearns shares has led to new interest in the role of company stock in 401(k) plans. The nonpartisan Employee Benefit Research Institute (EBRI) has done extensive analysis on company stock in 401(k) plans. The August 2007 EBRI Issue Brief found that, on average, 401(k) participants today hold significantly less of their account assets in company stock than they did in 1996 ...
'INCOME DECUMULATION' ... AND YOU
3/12/2008
From NEFE: Retirement asset decumulation and the decisions that influence it are gaining attention as more firms move from traditional pension plans to plans that put the responsibility to save on each individual (such as 401(k)s). Now, many Americans are responsible for saving and investing, and then face consequences if they make mistakes or receive sub-par earnings. Because retirees can make uninformed, unwise decisions that can affect their financial well-being and standard of living in retirement, the National Endowment for Financial Education (NEFE) organized a landmark Retirement Income Decumulation Think Tank this past December. Twenty leading national authorities examined the critical decisions Americans make about decumulation of retirement income and assets ...
THE QUEST FOR INVESTING VALUE
3/12/2008
From BetterInvesting: When you've identified a company to add to your portfolio, the quest for value may take you in an unusual direction. Let's assume you've evaluated a company's fundamentals and determined the price you're willing to pay, which is based at least partly on its discounted cash flow or the present value of the dividend income you estimate it should provide in the future. If the market price is higher than what you're willing to pay, exercising patience - an essential component of value investing - obviously is often the smart choice. While you wait, you may learn even more about the stock by examining recent patterns in its price. If you do, you're likely to discover that the price has moved up and down within a clearly defined and often fairly narrow trading range over a period of weeks, months or even longer...
BROKERAGE FIRM CUSTOMERS TO BE NOTIFIED
3/6/2008
From SIPC: The Securities Investor Protection Corporation announced today that it is liquidating Hanover Investment Securities, Inc., of Madisonville, Louisiana, under the terms of the Securities Investor Protection Act (SIPA). The liquidation of the New Orleans area broker-dealer is the first such proceeding to be initiated by SIPC in 14 months. Investor losses may be as much as $2 million. Information is expected to be sent shortly to known customers of the firm ...
MUTUAL FUNDS SALES CRACKDOWN
3/6/2008
From FINRA: FINRA announced today that it has settled cases against five firms for mutual fund sales and supervisory violations - including improper sales of Class B and Class C mutual fund shares and failure to have supervisory systems designed to provide all eligible investors with the opportunity to purchase Class A mutual fund shares at net asset value (NAV) through NAV transfer programs. For the share class sales violations, FINRA imposed an $800,000 fine against Prudential Securities and a $750,000 fine against UBS Financial Services, Inc. for improper sales of Class B and Class C mutual fund shares. A $100,000 fine was imposed against Pruco Securities for improper sales of Class B shares. In resolving the Class B and Class C share matters, these firms also agreed to remediation plans that will address over 27,000 fund transactions in the accounts of 5,300 households. It is estimated that total remediation to customers will exceed $25 million...
TAKE 5 FOR INVESTING KNOW-HOW
2/27/2008
From CFA Institute: Investment professionals, business news journalists, and investors who want to learn more about current market, ethical, and economic issues can now do so with the new CFA Institute "Take 15" Webcast series. These 15- to 20-minute interviews with topical experts are designed to educate those who follow today's news coverage but want to dig more deeply into topics such as who is responsible for the subprime crisis and where we may be going with systemic risk in structured products. Current "Take 15" topics include: Basics of Mortgage Securitization, Moral Hazard and Excess Liquidity, Systemic Risk in Structured Products, The Pricing of Illiquid Securities in the Subprime Space, Ethical Dilemmas in Soft Dollars, Gift Giving, and Proxy Voting, Asset Manager Ethics in Proxy Voting, and Avoidance of Front Running, and GIPS Compliance ...
CAPITOL HILL STOCK MARKET CHALLENGE
2/27/2008
From SIFMA: The Securities Industry and Financial Markets Association (SIFMA) recently announced the official start of the fifth annual "Capitol Hill Challenge Stock Market Game," SIFMA's only nationwide high school stock market game competition. Sixty schools across the country are competing for a grand-prize trip to Washington, D.C., to meet with their elected Member of Congress, tour the nation's capital and to see first-hand how our national economic policies are developed. Teams of three to five students each invest a hypothetical $100,000 portfolio in real-world securities ...
THE 2008 ELECTIONS AND YOUR INVESTMENTS
2/20/2008
From PathToInvesting: What impact is the outcome of the presidential election likely to have on your investment portfolio? In the short run, you'll probably be hard pressed to tell. There's no evidence to back up the claims that markets are stronger when one party controls the White House and weaker when the other does. Generally speaking, the markets prefer certainty to uncertainty. So once the ballots are counted and the decision is final, election speculation will no longer be a factor in whether to buy or sell. Investors will be reacting to other forces, and whether markets go up or down will depend on the same influences that affect them in non-election years ...
IDENTITY FRAUD TOPS LISTS
2/20/2008
From the FTC: The Federal Trade Commission has released the list of the top consumer fraud complaints received by the agency in 2007. The list shows that for the seventh year in a row, identity theft is the number one consumer complaint category. Of 813,899 total complaints received in 2007, 258,427 were related to identity theft, which can be a major concern for investors. The report states that credit card fraud was the most common form of reported identity theft at 23 percent, followed by utilities fraud at 18 percent, employment fraud at 14 percent, and bank fraud at 13 percent ...
PROTECTING SENIOR INVESTORS
2/12/2008
The Securities and Exchange Commission (SEC), the North American Securities Administrators Association (NASAA), and the Financial Industry Regulatory Authority (FINRA) announced a new initiative as part of securities regulators' efforts to protect senior investors. The goal of the initiative is to identify effective practices used by financial services firms in dealing with senior investors, and to provide information about these practices publicly. As regulators have increasingly focused on protecting older investors, many investment advisers and broker-dealer firms are evaluating their current practices in serving seniors ...
CHANGING ASSET ALLOCATION
2/12/2008
From AAII: Many investors who are approaching retirement are wondering if they will need to change their asset allocation when they are no longer collecting a paycheck. The information available from the popular press and many advisors is to generally guide retirees to change their allocation to one that is more conservative. This is usually interpreted to mean that the investor should lighten up on stocks and put more of their investments into bonds. But retirement doesn't necessarily mean an individual should change their asset allocation ...
HOW INVESTMENT RESEARCH PAYS OFF
2/7/2008
From CFA Institute: Investment analyst research can help investors make better informed investing decisions, which is particularly important during turbulent economic periods. "Investment research plays an important role in the investment decision-making process, and it can vary in terms of quality and usefulness," said Stephen Horan, CFA, head of private wealth at CFA Institute. "When there are significant market fluctuations, investors need to look beyond TV sound bites for information. CFA Institute believes it is important that individual investors understand the key benefits and limitations of securities research because doing so will help them make greater use of this valuable analytical tool." Horan said that, among other things, individual investors should read the entire research report with a critical eye to get the whole story ...
