By Robert L. Warner, Managing Director, The Pilot Program from Johnson Financial Group
Can a market timing newsletter help you arrive safely at your retirement destination?
Several years ago, a CNN Money article, “American Airlines Employees Grounded from Trading 401 (k) Funds,” reported on pilots who had been banned for a year from trading in their T. Rowe Price 401 (k) plans because they had been following recommendations from an industry market timing newsletter. The CNN article highlighted how mutual fund companies reserve the right to limit trading for those who they view as market timers, disruptive or abusive traders. In the fund company's view, this type of trading can be detrimental to the long‐term investment objectives of the fund and potentially harmful to other investors.
Given past upheavals in the airline industry, pilots in particular have to be more diligent in creating a retirement financial plan, saving aggressively and making solid decisions in order to meet their retirement goals.
Pilots who have subscribed to newsletters are clearly taking steps to try to grow their portfolios. A number of newsletters and online financial planning sites offer tools at relatively low cost to help with some of the basics of financial planning. But for many pilots who may have more sophisticated financial planning needs, these services can only go so far. And in some cases, like the trading ban cited above, these services could even have a detrimental effect.
Investors who are considering using a newsletter or an online financial planning site should answer the following questions:
Experience has shown me that when planning for retirement, the single most important thing to have is an overriding investment strategy and plan in place. For most, a plan should seek to achieve or exceed market returns during the retirement accumulation phase, and then in retirement, seek to deliver a steady retirement income stream. Having a plan you can follow helps you stay on track for your retirement and limits short‐term or emotional decisions based on the latest investment fad or hottest fund of the moment.
Reaching your retirement goal is a long‐term proposition that should be approached with a personalized strategy based on your individual needs and goals, not run from a generic one‐size‐fits‐all tip sheet.
1 Mark Hulbert, who as editor of the Hulbert Financial Digest, conducted an analysis of newsletters from 1986 to 2010 and found that they underperformed the S&P 500 by an average 2.6 percentage points. “About 20% of the newsletters I track will beat the market, and 80% will not,” he says in the CNN Money Article.
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