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A new study says that the Wall Street Industrial Complex is effectively scaring investors into saving more than they need for retirement, because the more money suckers like us invest, the more money mutual funds, brokers, and financial advisers make in fees.

The leader of this counterintuitive challenge is Larry Kotlikoff, a Boston University economics professor and co-author of "The Coming Generational Storm," an analysis of dire solutions necessary to cover future unfunded Social Security and Medicare benefits. His co-author is financial columnist Scott Burns of the Dallas Morning News. Kotlikoff's research says investors should focus on income while working to figure out retirement needs.

Saving too much? You bet. A New York Times review of Kotlikoff's numbers "showed that Fidelity's online calculators typically set the target of assets needed to cover spending in retirement 36.4% too high. Vanguard's was 53.1% too high. A calculator offered by TIAA-CREF, one of the largest managers of retirement savings, was 78%" higher than the calculations generated by Kotlikoff's ESPlanner.

As expected, they were quite defensive about this challenge. The Times says: "The financial-planning industry prefers to characterize itself as cautious. William Ebsworth, chief investment officer of Fidelity Investments' Strategic Advisers division, which runs retirement programs, said, 'We take a very conservative approach,' preferring to err on the side of having money left over at death rather than risk running out before then."

While their reaction is understandable, it's a diversion: They fail to deal with their own conflict of interest and motives in overstating assets needed in retirement.

So let's repeat it again: You are unnecessarily investing too much of your hard-earned money into too many assets for retirement. As a result, you're sacrificing too much of the present, under the highly questionable and misleading assumptions about piling up excessive savings for an uncertain future."


New Fund For Kids

03/07/07 -

Amazingly enough, some children would rather play Xbox 360 than learn about investing. The Monetta Family of Mutual Funds hopes to change that with the Young Investor Fund (MYIFX), a new no-loader geared toward the under-four-feet set.

When a child or teenager joins the fund, they are given an investment kit, which for children eight years old and younger includes an activity book, a CD with songs about money and a copy of the kid-friendly newsletter chock-full of jokes and other information that is intended to make it interesting to them.

Teenagers are offered a more sophisticated version of the kit and have the chance to enroll in a stock market game, in which they each receive $100,000 in "Monetta Bucks" that they have to use to construct a portfolio with any combination of stocks from the Dow Jones Industrial Average.

At the end of six weeks the first-prize winner gets to choose either a certificate for one share of stock or a $75 gift card to Best Buy. There are smaller gifts for other winners."


It would be great to get young people interested in money management, but from what I can remember about being a kid, I'd be interested in the 'CD with songs about money' and the activity book for all of 15 seconds before I turned my attention back to Viva Piñata.

MAX on Fox News

03/06/07 - ETFs

MAXfunds co-founder Jonas Ferris chats with Neil Cavuto about the recent market turmoil. Not seen in this video is the off-camera high jinks where said co-founder debates who invented the ETF with a representative of the American Stock Exchange. Maybe somebody caught the scuffle on their cell phone camera and it will show up on YouTube. Ok probably not..


Taxing Issue

Here's a simple trick, via Morningstar, that can save you a bundle in taxes, and that a surprising number of investors don't do: put funds with potentially high capital gains distributions in your non-taxable retirement accounts like your IRA or 401(k), and put tax-efficient funds in your taxable accounts:

When a fund realizes capital gains by selling stocks or bonds at a profit or receives interest or dividends, any amount above the fund's expense ratio must be paid out to shareholders, who are then taxed on that income. Some funds are much better than others at shielding shareholders from taxable income and capital-gains payouts. And some investors make it a habit to steer clear of "tax-inefficient funds," those that pay out a substantial portion of each year's gain as taxable income.

When you're choosing a fund for an IRA, though, you can ignore this issue. The attraction of IRAs and other tax-sheltered accounts, of course, is that the profits aren't taxed right away. Instead, they compound until you actually withdraw the money from your account. Only then do you pay the tax. That means some funds you might avoid in a taxable account are suddenly back on the menu when you're investing in your IRA."

They list four example funds that are likely to issue above-average taxable gains distributions and hence would be good fits for your non-taxable accounts:


WaMu Sued

Washington Mutual is accused of steering investors into their own mutual funds when better alternatives were available:

A class-action lawsuit was filed today against Washington Mutual, alleging that it deceived investors by steering them to the bank's own portfolio of mutual funds which were less attractive than alternative funds.

The complaint alleges that Washington Mutual and its subsidiary companies had an undisclosed "preferred list" of funds, and issued misleading disclosures and omissions regarding a side agreement designed to improperly promote WM Financial Services to favor Washington Mutual's proprietary funds, and thereby drive sales, regardless of alternatives for their individual retail investors."


Who would have thought that some guy at the bank isn't looking out for your best interests?

Market Mini-Crash – The Takeaway

It has been quite some time since the Dow dropped over 500 points in just a few hours. The last time it happened, the biggest terrorist attack in our nation’s history was the culprit. This time, we had only the vague notion that the Chinese government is concerned enough about stock market speculation and their economy, to rattle our stock markets.