WHY YOU SHOULD PUT UP WITH CALLS
2/7/2008
From FPA: With equity markets in turmoil, many investors are seeking ways to protect their portfolios against losses. One traditional method has been the use of options such as collars, calls, and puts. But do they really work, and if so, which strategies work best? That's the research focus of an article, "Benefits of Protecting Investment Portfolios with Options: A Historical Perspective," by Robert Dubil in the February 2008 issue of the Journal of Financial Planning, published monthly by the Financial Planning Association. "We find that buying near-the-money puts, while expensive, results in increased overall return and significantly reduced risk," concludes Dubil ...
HANGING ON TO IRAs
1/31/2008
From ICI: Most owners of Individual Retirement Accounts (IRAs) have a strategy for managing their income and assets in retirement and tend to preserve their IRA assets as long as possible, according to a new study released today by the Investment Company Institute. With $4.6 trillion in assets, IRAs represent more than one-quarter of Americans' retirement assets and 10 percent of all household financial assets. Americans husband those assets carefully: Eight in 10 households owning traditional IRAs indicate they have a plan for managing their income in retirement. For seven out of 10 traditional IRA owners, that strategy includes a plan to preserve their IRA assets as long as possible ...
FINANCIAL ED 101
1/31/2008
From NEFE: The National Endowment for Financial Education (NEFE) now provides an easily implemented, unbiased and noncommercial financial education solution for colleges, universities and alumni associations to offer to their students. CashCourse, an online financial education resource directed at college students and recent grads, was piloted last fall at several universities through their Web portals. Living away from the guidance of their parents during college is often a time when many students make unwise financial decisions due to lack of financial knowledge. This deficiency can lead to financially irresponsible or uninformed behaviors, such as getting into debt, which can extend well beyond their college years. Increasing concern over this issue has lead to the joint effort between NEFE and universities to fill in the missing gaps of financial knowledge that many college students have ...
WHY YOU NEED TO GROW YOUR NEST EGG
1/23/2008
From FiPA: It's tough to invest successfully. You're putting your money at risk when you invest. You can wind up with less than what you started with. In addition, unless you pay a mutual fund manager to do your homework for you, you can expect to spend several hours a week researching potential investments. All of that seems to work against the one true aim of investing: growing your nest egg now to have more money later. You absolutely need to invest today if you want a shot at comfortable golden years. The Motley Fool explains why you must invest NOW ...
WHY YOU SHOULD KEEP AN EYE ON COMMISSIONS
1/23/2008
From AAII: Non-financial firms can make consistent profits by combining parts into a whole. For example, GM buys parts, puts them together, and sells cars for more than the cost of the parts. GM adds value by putting the parts together. But financial firms cannot add value merely by buying securities and combining them into a portfolio. Mutual funds can charge a convenience fee for combining securities into a portfolio and for reinvesting the distributions, but these conveniences can be attained for 0.20% or less. Thus, there is, at best, a very small value added merely from combining securities into a portfolio ...
GUIDE TO ONLINE INVESTING FORUMS
1/16/2008
From NFA: The Internet provides many opportunities to get involved through live chat rooms, online forums and bulletin boards. In many cases, you can obtain valuable information from these Web sites. You can also, however, obtain false information and even become a victim of fraud. The National Futures Association offers tips on how to safely participate in these forums. Some posters use multiple aliases. That means it is very difficult for you to know the true identity of the individual behind the message. Don't assume that the person posting the information is an investment professional that has no ulterior motive in sharing his information with total strangers ...
CEO PAY: WHAT AN INVESTOR NEEDS TO KNOW
1/16/2008
From CFA Institute: The CFA Institute Centre for Financial Market Integrity has released its global manual, The Compensation of Senior Executives at Listed Companies: A Manual for Investors, which provides a comprehensive, in-depth examination of how executive compensation is determined, the elements of compensation, governance practices, and associated risks for investors. The Manual outlines some common corporate governance structures instrumental in setting compensation and describes the purpose and implications of each ...
INVESTING AT YOUR LIBRARY
1/9/2008
From FINRA: The Financial Industry Regulatory Authority (FINRA) Investor Education Foundation and the American Library Association (ALA) today announced 13 grants, totaling more than $853,000, to public libraries and library networks across the country, giving millions of library patrons and their families greater access to unbiased investing information and resources. The grants are awarded as part of a new program, Smart Investing @ your library, which is administered jointly by the Reference and User Services Association, a division of ALA, and the FINRA Investor Education Foundation. The program addresses the growing need for reliable investor education at the grassroots level. Increasingly, individuals are responsible for their own retirement planning and for navigating complex financial decisions virtually every day. Investor education opportunities and materials will be available to patrons at no cost ...
TARGETING YOUR FRIEND
1/9/2008
From PathToInvesting: A target fund is a fund of funds that holds a diversified portfolio of individual mutual funds or exchange traded funds (ETFs), or a combination of mutual funds and ETFs. The target fund managers choose the particular combination to create an asset allocation that's designed to meet a specific long-term investment objective. In most cases, the funds that are included in the fund of funds are part of the sponsor's family of funds. The money you invest is divided in proportion to the weight the managers assign to each fund in the portfolio. In a simplified example, if a target fund includes ten individual funds that are equally weighted, each time you invest, 10 percent of the total goes into each of the individual funds ...
PICKING THE RIGHT TAX POCKET
1/3/2008
From AAII: One big advantage of a 401(k) plan is that it is tax-advantaged -- it helps minimize the amount of money Uncle Sam can grab from your pockets in the form of taxes. But the best way to limit Uncle Sam's reach is to make sure you are putting the right assets in the right pocket. In this instance, the pockets are either taxable savings accounts or tax-deferred 401(k) accounts. The decision as to which account -- taxable or tax-deferred -- will hold your stock assets and which will hold your fixed-income assets while attaining your desired asset allocation is often referred to as the "asset location" decision. If you are just starting out and have savings only in your 401(k) plan, the decision is relatively easy. But sooner or later you will be saving in both taxable and tax-deferred accounts. In this situation, your first decision, as always, is your asset allocation decision the percentage of your total savings that you invest in the various asset categories. The recent AAII Journal article, "Picking the Right Tax Pocket for Your Assets" can help you make these decisions. ...
HOW TO STOP LOSING MONEY IN 2008
1/3/2008
From FiPA: The vast majority of retail traders lost money in 2007 and will lose money in 2008, despite ample doses of education, enthusiasm and brilliant ideas. The best way to start making money is to stop losing it. In that connection, TheStreet.com, a member of the Financial Publishers Association, is offering the thoughts of RealMoney.com contributor Alan Farley on the 20 ways to staunch the bleeding and get back into the winner's circle in the new year...
CASH COURSE FOR COLLEGE GRADS
12/27/2007
From NEFE: Do you know a college student who could use some personal finance education? Would you like your college-age child to learn the money management tools that will carry them through life? NEFE has developed the CashCourse.org Web site specifically to help college-age students on campuses across the country. This turnkey program allows universities to provide college students with the resources necessary to cultivate positive money management habits that will last a lifetime. Money management skills and access to personal financial planning resources are necessary for college students to build a healthy financial future ...
