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At this post, http://boards.fool.com/Message.asp?mid=27656562 , the OP has this article:
http://www.thebigmoney.com/articles/judgments/2009/05/03/end....

All these facts suddenly left the personal finance industry facing a conundrum of its own making. The backbone of the self-help complex is the idea that you can do it. You. Singular. But what happens when you lose your job and can't find a new one before your six months of recommended emergency savings runs out? Or a good chunk of your retirement income is in the form of a pension from your former employer—and that employer is named Chrysler? What then?

"Personal finance has come to substitute for the role government should play for people," observes Nan Mooney, author of (Not) Keeping Up with Our Parents. "In the past 20 years the myth of the person succeeding on their own has gotten bigger and bigger. This myth is dangerous. It tells you if you can't balance everything and you are in debt, it is your fault."


Two thoughts occur to me. First, from the second paragraph, when did the government have a role in planning my retirement? Nan Mooney's quote to me is from outer space.

Second, the idea that the personal finance industry's advice has been proven to be bogus seems true today, when I am down 40% or so in my various investments. The question arises in my mind, since their advice was seemingly wrong, am I doing the wrong thing in still following the advice?

I've kept the monthly purchases going at Vanguard and through the 401K. It has seemed an exercise in futility as the money invested contiued to drop each day. I've also got some stocks that I purchased after the first drop back in 08, they have also been down, although they have slowly inched up and am almost positive on two of the four stocks.

Is this all worth it? Can these plans work? Am I more foolish now than I was before? I find the thrust of the article to be a very valid question, and wonder if I should be so confident that it is still a good approach.

Anyway, musings on a Wednesday afternoon in Korea.

fredinseoul
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No. of Recommendations: 6
<<Second, the idea that the personal finance industry's advice has been proven to be bogus seems true today, when I am down 40% or so in my various investments. The question arises in my mind, since their advice was seemingly wrong, am I doing the wrong thing in still following the advice?

I've kept the monthly purchases going at Vanguard and through the 401K. It has seemed an exercise in futility as the money invested contiued to drop each day. I've also got some stocks that I purchased after the first drop back in 08, they have also been down, although they have slowly inched up and am almost positive on two of the four stocks.
>>


Why is it that people were so confident buying stocks when PEs were high, and now see no reason to invest when valuations are much cheaper?

These have been good times to buy. There is nothing wrong with the model if people continue to follow it. Over a period of additional years and decades, investments made now will turn out fine on the whole.



Seattle Pioneer
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"In the past 20 years the myth of the person succeeding on their own has gotten bigger and bigger. This myth is dangerous.

I'd wager he has a service to sell you.

It tells you if you can't balance everything and you are in debt, it is your fault."

That is true. You got yourself into debt and no one else.

JLC
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First, from the second paragraph, when did the government have a role in planning my retirement?

They have a role in that if there is a large starving population who is about to revolt, the government will be overthrown. That is the extreme view. The less extreme view is that the general voting population will put in leaders to make sure that they don't starve to death. Regardless, the government attempts to maintain civil stability- the social security system, which will undoubtedly be the only retirement vehicle for many, is a government created program. "The act was an attempt to limit what were seen as dangers in the modern American life, including old age, poverty, unemployment, and the burdens of widows and fatherless children."

So the government has had a role in planning your retirement since around August 14, 1935.

Second, the idea that the personal finance industry's advice has been proven to be bogus seems true today, when I am down 40% or so in my various investments.

I think it is more realistic to say that a segment of the personal finance industries advice was bogus. There are many contrarian points of view (including completely investing in TIPS as a vehicle to retirement which would have suffered very little loss).

I think it was true then, and is true now, that investing in individual securities should be a portion of a retirement plan, not the complete plan. And personally I think dividend paying stocks should be given more consideration than other stocks- you know at least what you are getting each year. Of course a lot of dividends will be cut this year and next, but a lot will not be.

If you had only invested in McDonalds stock you would actually be down quite a bit- in paper value (from $65 to $55 per share). However, your dividend stream would have gone up in the last couple years.

I think the real thing the financial industry has oversold is the expected rate of return on stocks- 10% a year may not really be realistic at all. Those returns were available in the 80's because stocks in general were priced at higher and higher values, not because they were intrinsically worth more (and I would place intrinsic value on dividends).

So what this means to me, and you, today is that our expected rate of return may be a bit lower than the talking heads have suggested, and that stocks should be a part of, but not the complete solution, to a retirement plan.
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