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Rethinking Retirement: Fixing Your Portfolio

KRON, November 20, 2001

(KRON) — You’re about to meet a guy who lost a quarter of a million dollars. He’s not a rich man. He’s like a lot of investors who’ve recently seen their retirement funds tank.

What’s an investor to do? Well, we took three investors in their 30′s 40′s and 50′s … All hurt by the recent market downturn and each agreed to disclose whats left of their nest eggs so you can learn what it takes to get back on track.. Drew James is a 52 year old semi-retired consultant whose 401k losses add up to $230,000.

Judith Klinger is a 41 year old attorney turned school teacher with a roll over IRA losses… $20,000.

Josh Weinberg is a 35 year old P.R. consultant whose 401k/IRA losses add up to $78,000. Each of these people are stock market investors from different age groups who suffered huge losses. Financial planner Joyce Franklin sees each having a different strategy to get back on track. “I come out here at night, sit in a chair, have a glass of wine.”Josh Weinberg says he enjoys the view from his San Francisco apartment but after his retirement fund lost thousands, he may have to move.

“Back at its height it was $100,000 dollars, says Weinberg. “and now it’s about $40,000.” But financial advisor Joyce Franklin says, “You have time for your portfolio to grow and your decision now is how you want to invest it.” With 18% invested in Intel, Joyce says Josh is heavily invested in his former employer’s stock. “I know you have very strong feelings about how that company’s going to do in the future,” says Franklin, “but it’s still making a big bet on one company.”

Her rule of thumb is no more than 10% in employer stock no more than 20% with any one stock. Also, Josh has 80% of his investments in large cap companies like Disney and Johnson&Johnson. Joyce says spread out those investments. “You should probably have as much of your portfolio as you can stomach in equities rather than bonds or cash,” she says.

Judith Klinger gave up her law career for teaching. She had no idea eight years later she’d lose $20,000 she’d socked away for retirement. “It makes me sad but on the other hand i’m not right around the corner to retirement,” says Klinger.

But her investments are too conservative for her age. Joyce would cut her bond investments from 19% to just 5%, putting the rest in riskier stocks. “There is no reason to have bonds because historically stocks have out performed bonds with a long term time horizon,” says Franklin. Judith also has heavy investments in international stock.

Joyce says cut that investment in half. “I’d like to see you have more of your portfolio in large cap U.S. stocks and more in small caps,” advises Franklin. 52 year old drew james retired last year to take up songwriting. Between savings and his 401k he thought he’d had enough for retirement. “At it’s highest point it was at $720,000, and now it’s down around half a million,” James says. “That age 55 has been pushed off to the future,” says Drew, who’s back to work part time. But James had 100% of his money in stocks. Much of it’s invested in his 401k plan, untouchable for 3 years.

“Move the bulk of your investments that are outside your company stock into the S&P 500 fund within the 401k plan and then use assets outside of your 401k plan to satisfy the other asset classes,” suggests Franklin. Because Drew is near retirement, Joyce says bonds should be part of his mix.

“In this environment, corporate bonds are a good place to be, treasuries are not as good because you know the interest rates are dropping.” Just to mention, none of the investors you met are Joyce Franklin’s clients. We brought them together for this story.

And one last tip, Joyce says if you’re unsure about picking stocks yourself, mutual funds are an excellent way to diversify and allow a professional to pick specific stocks for you.

© Copyright 2001 by KRON 4 TV. All Rights Reserved.

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