"PRIMER" FOR HEDGE FUND INVESTORS
12/27/2007
From CFA Institute: A new free brochure from the CFA Institute Centre for Financial Market Integrity provides information primarily for retail investors on issues they should consider when investing in hedge funds. The brochure, "Investing in Hedge Funds − Information for the Retail Investor," highlights the differences between hedge funds and other investment vehicles and provides a number of questions investors should ask themselves to make well-informed investment decisions. In particular, the brochure focuses on the varying degrees of leverage and risk associated with hedge fund investing in presenting a "primer" on many of the investment considerations of this investment option ...
UNION INVESTOR EDUCATION PUSH
12/20/2007
From FINRA: The American Federation of State, County and Municipal Employees' (AFSCME) Training and Education Institute has announced the creation of Investor Education for Working Families, a ground-breaking program funded with a $692,180 grant from the Financial Industry Regulatory Authority Investor Education Foundation. The new program is designed to teach AFSCME members, who total 1.4 million, basic investing principles and increase their investment literacy, giving them tools to protect their retirement by making informed investment choices. The program combines in-person and online teaching with self-paced components ...
IF YOUR MORTGAGE LENDER GOES UNDER ...
12/20/2007
From the FTC: A new "Facts for Consumers" publication issued by the Federal Trade Commission (FTC) advises consumers what to do if their mortgage company or mortgage servicing company closes or files for bankruptcy. "How to Manage Your Mortgage If Your Lender Closes or Files for Bankruptcy" has several situation-based tips for consumers related to servicing transfers, escrow accounts, and payment disputes. Copies are available from the FTC's Web site and from the FTC's Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, DC 20580. Or, call toll-free: 1-877-FTC-HELP....
MUTUAL FUNDS ROLL ON IN 2007
12/5/2007
From ICI: Almost 51 million American households own mutual funds in 2007, according to a new study from the Investment Company Institute. That is about 44 percent of all households in the U.S. and translates into 88.2 million individual shareholders. Mutual fund ownership remained essentially steady from 2006, when 49.9 million households and 87.9 million individuals held mutual funds. The study, entitled Trends in Ownership of Mutual Funds in the United States, 2007, was compiled by the Institute's Research Department. About three in five U.S. households owning mutual funds have incomes between $25,000 and $99,999, and about two-thirds are headed by individuals between the ages of 35 and 64. The research showed that fund ownership has grown through workplace retirement plans, largely fueled by the growing popularity of defined contribution plans, such as 401(k)s ...
U.S. SECURITIES MARKET GROWS
11/28/2007
From SIFMA: According to the latest Research Quarterly issued by the Securities Industry and Financial Markets Association (SIFMA), issuance of securities in the U.S. capital markets reached $5.06 trillion in the first nine months of 2007, a 7.7 percent increase over the same period in 2006. Third quarter issuance volume was lower at $1.33 trillion compared to $1.92 trillion in the second quarter of 2007 and $1.51 trillion in the third quarter of 2006. Long-term municipal issuance continues at a record pace, boosted by refunding activity. Corporate bond issuance remains ahead of last year and on a record pace despite a sharp drop in high-yield issuance in the third quarter. Agency and mortgage-backed securities (MBS), asset-backed securities (ABS) and collateralized debt obligations (CDOs) fell in the quarter on housing sector weakness and subprime mortgage market deterioration ...
MONITORING YOUR 401(k)
11/28/2007
From AAII: Setting up a reasonable and workable investment plan for your retirement is one of the most important decisions you can make. But once that decision is made, your work is only half done. An equally important task is to monitor your selections and the portfolio as a whole to make sure your original plan is still on track. What does monitoring consist of? Most 401(k) plans are composed of mutual funds, where daily scrutiny isn't necessary or even desirable. Quarterly check-ups - a review every three months or so - is more in order. Monitoring your portfolio of mutual funds requires only a little bit of time and a small amount of effort to ensure that your plan is on track. Ignore your portfolio-and it may just go away ...
HEDGE FUND BASICS
11/14/2007
From CFA Institute: A new article in the Journal of Economic Perspectives, "Hedge Funds: Past Present and Future," examines the history of hedge funds, outlines their structure and various styles, and analyzes past performance. Looking to the future, the author believes that increased competition, institutional participation, and regulation will cause the performance of hedge funds to be lower than it has been in the past ...
FINANCIAL PLANNING AID
11/14/2007
From FPA/NEFE: Are you in need of financial planning advice but cannot afford it? Are you faced with an immediate or unusual financial need and don't know where to turn? If so, visit the Project for Financial Independence Web site and see if you qualify for pro bono assistance. One way to determine if you qualify is by looking at total annual income for your household. A chart on the Web site lists the most income you can have based on the size of your family to still qualify for pro bono assistance. The Project for Financial Independence is sponsored by several AIE members, including the Financial Planning Association and National Endowment for Financial Education ...
DEBT REDUCTION SCHEME HOTLINE
11/7/2007
From FTC: The Federal Trade Commission has created a consumer hotline for consumers who purchased "debt reduction services" from Edge Solutions, Money Cares, the Debt Settlement Company, the Debt Elimination Center, and Pay Help Inc. Consumers can call the FTC's hotline at 202-326-2998 and should verify with their financial institution that all automatic debits to any of the companies have ceased ...
SAFE WITHDRAWAL RATES FOR RETIREMENT
11/7/2007
From FPA: A recent article from the Financial Planning Association® (FPA®) provides a more robust calculation of "safe" withdrawal rates for retirement and provides a graphic method for better understanding the interrelationship among withdrawal strategies, risk tolerance, and asset allocation. In developing the more expansive set of numbers, the authors also developed a visual way of presenting the results, using what they call contours. For example, a runout contour shows a set of contour lines that indicate the probability of running out of money as withdrawal rates and stock percentages change (the test portfolios are a combination of stocks and bonds). For example, say an investor wants to take no more than a 10 percent risk of running out of money by the end of the 30-year period. By looking at the contour lines, this investor will easily see they can use a withdrawal rate of no more than 3.5 percent if they're 100 percent in bonds or up to 4.4 percent given a 50/50 bond/stock allocation ...
DOES FINANCIAL DISCLOSURE WORK?
10/31/2007
From FINRA: The FINRA Investor Education Foundation has awarded a grant of $324,125 to the University of Central Florida to analyze how well investors understand the disclosure information presented with financial products -- and how to make that information more meaningful to both retail and institutional investors. The project, Financial Reporting Simplification: Understanding Investor Decision-Making Behavior and Disclosure Preferences, will examine the value and relevance of current types of disclosure to both retail and institutional investors, and will attempt to identify the kinds of disclosures each type of investor would find helpful and their preferences for how that disclosure information is presented. The study will focus on how to foster accuracy and encourage transparency in the various types of financial information made available. The project will seek ways to reduce disclosure complexity, and in particular examine how investors use disclosures made in Management's Discussion and Analysis (MD&A) and the footnotes accompanying financial statements ...
