If Your Retirement Account Has Tanked, Then You Need to Read This! Why Buy and Hold has not worked - By: Harry Woodcock

Just about every day we hear of people who have planned on retiring using their IRA, 401Ks or other savings to supplement their Social Security benefits. Even one of the commentators on CNBC (The NBC news channel) was reflecting on her own retirement fund and said, "It has gained nothing during the last 10 years!" I'm sure she is right!

Most retirement accounts, mutual funds, and other large pension funds are invested in the S&P 500 corporations.

Unfortunately, many, many seniors do not understand how their investments are being managed, or simply do not understand the basic nomenclature of the "so-called" investment gurus.

In fact, today, (12/4/2008) I heard a very prominent mutual fund manager who is extremely experienced and respected in the financial community state, "Do not sell your funds as I expect the market to turn around momentarily and produce returns of 10% over the next 10 years!"

He obviously gets paid whether your investments go up or go down, and he needs to keep as much cash in his family of funds as he can.

I disagree with his prediction and I will explain why, as follows.

First, let's try to make the senior or novice investor understand what the S&P 500 really is, and why its members are so important to both the American economy and more importantly, to the welfare of the planned retirement community.

Why are most equity funds invested in the S&P 500? A summary of the definition from "The Wikipedia", the free encyclopedia. . . The S&P 500 is the most widely followed index of large-cap American stocks. It is considered a bellwether for the American economy, and is included in the Index of Leading Indicators. Some mutual funds, exchange traded funds, and other managed funds, such as pension funds, are designed to mimic the performance of the S&P 500 index. Many hundreds of billions of US$ have been invested in this fashion.

Companies such as General Electric, Bristol-Myers Squibb, Alcoa, Apple Inc, Black & Decker Corp., and Home Depot are just a few of the more recognized of the 500 listed. If you want to see the complete list, click on this link: http://en.wikipedia.org/wiki/List_of_S%26P_500_companies

How has this group of funds performed for the past 10 years?

The following link shows a chart of data from Yahoo.com and graphically depicts the ups and downs of the S&P 500 performance. The overall chart is for 58 years. (1950 through 2008)

To see the chart, click on this link: http://www.cabinetsoflasvegas.com/S_P500Sum

Unfortunately, if you or your financial administrator invested in the index or stocks or funds that mimicked this index, you made no headway in your account during the last 10 years.

Will the volatility continue for the next 10 years? Obviously no one can predict the future, but there simply are better ways to invest than to buy and hold, and you can do it yourself with such a little bit of effort.

There are trading systems using funds that invest in the same S&P 500 stocks that have produced returns over 27.7% annually during the same 10 year period for which the "Buy and Hold" investors received 0%.

Remember the rule of 72. This rule states that to find the number of years required to double your money at a given interest rate, you just divide the rate into 72.

If your investment earns 7.78% return, like it did for 44 years, it will double every 9.3 years (72 divided by 7.78%). So, if your $40,000 investment had grown at 7.78% for the past 10 years, it would be worth $84,771 after 10 years.

However, if you traded the same mutual funds and received 27.7% return for the past 10 years, your account would be worth $461,285.

Isn't it worth looking into a better way of getting your retirement fund back on track?

About the Author

How You Can Invest and Trade Mutual Funds, by Yourself, and Earn Over 27.7% Returns, Even If You Have Never Invested Before and Have Little Computer Experience! Live with dignity in your retirement by getting funds available that you will need! By Harry Woodcock, President Modern Concepts Inc http://themutualfundtradingsystem.com

Article Directory Source: http://www.articlerich.com/profile/Harry-Woodcock/44432

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