Are you managing your retirement dollars?

We should get one thing straight right away; volatility is not friend to the investor. Volatility is friend to the trader and over the past year, volatility has risen to alarming levels. Once again, I don't know what's more alarming, the level of the rise, or the length of time volatility has remained elevated. The volatility has resulted in many retail investors doing what they usually do when fear is in the air, selling in a panic. What's an investor to do? You can't trust the 'talking heads', and given recent events, you can't trust your banker, hedge fund manager, or financial advisor.

There was a time when it was said, and it was true, that fundamentals always ruled the day, at least in the long term. Tell that to someone who's been invested in the S&P for the past 10 years, they're down about 30%. If you bought the S&P 500 any time before 2008, going back 10 years, you've made no money. Companies like Hartford Financial (HIG), Citigroup (C), and General Electric (GE), all companies that in the past few months have been rumored to be on the verge of collapse, have slashed dividends and seen their stock prices trade at depression levels. Right or wrong, falling stock prices have cost investors billions.

Does this sound familiar; you're told to buy stock in a company like GE when the stock is trading at $30, forget about it for 10 years, collect a nice dividend and sleep well at night knowing part of your portfolio is invested in a company that will be around long after you're gone. Two years later the stock is trading under $10, the dividend is slashed and everyone around you is saying the company won't be around by Christmas. You sell the stock at $6 hoping to save what you have left, then two years later when the stock is trading at $30 you're told to buy the stock once again. What happened to buy and hold? After hearing for decades that buy and hold long term was a winning strategy, I can't turn on the television now without one of the 'talking heads' saying buy and hold doesn't work. Again, what's an investor to do?

It's apparent investors aren't getting the help they need from regulators. Regulators made it easy for professional traders to rout and loot the stock market. Remember rules like no naked short selling and the Uptick Rule. When these rules were eliminated, it became open season on stocks. Without these rules, it makes it easy for large quantitative funds to build programs that do the work. The fewer rules there are, the easier the programs are to build. The easier the programs are to build, the more participants, the more participants, the more programs, and more trades, and more volatility, etc.

Remember the big push a few years ago to do away with the traditional Social Security program in favor of letting you and me manage our own retirement money. Scary! The average 401k plan at most jobs is scary enough. Look real hard at those funds you have to choose from. Many times, they're funds you wouldn't buy unless you had to, but there you are, piling your retirement dollars into these funds, and be honest, you probably don't know how you should be allocating your money to begin with. I won't criticize without offering one idea. Depending on the industry, or if the employer is large enough, pool the retirement money and have it professionally managed. This framework is similar to employer insurance. This way, the employer will look for funds that offer competitive returns that match both the generally high fees charged and risk associated with the fund. Just as important, individuals wouldn't sit up at night wondering how much or whether or not to allocate to this fund or that fund. Sounds like a pension, right?

Frankly, I'm tired of listening to stories of 60 year olds saying they may have to work until 70. I don't blame the individual, I blame the system. You give a nurse $15,000 per year and say grow this money, and retire well in 20 or 30 years, and the only investment advice she gets is from self serving 'talking heads'. That nurse isn't qualified to manage her retirement, and doesn't have the necessary time to learn because remember, she has a day job.

Author Michael K. Marshall is a Chicago/Berkeley educated entrepreneur writing for the blog, papergains.blogspot.com. He is a former financial services professional having worked at both large and small financial firms. Marshall's primary areas of interests are the capital markets and financial risk. papergains@gmail.com