U.S./KOREAN INVESTMENT COOPERATION
10/31/2007
From SIPC: The Securities Investor Protection Corporation (SIPC) and the Korea Deposit Insurance Corporation (KDIC) have entered into a memorandum of understanding (MOU) covering cross-border cases involving brokerage firm insolvencies and liquidations in which the customers are protected by SIPC and/or KDIC. The new SIPC-KIDC MOU covers "the exchange of information on a regular basis regarding the nature, role and experience" of the two entities and "cooperation when dealing with claims for compensation that involve cross-border issues of member firms" ...
U.S. RETIREMENT DOUGH KEEPS RISING
10/24/2007
From ICI: Americans' assets for retirement rose to a record $16.6 trillion as of March 30, 2007, according to a new statistical series launched by the Investment Company Institute, the national association of U.S. mutual funds and other investment companies. ICI, which for many years has published the earliest comprehensive releases on year-end retirement assets, will now update total and detailed figures on retirement savings on a quarterly basis. Complete data can be found in The U.S. Retirement Market, First Quarter 2007 ...
ESTATE PLANNING: GETTING STARTED
10/24/2007
From AAII: It is well-known that the best way to motivate someone to go see an estate planning attorney is to arrange a trip to a faraway place. There are, of course, excellent reasons for consulting with an estate planning attorney other than exotic travel. Up-to-date estate plan documents maximize the chance that your wishes with respect to both medical and financial affairs will be carried out in the event of your death or disability. Thus, you do not have to be wealthy to benefit from good estate planning. It is sufficient simply to desire that your personal values about both medical and financial matters be honored in the event that death or incapacity prevents you from acting for yourself. In addition, tax minimization is a further and very important goal of estate planning for persons with taxable estates. In general, your "estate" includes all of your assets, less all debt, plus death benefits from all life insurance policies not held in an irrevocable trust. Thus, for many people, the purchase of life insurance coverage can create a taxable estate ...
GETTING SMART ABOUT 401(k) FEES
10/17/2007
From PathtoInvesting.org: An important step in evaluating 401(k) investment alternatives is weighing investment objectives, risk profiles, and fees. Some fees pay for managing and administering the 401(k) itself, while others are associated with specific investments and investment transactions within the plan. PathToInvesting provides an overview of some of the 401(k) fees you need to know about. If you have questions about how much you're paying in 401(k) fees, you can review the investment fact sheet or prospectus for each of the plan's investment options, available at enrollment or on your plan provider's Web site. You can also contact your plan administrator, who can provide a summary plan description that may give you more information about the expenses associated with running the plan and how they're paid. Keep in mind, though, that the lowest cost fund isn't necessarily the best match for your portfolio, and you'll also want to consider the investment objective, risk profile, and performance history before choosing a fund ...
GROWTH OF IRAs CONTINUES
10/17/2007
From EBRI: Individual account retirement plans, such as 401(k) plans and individual retirement accounts (IRAs), have continued to increase their share of retirement assets, and this share is projected to grow further, particularly for private-sector workers, according to a study published by the nonpartisan Employee Benefit Research Institute. The most recent data show that as of 2006, about $7.5 trillion in assets were held in IRAs and private-sector defined contribution plans such as 401(k)s, up from about $4.8 trillion in 2000. The sharp increase in the number of DC plans and the number of participants in those plans, which had grown steadily through the 1990s, had leveled off by 2004. The number of DC plans hit almost 687,000 in 2000, and was down to less than 636,000 in 2004. The number of DC participants reached 52.9 million in 2002 and was down to 52.2 million in 2004...
NEW AND FREE: MARKET DATA
10/10/2007
From FINRA: The Financial Industry Regulatory Authority has launched one of the most comprehensive and free online information resources for retail investors -- and the only one with a strong emphasis on fixed-income securities. The new Market Data includes detailed data on equities, options, mutual funds and a wide range of bonds - corporate, municipal, Treasury and Agency. It offers a full profile for every exchange-listed company, including company description, recent news stories and Securities and Exchange Commission filings, and an interactive list of domestic securities the company issues. In addition to information on individual securities, the site also provides familiar equities indices and the FINRA-Bloomberg Active U.S. Corporate Bond Indices for investment-grade and high-yield bonds. It also features U.S. Treasury Benchmark yields, market news an economic calendar and other information indicating current market conditions. All of this data, news and information is clearly presented on pages that are easy to navigate. There is no advertising or commercial clutter ...
UNDERSTANDING MORTGAGE LOANS
10/10/2007
From AFSAEF: Lender and regulator groups have updated Mortgage Loans, a joint brochure to help educate both first-time and veteran homeowners, as well as second mortgage holders and those refinancing a loan. The brochure, originally produced in 2001 by the American Financial Services Association, the AFSA Education Foundation and the American Association of Residential Mortgage Regulators, has new information about adjustable-rate mortgages, which have an interest rate that changes over the life of the loan. The brochure contains work sheets to help consumers shop for the best mortgage deal and determine an affordable monthly mortgage payment ...
THE 411 ON INVESTMENT CLUBS
10/4/2007
From Better Investing: An investment club is a small group of individual investors who come together to learn, share investing experiences and help each other become more successful investors. Investment clubs are a great way for you to stay motivated while you improve your investment knowledge. Today, there are over 102,000 BetterInvesting members that participate in clubs. The average club has about 11 members and invests $84 monthly. Typically, individual investments are between $25 and $100, but how much your club invests is up to its members ...
CTFC ENFORCEMENT RECORD SET
10/4/2007
From the CFTC: The U.S. Commodity Futures Trading Commission (CFTC) announced today that its Division of Enforcement was awarded during the most recent fiscal year a record total of more than $540 million in civil monetary penalties, restitution, and disgorgement from respondents and defendants in actions involving fraud, manipulation, and other misconduct. Of the 41 new actions that were filed during fiscal year 2007, the Commission took eight actions against hedge funds/pool operators/trading advisors, and three attempted manipulation cases in the energy markets. The 2007 results cap a five-year period in which the CFTC's Enforcement Division litigated more than 50 percent of its cases and was awarded in excess of $1.8 billion in civil monetary penalties, restitution, and disgorgement ...
AUTOMATIC BOOST FOR 401(K)s?
9/26/2007
From EBRI: A key provision of 2006 retirement legislation is likely to result in a significant increase in 401(k) accumulations, according to a study released by the nonpartisan Employee Benefit Research Institute (EBRI). The Pension Protection Act of 2006 allows employers to automatically enroll workers in the company's 401(k) plan and to automatically increase a worker's 401(k) contribution to coincide with a raise or a work anniversary. The provision was added in an attempt to boost 401(k) accounts, the primary vehicle for worker retirement savings. An article in the September 2007 issue of EBRI Notes says that, under a set of assumptions and scenarios described in the article, automatic escalation was found to increase 401(k) accumulations by these amounts: 11-28 percent for 401(k) participants in the lowest-income group and 5-12 percent for participants in the highest-income group ...
