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Retirement Savings for Late Starters

You can do well enough to take control of your retirement, rather than just drifting toward it like a canoe heading for the waterfall.

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This Week’s Fortune Cookie

Retirement Savings for Late Starters

In Case You Missed It


In this week’s market review, I point out the obvious, which is that the market was not pleased with the Fed’s repeated hint that it would eventually taper off its asset purchases. The sharp drop in the markets turned Cabot’s short- and medium-term market timing indicators negative, which means you should work toward selling your losers and laggards and keep new buying to a minimum. I look at the negative reaction on many stocks and discuss a few that are actually holding up pretty well.


Retirement Savings for Late Starters

I think this may turn out to be a rant, so I apologize in advance.

Investment gurus are a predictable bunch, and they dispense almost identical advice.

• “Start young!” they tell you, pointing out that just $250 a month in a Roth IRA starting at age 23 will have you within spitting distance of a million bucks by the time you roll into age 65.

• Live a disciplined life—no Starbucks lattes or Cristal champagne—buy the sensible used car and practice moderation and blah, blah, blah.

• Diversify, take the long view, get a financial advisor, rotate your tires and drink eight glasses of water a day.

It’s enough to give a man a sour stomach.

The fact of the matter is that many of us are too old to start young. And I speak from personal experience.

I came of age during the 1960s, and for the four years I was in the Army and the six years I spent in grad school eating cheap and drinking cheaper (Wisconsin Club at $0.99 an eight-pack!), retirement planning was the last thing on my mind. Graduate students have shallow pockets, and buying new record albums (remember those?) and books and more books soaked up any leftover cash.

After I started teaching college, the pay was wretched and the retirement savings plan was pitiful. I loved teaching, but financially, things didn’t pick up until I left the ivory towers behind and hooked up with a big Boston financial house, which was well into my theoretical peak earning years.

Throw in a couple of major market corrections and you have a recipe for a retirement fund that’s closer to the 98-pound weakling than to Charles Atlas.

I’ve been playing catch-up for years, and I’m getting a little more comfortable with the idea of retirement, although I imagine I’ll probably follow in my dad’s footsteps and work as long as I can drag my bones out of bed. Life is just more interesting if you stay useful.

But I suspect there are a lot of people out there who have gotten sufficiently terrified about the state of their retirement savings accounts only recently as their personal odometers have ticked over into the fifties and sixties. And when they start looking for retirement advice, what they run into is the “start young, diversify, stay the course” crap that financial advisors dish out.

To paraphrase Jethro Tull (now there’s a generational touchstone if there ever was one), you’re too old to start young, but too young to retire.

The mutual fund people (who make money by taking a yearly cut off the top of what they manage for you) tell you to just keep shoveling money into your diversified account and leaving it there. And if you’re a little older than you should be (given the amount you have in your account), you need to shovel more.

But the mutual fund people and the financial advisors seldom acknowledge that it is possible to beat the broad market by strategically investing in growth stocks. The Cabot Market Letter has done it for years. And when markets are in an uptrend, the Cabot China & Emerging Markets Report can also gather momentum quickly.

Personally, although I’m not a certified financial advisor, I think that anyone who’s concerned about the state of their retirement funding ought to think about putting 10% of their stock portfolio into growth stocks, with at least half of that in aggressive growth stocks.

Managing an aggressive growth portfolio isn’t easy. It takes hours of study and analysis, and you have to be prepared to live through some dismaying downmoves as stocks hit the rocks from bad earnings reports, scandals, market downturns and inexplicable failures to thrive. But if you have an advisory that will get you out of the market and into cash when the tides turn against you—as both the Cabot Market Letter and Cabot China & Emerging Markets Report will—and a sell discipline that will cut your losses short, you can do well enough to take control of your retirement, rather than just drifting toward it like a canoe heading for the waterfall.

If this seems like a rant, well, I guess it is. I think people have been sold a bill of goods by the financial industry. But you don’t have to just sit there while management fees and inflation let the air out of your retirement party balloon.

Get to work! And we’ll help.

Here’s this week’s Fortune Cookie. Remember, you can view all previousContrary Opinion buttons here.

“Don’t look for the needle. Buy the haystack."-John Bogle

Tim’s Comment: Bogle’s advice was great in the bull market of the 1990s, especially for the average investor, who tends to enter the bull market too late, buy the popular stock, and then hold too long as it goes down. But for the past decade’s market, and perhaps the next as well, buy-and-hold has been beaten by market timing combined with astute stock selection, and in the long run, it will always be so.

Paul’s Comment: John Bogle, the founder of The Vanguard Group and the Grand Guru of index investing, tells people to put their money into low-cost index funds and just leave it there. He argues against actively managed funds (high fees) buying individual stocks (too much risk). I admire Bogle a lot; he’s very smart and he’s probably right about keeping costs down. But

I can’t agree that “buying the haystack” and just sitting there is the cure for investment woes. And anyone who got swatted by the 21st century’s two bursting bubbles would probably agree. Cabot has a lot to say to investors who want to be less passive in building their retirement portfolios, and finding a few golden needles can make a huge difference to your portfolio.


Update on Cabot Investors Conference: The first-ever Cabot Investors Conference is in less than two months—on August 14-15 at the Hawthorne Hotel in Salem, Massachusetts. If you’re planning on attending the Cabot Investors Conference but haven’t reserved your spot, we urge you to register now!

Why Should You Attend the Conference?

*Interact with like-minded investors from all over the U.S. and Canada

* Enjoy a comfortable atmosphere with a unique opportunity to really get to know the Cabot advisors and your fellow attendees

* Participate in presenters’ conversations to strengthen your mastery of investing strategies

* Learn about the Cabot investment processes to boost your returns

How Will You Benefit from the Conference?

*The intimate setting will allow you to interact easily with Cabot editors and other participants.

* Cocktail reception/Breakfast/Lunch will offer casual networking opportunities

* You’ll leave the Conference with the latest investment recommendations and timely insights

If you’re interested in joining your fellow investors at this very special event, please act quickly (note that the Conference discount at the Hawthorne Hotel expires July 13).

In case you didn’t get a chance to read all the issues of Cabot Wealth Advisory this week and want to catch up on any investing and stock tips you might have missed, there are links below to each issue.


Cabot Wealth Advisory 6/17/13—Apple Has Bottomed, But Should You Buy It?

In this issue, Tim Lutts, who captains Cabot Stock of the Month, looks at the psychology of investors and three ways they can improve their performance, including keeping losses small, learning to read charts and analyzing revolutionary potential. He also advises against buy Apple (AAPL). Stock discussed: Yelp (YELP).

Cabot Wealth Advisory 6/18/13—How Algorithmic Trading Affects You

Robin Carpenter of Cabot ETF Investing System writes in this issue about High Frequency Trading, which is computerized trading that tries to exploit tiny advantages in information. Mostly, he says, there’s little danger to ordinary mortals like us.

Cabot Wealth Advisory 6/20/13 — What To Do With Your Dividend Stocks Now

Mike Cintolo, editor of Cabot Market Letter, discusses the turnaround of a long rally in income stocks. He thinks interest rate concerns are overdone, but has some advice for handling what looks like an “income pickers market.” Stock discussed: Seaspan (SSW).

Have a great weekend,

Paul Goodwin

Editor of Cabot China & Emerging Markets Report

and Cabot Wealth Advisory


Paul Goodwin is a news writer for Cabot’s free e-newsletter, Wall Street’s Best Daily.