Wall Street Steward Blog

Truth & $hare: 8/8/2013

Time to introduce a new feature on the blog – Truth & $hare. Lots of times I get asked “did you see that article in the WSJ?  What do you think about it?” In this new series I will provide color commentary to articles I have read recently. Sometimes agreeing with the author, and sometimes disagreeing…I promise to always offer my opinion on the subject. If you have recommendations for future editions, please let me know. Here is edition one.

In the news today, yet ANOTHER ponzi scheme allegedly rips investors off. This time, for $300 million. Read the recap here many red flags did the investors need? They touted a 432% return over a 5 year period! Two lessons here: (1)that is either too good to be true, or (2)they would have had to take an incredible amount of risk to produce those returns…as in betting your capital on penny stocks, etc.

So, even if those returns are possible, would you be willing to bet every penny on it? If your answer is yes, you might as well fly to Las Vegas, purchase as many chips as your net worth will buy, and walk to the nearest roulette table and bet it all on black. You could either double your net worth or go broke…but at least it will be quick.

PLEASE do not get taken in one of these scams. If you have a doubt in your mind, call me. I will give you my opinion for free. Yes, free. *%{color: #003366}F.  R.  E.  E.%*

Unlike many in the finance business, I am a Jim Cramer fan. Don’t misunderstand…I am NOT saying that his advice is always sound, but rather he is a knowledgeable financial mind who is entertaining enough to get people to listen. Lately, he has been picking on 401(k) plans, which nearly every American has, so I feel as though it is my duty as your Steward of Capital to offer my opinion on his comments. Read the full article if you’d like.

“As much as I like the tax-favored status of 401(k) plans, I need to tell you something heretical, something almost nobody else will come out and say: Most company 401(k) plans stink,” he said. “They have high management fees and administrative costs that eat into your returns, and worst of all, they typically offer you lousy choices for your investments and not nearly enough control over them,” Cramer added. “The 401(k) business is a racket for the managers who get to charge you these fees. ”They only let you choose from mutual funds, bond funds and perhaps index funds."

I happen to agree with Cramer on this topic.  Most 401(k)s offer limited choices and charge higher fees than necessary. However, as an employee, you have no control over what an employer offers you. All you can do is complain to the “higher-ups” and hope that they listen. Ask them for more choices and more eclectic investments, like Alternatives. But, DO NOT allow yourself to use these negatives as a reason to not participate in your 401(k) plan because for many Americans, that plan represents the best chance you have to save for retirement.  You being broke will not enact revenge on your company for offering a crummy 401(k) plan.