FOREX CRACKDOWN
9/26/2007
From NFA: National Futures Association has ordered a Futures Commission Merchant and Forex Dealer Member in Salt Lake City, Utah, to pay a fine of $100,000. The decision issued by a NFA hearing panel is based on a complaint filed in April 2007. NFA found that the Utah firm used misleading promotional material and it failed in its duty to supervise the contents and use of its promotional material to ensure its compliance with all NFA requirements ...
FED RATE CHANGES ... AND YOUR RETURNS
9/12/2007
From CFA Institute: Are Fed rate changes associated with strong patterns in equity returns? The results from "Sector Rotation and Monetary Conditions," which will be published in a forthcoming issue of the Journal of Investing, indicate that a sector rotation strategy guided by Fed rate changes could have substantially improved portfolio performance over the past 33 years. Under this approach, a more aggressive posture is advocated following decreases in the Fed discount rate and a more defensive posture is recommended following a rate increase. The authors of the study consider long-term stock returns following directional changes in the Federal Reserve discount rate. They identify a prominent pattern whereby stocks generally languish during periods following discount rate increases and prosper during periods following rate decreases ....
BLENDING ASSET CLASSES
9/12/2007
From FPA: A key to reducing risk and improving returns in a portfolio is to blend different asset classes whose performances don't correlate strongly to each other. But too often investors blend assets that are closely correlated while neglecting lower-correlated assets that provide higher diversification benefits, according to an article in the September 2007 issue of the Journal of Financial Planning, published by the Financial Planning Association. The author examined the long-term correlations of 18 different asset classes with each other, including the volatility of their correlations and the consistency or inconsistency of the correlations ...
AMERICAN INVESTORS ARE ANXIOUS
9/6/2007
From FINRA: A new national survey shows American investors have significant and widespread anxiety about the security of their investments, particularly as it relates to their retirement savings. More investors are anxious about losing money on their investments (78 percent) and saving for retirement (73 percent) than they are anxious about losing their job (50 percent), buying a house (42 percent) or paying for college (35 percent). Only serious health problems were ranked above investment-related concerns in the survey. The survey was commissioned by the Financial Industry Regulatory Authority (FINRA). Although retirement ranks as the most important saving and investment milestone for a majority of investors (72 percent), under half (47 percent) are highly confident they are saving and investing enough for their retirement ...
KEEPING 'KEEP-SAFE' MONEY SAFE
9/6/2007
From FiPA: When planning for retirement, a common error investors make is to confuse keep-safe money from risk money. They're not the same. And they should be kept separate. Keep-safe money should be protected as much as humanly possible from losses. It should be available when you need it for emergencies. And it should grow almost entirely by generating a steady yield. Risk money is not necessarily for speculation - it can also be invested with prudence and caution. But in either case, it's for investments that can go up or down, that aim primarily for profit, but can also deliver losses. The best ways to handle keep-safe money are outlined in this Weiss Research article ...
LEARNING TO TRUST THE TRUST
8/30/2007
From PathtoInvesting: In addition to a will, you can use other legal arrangements to ensure your heirs get their inheritance when and how you wish them to. A trust is such an agreement. It allows assets to be held and managed by one person, called a trustee, for the benefit of another, called the beneficiary. You can use different kinds of trust arrangements to accomplish different goals, including: manage your property; distribute your assets; reduce estate taxes; avoid probate; and meet charitable or other specialized goals. Before going to the time and expense of setting up any trust, though, it's important to define your goals and consider what you hope to accomplish. And you'll want to consider the cost of holding property in trust, particularly if you select a corporate trustee, which will charge a fee for these services ...
GETTING CREDIT ... FOR GOOD CREDIT
8/30/2007
From the FTC: Credit is so much more than a plastic card. It's your financial trustworthiness. Having good credit means it will be easier for you to get loans and low interest rates. Low interest rates usually translate into smaller monthly payments. That's important when you borrow money for a car or a place to live. The Federal Trade Commission (FTC) created the "Getting Credit" Web site. As a trusted source for consumer information, the FTC wants you to know the facts when it comes to your credit. The new Web site reviews the first steps in building a strong credit history, informs consumers about what information creditors looks for when deciding whether to make a loan, offers tips for how to improve your credit if you've made mistakes along the way, and tells you how to protect yourself in case there is a problem with your credit ...
8/22/2007
From CFA Institute: Women are more risk averse in their investments than men, which ultimately affects savings levels, according to a study published in the July/August issue of the CFA Institute Financial Analysts Journal. In "The Impact of Differences in Risk Aversion on Expected Retirement Benefits of Men and Women," the authors find that the lower earnings level of women will lead to reduced expected retirement benefits. The tendency of women to retire earlier and live longer than men, and yet have similar annual retirement needs, compounds the problem ...
FINANCIAL RITES OF PASSAGE
8/22/2007
From AAII: We live in the largest and most enduring free economy in the history of the world. And yet, we have no standard rituals to mark the entry of our youth into the economy as fully responsible adults. We do nothing for young people to mark their entry as an adult into the financial realm. Rituals usually are the culmination of a process that prepares young people for independence as they move to adulthood. This preparation process is key, and is now missing in many young people's lives. In this context, the American Association of Individual Investors has assembled a collection of steps to consider for creating financial coming-of-age traditions tailored to your family's values and circumstances ....
HELP FOR RETURNING SERVICE MEMBERS
8/16/2007
From NEFE: Returning service members who are severely injured face an array of difficult and unique financial challenges as they re-enter their lives at home. To help address this issue, the Project for Financial Independence recently offered to assist Heroes to Hometowns, a Department of Defense program created to help severely injured military members, by providing pro bono financial planning assistance to these individuals. Among its many services, Heroes to Hometowns helps severely injured service members find suitable homes, adapt vehicles to accommodate their injury, secure transportation to medical appointments, find jobs, and locate child care. In addition to providing severely injured service members with pro bono financial planning, the Project for Financial Independence also offers no-cost planning assistance to disadvantaged members of the public ...
MEET THE FINRA FOUNDATION
8/16/2007
From FINRA: Financial Industry Regulatory Authority (FINRA), the self-regulatory organization formed by the consolidation of NASD and NYSE Member Regulation, is home to the FINRA Investor Education Foundation, formerly known as the NASD Investor Education Foundation. The Foundation will continue to fund innovative research and educational projects aimed at segments of the investing public who could benefit from additional resources. The FINRA Foundation will be the largest foundation in the U.S. dedicated to investor education ...
401(K) RETURNS KEEP RISING
8/9/2007
From ICI: The average 401(k) retirement account rose for the fourth consecutive year in 2006. Propelled by strong stock market returns, the average 401(k) account increased 17 percent in 2006, according to the annual update of the EBRI/ICI 401(k) database. The EBRI/ICI analysis is based on the largest
compilation of data on participants in 401(k) plans, which are now the primary retirement savings vehicle for the vast majority of working Americans covered by retirement plans ...
