Don’t be passive when managing investment costs

As you know, gains in your stock investments are not guaranteed, even though it may feel like it if you’ve been invested in the market for the last decade.  Looking at the last five years, the S&P 500 index has increased an average of nearly 17% annually, with only minor corrections along the way.  In fact the S&P 500 returns have been so consistent that most large cap equity funds haven’t been able to beat this performance. Over a five year period only 17.6% of large cap equity funds beat the S&P Index (see exhibit 1 below).  In other words, if you had simply invested in the S&P 500 index then you would have done better than the majority of professional stock investment managers. But that’s not the end of the story. Even if you had invested in a fund that tracks the S&P 500 index, you still could have under-performed depending on the fees you paid to the investment company that managed your money.  Continue reading “Don’t be passive when managing investment costs”

How much money do I need to retire?

I was recently asked by a friend if I’ve calculated the amount of money I need for retirement, and if so, how did I do it?  I think he was surprised by my response that I calculated the amount a long time ago when I first started working and have been updating the plan numbers every year based on new information. I asked him if he had a retirement plan and his response was that he’s also been saving for retirement since he started working many years ago, but his “plan” was to save as much as he could, whenever possible.  Continue reading “How much money do I need to retire?”