In a WSJ article Jason Zweig reminds readers that “Fear and Greed: 2 things you shouldn’t invest in”  and that “there’s nothing like a missed opportunity to bring out the greed”. He is talking about people who like those reported in an earlier article, “Many bought shares high, sold low”, that they couldn’t deal emotionally with the stock market losses and dramatically reduced their equity holdings earlier this year. Of course they missed the last eight week rally as well. Zweig is often asked whether it is too late to get into the market now. His advice is to use “disciplined systems” which “separate emotion from reason”; these systems are anchored on asset allocation models accompanied by a disciplined rebalancing when asset weightings move out of planned ranges.

The NYT’s Ron Lieber writes in “Stirring up the right investment mix” about new services available on the web, like MarketRiders , which for $10/mo and a few questions on “your age, time horizon, investment experience and risk tolerance… it spits back a suggested asset allocation” and a corresponding ETF based portfolio implementation. More personalized hand-holding/coaching is available for $399 and they will do everything for you for 0.5% of assets. Portfolio Solutions and AssetBuilder also offer complete asset allocation and portfolio services for 0.2-0.5% of assets using low cost index approach for implementation. Some free portfolio model sources are also mentioned. (You can also find some typical asset allocation model with corresponding ETF implementation here, e.g. Simple and Cheap ETF Implementation of a Balanced Portfolio ) Lieber concludes with “But in the end, it doesn’t much matter which option you choose. All you need to do is stick with it over the long haul, and you’ll outperform the vast majority of professional stockbrokers”. (I haven’t tried any of these services but they sound like a business opportunity for the provider. Note that for a Canadian investor, the appropriate asset allocation is different than for a U.S. based investor due to tax and currency considerations.)

On a related topic, Jonathan Chevreau asks “Are you better off alone?” . He talks about high mutual fund and wrap account fees. His advice is “cut costs and maximize your Web-based flow of information. But also be willing to pay for a good financial plan and occasional monitoring of its progress. – Jonathan Chevreau uses a discount broker and gets guidance from a fee-only advisor.” (Sensible advice.)

Charles Farrell writes in InvestmentNews that “Now may be the time to buy that vacation home” for retirees based on comparing cost of buying and renting. He runs through the analysis and even after the current 30-50% lower property prices in retiree favourites like Florida and Arizona, and assuming that you intend to occupy (i.e. rent) the property for even 5-6(!) months a year, he concludes that renting is cheaper. He includes in his calculation forgone income from asset to buy (i.e. tide-up in) the property. If he includes an assumed 3% annual long-term property appreciation, then it becomes more of a breakeven proposition. (His assumed 2-3% maintenance, taxes, insurance, assessments, etc is way too low for Florida’s east coast where property taxes alone are 2-2.3% for out of state residents.) He concludes with “At the end of the day, it is really a lifestyle choice…(it would be reasonable to) rent forever, which generally provides more flexibility and less risk.” (Yes it is a lifestyle choice, not an investment.)

The WSJ refers to a research report from the Center for Retirement Research by Sun and Webb where they discuss “How Much Do Households Really Lose By Claiming Social Security at Age 62?” . The bottom line is that, unless you need the money to live on (or your know that your life-expectancy is much lower than average), due to the built in  longevity insurance (and fully inflation indexed income stream) starting Social Security (and it applies to Canada Pension Plan as well) payments closer to 70 than the permitted 62 is a better decision.

Lucy Warwick-Ching  Financial Times article  “Wealth managers fail to deliver returns” discusses how truly difficult  it is to out-perform using market timing. “One of the problems has been that managers remained too cautious going into 2009 and were too slow to de-risk their portfolios. Many of them put the brakes on too late and those that came out of equities in the third and fourth quarter of last year missed the rally when equities went up.” (Buy-and-hold- your name is not mud!)

Free lunch and an “educational” seminar? Well not quite according to Jennifer Levitz writing in the WSJ’s “Laws take on financial scams against seniors” and states are cracking down with doubling civil penalties. Examples where seniors were sold inappropriate investments through free lunchtime seminars are increasing with the recession. An example of an 82 year old lady who “was sold a complex annuity by a broker at a senior seminar, when she thought she was buying a certificate of deposit. ”I had never been involved in handling the finances — my husband did all that. I guess I was just too trusting of this fellow,” she says. She says the investment restricted access to her nest egg so much that she couldn’t afford to replace the drafty windows in her house”. Questions to ask before you fall for the sales pitch include: risk, total (ongoing) investment commitment, liquidity, surrender charges, suitability. The article also provides a number of educational links on financial fraud, such as North American Securities Administrators Association . Product sold in seminars and one-on-one sessions with ‘advisors’ include ones which often come with punishing fees such: reverse mortgages, deferred annuities, variable annuities and other products promising to protect the downside while allowing participation in the upside. (You can read about these elsewhere at this website: reverse mortgages, annuities and GMWB –like products.)

Jamie Golombek in Financial Post’s “Do it yourself filers should still let a pro review their return” advises DIY tax filers, that a review of the return by a pro may be a good investment. Mistakes/oversights can be expensive. He gives examples.

And for a few ‘interesting’ pension related articles we start with Jilian Mincer writing in WSJ’s “Lump sum distributions become harder to get” that U.S. law restricts lump-sum payouts when pension funding level goes below 80%  and halt payouts at 60%. In the U.S. the PBGC insures benefits up to $54,000/year. (This will no doubt lead to significant pension envy among Canadian pensioners with underfunded pension plans from financially shaky companies.)

In “CPP fund records worst return in its history” the Ottawa Citizen’s Karen Mazurkewich writes that Canada’s CPP lost four years’ worth of contributions in the past year’s $23.6B (18.6%) loss. (I suspect that CPP contributions could be increased if necessary should assets and liabilities become irreconcilable for an extended period.)

Still on pensions in the ‘too little too late!’ category, in Ottawa Citizen’s “Court names Toronto law firm to represent Nortel pensioners” Bert Hill reports that Koskie Minsky was named to represent employees, ex-employees with severance grievances, and pensioners. (The judge actually wrote that KM is appointed “sole representative counsel. Written reasons to follow on May 26/09.”) It will be interesting to read the reasons and who is included in “representation” and what steps if any the excluded firms and their clients may take next.) But the other story discussed in the article (not mentioned in the title), is Nortel’s proposed reduction in CV (commuted value) payments from 86% to 69% for future payments. (The good news is that this will reduce the bleeding of the already underfunded pension assets in anticipation of the ramp-up of further downsizing in Canada; the bad news is that this should have done at least immediately, if not before, bankruptcy protection was declared. The even worse news is that the 69% is still based on overly aggressive assumptions of what the final annuity based haircut pensioners would have to take upon windup. Therefore 50-60% interim payout would be a safer number to proceed with until the actual outcome is better understood- see my upcoming blog “Too little too late” this weekend.)

And finally, Andrew Edgecliffe-Johnson writes in Financial Times’  “Media’s want to break free”  that “consumers, used to having a free ride on the information superhighway, are about to be confronted by many more tollbooths.” On-line content has increasing been offered on the assumption that advertising revenues will cover costs of generating content. Business model evolution could affect one’s free access to read the articles referred to in these (and other) blogs. The ideas bandied around range from traditional subscription services, to tiered services, hybrid models, pay-per-view or micro-payments. Some predict that “Professionally produced content, however, is likely to become much scarcer for those unwilling to pay for it.”