HOW TO USE A TRUST
8/9/2007
From PathtoInvesting: In addition to a will, you can use other legal arrangements to ensure your heirs get their inheritance when and how you wish them to. A trust is such an agreement. It allows assets to be held and managed by one person, called a trustee, for the benefit of another, called the beneficiary. You can use different kinds of trust arrangements to accomplish different goals, including: manage your property; distribute your assets; reduce estate taxes; avoid probate; and meet charitable or other specialized goals ...
LIVING IN THE MARGINS
7/31/2007
From NYSE: Customers who buy shares on margin or who otherwise borrow money from their brokerage firm should be aware that, under certain circumstances, they may lose their right to vote some of the shares in their account. When a customer with a margin account borrows money from his or her brokerage firm, whether as the result of a purchase of securities on margin or through a loan for other purposes, member organizations have the right to hypothecate. This means they can pledge the shares as collateral for a loan at a bank. Also, the brokerage firm can lend the shares to other customers or to other broker-dealers, according to margin agreements with their customers and subject to certain regulatory limitations. The brokerage firm - not the customer - usually reserves the right to choose which securities will be pledged in the margin account. When shares are lent, the right to vote the shares goes with them ...
INVESTMENT PHONE SCAMS FLOURISHING
7/31/2007
From the FTC: The Federal Trade Commission told the Senate Committee on Commerce, Science, and Transportation Subcommittee on Consumer Affairs, Insurance, and Automotive Safety this week that targeting fraudulent and abusive telemarketing is a top priority at the agency. Lydia Parnes, Director of the FTC Bureau of Consumer Protection, told the subcommittee, "From 1991 to present, the FTC has brought more than 350 telemarketing cases. The vast majority of these involved fraudulent marketing of investment schemes, business opportunities, sweepstakes pitches, and the sales of various goods and services, including health care products." The testimony notes that in addition to halting the deceptive telemarketing, ".. the Commission, through cases filed on its behalf by the U.S. Department of Justice, has obtained civil penalty orders totaling nearly $17 million" ...
Capital Formation 101
7/26/2007
From NCEE: The National Council on Economic Education (NCEE), with support from The Goldman Sachs Foundation, announced the first-of-its-kind Institute on Capital Formation, an intensive, professional development program for top-tier New York high school teachers of economics. The five-day, intensive program is designed to provide instructors a deepened understanding of capital formation for the enrichment of the classroom experiences of their students. It will enable high school economics instructors to make greater connections between what is occurring in the world and what they teach in the classroom. The Institute on Capital Formation will be offered at the Midtown Executive and Chemist's Club in New York from July 23-27...
Ask Investor Ed
7/26/2007
From the SEC: Are you interested in learning helpful tidbits about investing wisely and avoiding fraud? We believe making a regular effort to improve your financial literacy is one of the most important investments you can make. Check out the new RSS feed, "Ask Investor Ed," which provides unbiased answers every week to common questions on investing and personal finance. You can see recent columns answering question on topics like email from fraudsters, the differences between saving and investing, mutual funds and more ...
UNDERSTANDING YOUR COST BASIS
7/18/2007
From Pathtoinvesting: At tax time, there's a pressing question you'll have to answer if you've sold investments in a taxable account during the previous year: What were your capital gains and losses? You'll either owe capital gains taxes on your profits from selling, be able to take a deduction for your losses, or use your losses to offset gains and reduce the tax that's due. However, calculating what you've gained or lost can be more complicated than you might think. Before you determine your profit or loss, you need to know your original cost basis. Your profit or loss depends on the difference between your cost basis and the price at which you sold your investment. In the normal scheme of things, your cost basis is your original purchase price, but sometimes you can make adjustments to that figure to make it larger. Other times, you need to do a little calculating or even some sleuthing to figure out the correct basis to use....
INVESTOR EDUCATION OFFICIAL JOINS BOARD
7/18/2007
From BetterInvesting: Lori Schock, The Center for Audit Quality's director of outreach and former U.S. Securities and Exchange Commission (SEC) acting director of Investor Education and Assistance, and Gary Ball, a long-time BetterInvesting volunteer and investment education instructor, are joining the board of BetterInvesting. The new directors were elected at the board of directors meeting held during the 2007 BetterInvesting National Convention in Dallas ...
BEST LOCATIONS FOR RETIREMENT ASSETS
7/12/2007
From FPA: Most investors and their advisors make asset allocation decisions on a pretax basis. But for investors with assets in different types of retirement accounts, or a mix of retirement and taxable accounts, calculating asset allocations on an after-tax basis more accurately reflects the asset allocation and the portfolio's real risk and return. This approach also has implications for where to locate a particular asset in which type of account, finds an article in the July 2007 issue of the Journal of Financial Planning, published monthly by the Financial Planning Association. Using the after-tax asset allocation framework found in the article, an investor can better answer questions of where to locate particular types of assets for retirement ...
CROOKED CARD SCHEME
7/12/2007
From the FTC: In the case against the cross-border advance-fee telemarketing scheme known as Centurion Financial Benefits, a federal district court - acting at the request of the Federal Trade Commission - has entered several additional orders against participants in the scam. The FTC today announced the court has entered final orders requiring the corporate defendants to halt their illegal cross-border telemarketing and barring them from violating the Commission's Telemarketing Sales Rule (TSR). These orders contain monetary judgments of nearly $10 million. Since at least 2004, the defendants used outbound telemarketing to contact consumers in the United States, falsely offering major credit cards to people who agreed to have the defendants electronically debit their bank accounts for an advance fee of $249. The defendants typically claimed that the credit cards would have a $2,000 credit limit, 0-percent interest, and no annual fees, and often targeted their offers at consumers with poor credit histories. Consumers who provided their bank account information did not receive a major credit card, but instead were sent an application for either a "stored value card" or "cash card" that had no line of credit associated with it and could be used only if the consumer first transferred funds onto the card ...
BOGUS INVESTMENT PERFORMANCE CLAIMS
7/5/2007
From AAII: In an article in the American Association of Individual Investors Journal, Mark Hulbert states: "I am continually mystified by individuals' gullibility in the face of exaggerated investment performance claims. Investors who are nobody's fool when it comes to outrageous advertisements in other areas of their lives suddenly become naive when confronted with equally outrageous investment performance claims ... [M]any of you ... actually paid good money - to refer to a successful ad campaign of several years ago - to an investment newsletter that claimed that in 13 years' time it had turned $10,000 into more than $40 million ..." To beef up your investing savvy when it comes to performance claims, read "Outrageous Advertising: A Survival Guide for Investors"...
INVESTING IN YOUR NEXT MOVE
7/5/2007
From NEFE: How much will you invest in your next move? Whether across town or across the country, Americans have never hesitated to pack up and head for greener pastures. The challenge is to keep the cost of moving to a minimum. The least stressful way to face that obstacle is by planning ahead. Keep in mind that you could run into unexpected costs if your favorite lamp is broken during the move, a friend gets hurt or the truck is involved in a traffic accident. The National Endowment for Financial Education offers more tips on how to save when you move ...
