Letters to the Editor
To the Editors:
I follow your Mutual Fund portfolio [last reviewed in the February 2007 AAII Journal; information is available in the Model Portfolios area of AAII.com]. In fact, I use the guidance for about 40% of our investment portfolio.
I thought you might be interested in a different perspective on international exchange-traded funds (ETFs):
- There probably is something to the notion of global investing and the fact that we are engaged in a ‘global’ economy;
- America, as a country and a market, although strong, can no longer be considered the predominate market driving the world;
- Lots of very stable countries and markets exist with millions of responsible and committed investors and businesses—in short, there probably is no longer a reason to fear the ‘foreign boogieman’ for established countries and markets;
- Global investing approaches diversify risk by smoothing out issues of currency fluctuation and economic cycles in a particular country/region; and
- ETFs focused on foreign markets with high-quality indexes provide a very low cost way to capture this diversification of economic cycles and currency fluctuations.
My thoughts are that foreign ETFs represent a low-cost way to capture excellent diversification and participate in the ‘global’ economy.
Jim Cloonan Responds:
I am giving serious consideration to more emphasis on international investments, and I think the most effective place to start would be in ETFs where costs are more reasonable. There is no question that business-wise we are in a global economy. Since American and many foreign firms are so internationally diversified, part of globalization is taken care of with many firms regardless of where there home office is. I do believe, however, that it may be time to invest in stocks tied to different economies even though economic conditions tend to travel gradually throughout the developed world. I am looking into the possibilities.
To the Editors,
I read with interest your Journal from cover to cover and in general find it very informative and complete. However, I was rather surprised in reading the article on life cycle funds that no mention was made of the fact that this alternative investment strategy necessitates another significant layer of management expenses on top of the expenses associated with the underlying mutual funds [“Choosing the Right Mix: Lessons From Life Cycle Funds,” by William W. Jennings and William Reichenstein, January 2007 AAII Journal].
I feel that life cycle funds are only suitable for those who are completely unequipped to make even the simplest investment decision on their own. Who would want to spend another 1% of his/her assets each year to have an investment company reduce the equity mix by 1% and add it to the bond mix every year or two?
To the Editors:
As a longtime member of AAII, I eagerly reviewed “Invest or Delay? Strategies for Taking Social Security Benefits,” by Christine Fahlund, CFP [February 2007 AAII Journal]. It was a good read, but focused only on the strategy for a man earning top dollar with maximum years in the labor force. I wondered to what extent the analysis applied to me as a woman with something less than the maximum number of years in the labor force.
There is a resource called Quarterly Workforce Indicators (QWI) now available from the U.S. Census Bureau that offers economic data suggesting that women have to make significantly different kinds of retirement choices compared to men.
For example, women outnumber men in the labor force if they are younger than 25, or if they are between the ages of 45 and 65. As another example, women earn an average monthly wage that’s about 60% of the wage earned by men.
These two work patterns infer that women do not have the same access to employer retirement plans, may not accumulate the maximum number of years, and may not gain the leverage in the calculation of retirement plan benefits that men have.
It seems to me that the retirement strategies adopted by women must necessarily be different from the retirement strategies adopted by men.