SUMMERTIME ... AND THE SAVINGS ARE EASY!
6/27/2007
From the Financial Publishers Association: Summer fun can get expensive, so save your receipts for summer camp for your kids, vacation and your company's BBQ as you may be able to deduct some of those expenses next April, according to TheStreet.com. Here's how: If your kids are under age 13 and you need to pay someone to watch them so you and your spouse can work or go to school, you're eligible for the credit. That equals up to $3,000 of the expenses paid in a year for one child, or up to $6,000 for two or more kids. And good news -- that includes day camp all summer. If you have any business trips planned this summer, consider bringing the family along. You may be able to deduct some of your unreimbursed travel costs. As long as at least 50% of the trip is for business purposes, your travel costs and any associated meals and entertainment expenses will be deductible as a business expense ...
PREYING ON MILITARY FAMILIES
6/27/2007
From the FTC: The Federal Trade Commission is warning consumers about a scam targeting families of military members. A caller, claiming to work for the Red Cross, notifies an individual that their family member has been injured while on duty. To get immediate aid to the injured service member, the caller says, paperwork must be completed, and personal information must be verified. The FTC says this scheme is a variation of "phishing" - a technique identity thieves use to get personal or financial information from unwary consumers. The identity thief claims to represent a trusted source - a bank, a government agency, or in this case, The American Red Cross - to get someone to divulge their personal information. The FTC urges military family members not to give out personal information on the phone if they are contacted by an individual they don't know ...
MINORITY RETIREMENT PREPAREDNESS
6/20/2007
From EBRI: African-American and Hispanic workers are at least as likely as American workers overall to feel confident about their retirement security even though their savings and preparations lag behind, according to findings of the 2007 Minority Retirement Confidence Survey. While some differences in preparation can be attributed to differences in income distribution, other findings show that minorities are less prepared even when comparisons are made among workers with similar levels of household income ...
FUND FEES STILL FALLING
6/20/2007
From ICI: The cost of owning mutual fund shares continued to decline last year, to the lowest levels in more than a quarter century, according to new research published by the Investment Company Institute. The study, Fees and Expenses of Mutual Funds, 2006, found that last year's decline in mutual fund fees and expenses continues a trend that has been in place since at least 1980. The decline has been most pronounced among stock and bond funds, where average fees and expenses have dropped by more than 50 percent. The average fees and expenses of money market funds, which are lower than those of stock and bond funds, have fallen about 25 percent since 1980. In 2006, stock fund investors on average paid 107 basis points (1.07 percent, or $1.07 for every $100 in assets invested) in fees and expenses, including loads, a drop of 4 basis points from 2005 ...
ARE YOU A CLASS VALUE-DICTORIAN?
6/13/2007
From the FTC: It is graduation time, with schools celebrating their students accomplishments and their readiness to move on to the next challenge. The Federal Trade Commission offers its own commencement advice for graduates, on how to make the most of their money and protect themselves in the marketplace. "How to be the Class 'Value-dictorian'" offers tips, including keeping your personal information to yourself, understanding credit, and knowing that some employment services are scams, among others ...
MORE STOCK MARKET GAME WINNERS
6/13/2007
From SIFMA: The Foundation for Investor Education honored the Los Angeles and San Diego winners of the Stock Market Game Program, which now serves nearly 50,000 California students. The San Diego InvestWrite regional winners will be honored at an awards ceremony on June 12 at the San Diego Union-Tribune. Since committing to a strategic growth strategy in California two years ago, student teams for the Stock Market Game™ Program in California have grown dramatically. For the 2006-2007 school year, 12,042 teams, consisting of nearly 50,000 students, participated in the Program in California. The Los Angeles area saw a 717% increase in participation from the 2005-2006 school year while the San Diego area saw a 37% increase. The Stock Market Game Program™ combines a stock-trading simulation with classroom curriculum for students in grades 4-12. Using curricula that meet national standards in mathematics, social studies, business, economics and language, students participating in the Program (more than 10 million since it began in 1977) learn about long term saving and investing and how the capital markets work ...
FRAUD FIGHTING TIPS FOR SENIORS
6/6/2007
From NASD: Even if you have never been subjected to an investment fraudster's sales pitch, you probably know someone who has. Following the legendary motto of Willie Sutton, fraudsters tend to go "where the money is" - and that means targeting older Americans who are nearing or already in retirement. Fraudsters also have in their sites the millions of Baby Boomers who have been accumulating sizeable retirement nest eggs through company 401(k)s and personal accounts. You can help protect your family and friends by using these tips from the National Association of Securities Dealers to learn how investment fraudsters operate and then reporting suspicious sales pitches and outright scams ...
WOMEN, SOCIAL SECURITY AND PERSONAL FINANCES
6/6/2007
From FPA: Deciding when to begin claiming Social Security retirement benefits is often a difficult decision if one wants to maximize benefits. But it's particularly difficult for women, concludes an article in the June 2007 issue of the Journal of Financial Planning. Many people claim at the earliest available age, 62, often because they can't afford to wait. But claiming early decreases the size of monthly payments. Thus, workers with a longer-than-average life expectancy under Social Security's actuarial tables usually collect more in total lifetime benefits if they wait to claim until normal retirement age or later because they'll receive larger monthly payments. For women, the decision is more complicated, however. They typically live longer than men and the average life expectancies published in the Social Security actuarial tables. That would suggest that most healthy women should delay the start of their benefits. For a single woman this makes sense, but perhaps not so if you are married, contend the authors ...
DEPENDENCE ON SOCIAL SECURITY RISES
6/1/2007
From EBRI: Social Security provides a growing source of income as
the nation's elderly population ages, according to a new study published by the nonpartisan Employee Benefit Research
Institute (EBRI). The share of the older population's 2005 income that came
from Social Security rises from 30 percent for those ages 65-69 to 55 percent
for those ages 85 and older, said the study, published in the May 2007 EBRI
Notes. The number was higher for each progressively older age group. On
average, Social Security provided 40 percent of the income for all those age 65
and older in 2005. Elderly women received 50 percent of their income from Social
Security, compared with 33 percent for elderly men. The lowest-income quartile
(less than $7,895 a year) among the elderly received 91 percent of their income
from Social Security in 2005, while the highest-income quartile (more than
$32,198 a year) received 18 percent of its income from Social Security ...
THE SUPER BOWL FOR YOUNG INVESTORS
6/1/2007
From NCEE: Iolani High School and Carmel High School beat more than 1,000 teams from across the country to become the champions in the National Economics Challenge competition sponsored by the National Council on Economic Education and the Goldman Sachs Foundation. Student teams from eight high schools across the country competed as finalists and traveled to New York to compete to win in one of two divisions. The eight teams previously won state and regional competitions defeating nearly 1,000 teams from 36 states to advance to the championship series. Over $100,000 in U.S. Savings Bonds were awarded to the first and second place teams and their teacher-coaches for their winning efforts in the national and regional competitions ...
INDEX INVESTING FOR BEGINNERS
5/23/2007
From PathToInvesting: Hundreds of indexes track changes in the financial markets. Some are narrow measures of a specific sector or industry, such as indexes that track clean technology or consumer goods stocks or the securities of a particular country. Others are broad gauges of overall market activity and are considered bellwethers of the health of the economy. With the important role that indexes play in the financial markets, it's no wonder some people think that an index might be the perfect investment. The trouble is, you can't invest in an index. It's a statistical calculation, not a security. And it's not for sale. But there are some investment alternatives. Index-based investment products, including index mutual funds, exchange traded funds (ETFs), and unit investment trusts (UITs), are all designed to mirror the performance of a stock or bond index, from the very narrowly focused to the very broad ...
INVESTOR ED FOR NURSES
5/23/2007
From NASD: The Women's Institute for a Secure Retirement (WISER), in partnership with the Center for American Nurses, announced a major financial education initiative aimed at strengthening the financial security of our nation's nurses. The ambitious three-year project is being funded by a $495,200 grant from the NASD Investor Education Foundation. The three-year financial education project will seek to identify nurses' specific financial information needs and create education modules and tools to address them ...
INSIDE "SCAMS AND SWINDLES"
5/16/2007
From NFA: National Futures Association (NFA) announced today that it has published a new investor education booklet entitled "Scams and Swindles: An Educational Guide to Avoiding Investment Fraud." The guide describes common characteristics of investment scams and outlines steps individuals can take to avoid them. Knowing some common characteristics of a fraudulent investment offer can help you to avoid becoming a victim of a scam. These characteristics include: a demand for an immediate decision, a request for a credit card number other than to make a purchase, and an investment that is "without risk." Single copies of "Scams and Swindles" are offered free of charge. Individuals may order a copy of the publication by calling NFA's Information Center toll-free at 800-621-3570 ...
RETIREMENT ASSETS UP
5/16/2007
From ICI: Americans held a record $16.4 trillion in retirement assets at the end of 2006, up $1.7 trillion from the previous year, the Investment Company Institute reported today. In the first comprehensive look at the scope of the nation's retirement market during 2006, ICI found that strong growth in individual retirement accounts (IRAs) and employer-sponsored defined contribution plans, including 401(k) accounts, powered the 12 percent increase. The ICI's research serves as a primary source of IRA data and provides detailed measures of 401(k) and other defined contribution plans ...
STUDENTS SHOW THEIR ECON SMARTS
5/9/2007
From NCEE: Student teams from eight high schools across the country have emerged as finalists in the National Economics Challenge competition sponsored by the National Council on Economic Education and the Goldman Sachs Foundation, and now will come to New York to compete to win in one of two divisions. The Adam Smith Division challenges advanced placement, international baccalaureate and honors students, and the David Ricardo Division challenges single semester general economics students. The eight teams previously won state and regional competitions defeating nearly 1,000 teams from 37 states to advance to the championship series. The final competitions will be held on May 21, 2007 from 1 pm to 4 pm in New York City at the Science, Industry and Business Library. About 200 educators, students and economists are expected to attend the event ...
YOUR BIGGEST INVESTMENT: YOUR HOME
5/9/2007
From the FTC: Your home may be your biggest investment. The Federal Trade Commission has tips for considering a real estate professional and using the Internet as a new source of information, and explains why new sales models for buying and selling a home mean more choices for consumers. The new publication, Buying a Home: It's a Big Deal, lists questions to ask when a consumer is considering a real estate professional. It prompts home buyers to determine who the agent works for, and the type of business relationship that they will have with the agent. It also says that consumers need to know whether their agent has made the required disclosures and whether their agent plans to show them homes listed by non-traditional brokers ...
STOCK MARKET GAME WINNERS ANNOUNCED
5/4/2007
From SIFMA: The Securities Industry and Financial Markets Association and its non-profit affiliate, the Foundation for Investor Education, report that five seniors at Valley High School in Elgin, Iowa are the 2007 national champions of the "Capitol Hill Challenge Stock Market Game." The competition uses the Stock Market GameTM Program to help students develop math, economic and research skills associated with long-term saving and investing and to better understand how the capital markets work. Teams of three to five students each invest a hypothetical $100,000 portfolio in real-world securities transactions. The Iowa students, under the direction of their economics teacher, Kent Bonte, beat out 364 teams from 84 schools across the country ...
FANNIE MAE SETTLEMENT FUND UP
5/4/2007
From the SEC: The Securities and Exchange Commission has announced the beginning of the distribution process for a $357 million Fair Fund created as part of a settlement last year with Federal National Mortgage Association (Fannie Mae) on charges of financial fraud in connection with the preparation of its annual and quarterly financial statements. The distribution is expected to be completed by October. Injured investors also can request a claims packet directly from the distribution agent. More information is available at www.SECFannieMaeSettlement.com ...
DOLLAR COST AVERAGING FOR BEGINNERS
4/26/2007
From AAII: The first step is always the hardest. And individual investors taking their first steps in an investment program must also confront a sea of stock market uncertainty. Some plunge headlong into the market with all their savings. Others barely wet their feet before heading back to the safe shores of their money market funds. The problem, however, with these two all-or-nothing approaches is one of timing-the risk of entering the market at a high point in the market cycle. Dollar cost averaging and its variations, such as value averaging, offer investors an alternative, allowing them to ease into the market over time, which reduces the timing risk ...
UNDERSTANDING STYLE DRIFT
4/26/2007
PathtoInvesting: Style drift occurs if an investment manager moves away from the investment mix that's appropriate to a mutual fund or managed account portfolio based on the portfolio's objectives and style. Such a drift typically occurs if the core portfolio is providing disappointing returns while other investments in the marketplace are performing better. In this case, a manager may feel pressure to increase the bottom line. The drift may also occur inadvertently if some of a portfolio's underlying investments take on different characteristics. For example, a small company may become a mid-sized company or a value investment may increase substantially in price. The danger of style drift from a portfolio perspective is that you might end up owning investments that are more or less risky than you intended or that expose you unexpectedly to portfolio overlap...
GRADING INVESTOR EDUCATION PROGRAMS
4/18/2007
From NEFE: Financial education programs have proliferated in recent years. Yet, accessible ways to evaluate their effectiveness have not kept pace. Focusing on this challenge, the National Endowment for Financial Education provided a grant to a team of university researchers for creating a powerful assessment tool designed to help educators measure the success of their respective programs. The result of the collaboration led to the development of the NEFE Financial Education Evaluation Toolkit, an innovative resource that now is available online at no cost to users. The toolkit has two components: a database, which allows users to quickly and conveniently customize an evaluation tailored to their financial education program; and a supplemental manual, assisting educators in designing a measurement tool and collecting and analyzing the resulting data. Equipped with this knowledge, instructors can improve their program's effectiveness ...
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