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  • 3 Lessons The Facebook IPO Can Teach You About 401(K) Investing

    During the past several weeks, our advisers have addressed one question over and over with our members: should I buy Facebook?

    The Facebook story has further unfolded during the two weeks since the IPO - Initial Public Offering - on May 18th when the company became publicly traded.

    Of course the story hasn't exactly played out the way many pundits expected. The level of enthusiasm coming from some camps was simply the latest example of emotions-driven investing gone wild.

    There's no question the Facebook story is a great one, but the substantial wealth Facebook's founders produced for themselves didn't appear overnight. The company's success created an illusion, for some investors, that the IPO would give the everyday investor an instant pathway to wealth and prosperity. And, let's be honest, the desire to get-rich-quick is a natural part of the human psyche. We'd all love to hit the jackpot, but gambling isn't investing.

    There are a few reminders we can take away from the whole Facebook IPO affair:

    1) Don't get caught up in the hype and emotion of the stock market. Avoid the expectation of overnight success. Remind yourself that short-term, emotions-driven investing is more like a weekend trip to Vegas and less like well-researched retirement planning. Instead, create a long-term investing strategy based on your individual situation. Invest in mutual funds from the asset classes that are appropriate for your retirement strategy. This well-planned diversification will allow you to avoid the stress of often-dramatic swings in the price of a single company's stock.

    2) Planning for retirement takes work and a strategy tailored toward your goals. Do your homework in order to determine the best course for you; an appropriate plan is essential. If you're not comfortable creating your own plan, talk to someone who offers retirement planning services and isn't trying to sell you on a specific product.

    3) When retirement investing is involved, think long-term. It will help you zone in on your investments' real value. Preparing for all possibilities is important; you or your adviser can do so by creating an appropriate long-term strategy. Then check in on your retirement investments quarterly. And, just as companies like Facebook evolve and adapt to different business environments, your 401(k) investment allocation can be adapted so it continues to fit your long-term strategy. You'll want to revisit your strategy yearly to ensure it continues to fit your goals, risk tolerance and time line to retirement.

    If you want to discuss your long-term retirement strategy or have other 401(k) investing questions, call our adviser team at 877-627-8401 or email us at info@smart401k.com.

    Your Turn:

    Have you learned any lessons from the Facebook IPO or any other high-profile IPOs? Let us know in comments section below and speaking of Facebook, be sure to 'Like' Smart401k so you can follow all our commentary.

    Andrew Thomas

    Smart401k Associate Representative

    Photo credit: Robert Scoble

    Return to the Smart401k Blog homepage>>

    About Smart401k

    Smart401k is a web-based investment advisory service providing unbiased recommendations to help people invest in employer-sponsored retirement plans. Smart401k provides service to nearly 11,000 clients who collectively have more than $2 billion in assets. Plan participants receive personalized, fund-specific investment recommendations and the support of professional investment advisers available to discuss all investment questions. Based in Overland Park, KS, Smart401k is online at Smart401k.com.

    Jun 06 3:25 PM | Link | Comment!
  • 3 Considerations When Contemplating A Career Change

    The decision to change careers can be a difficult one to reach. You have likely found yourself wondering is the new field where I want to be? Is it the right time? What are the financial ramifications? How will it affect my personal life?

    Am I comfortable starting over and what if it doesn't work out? It's impossible to know the absolute answer to all of the questions before making the leap, but a little planning can go a long way toward making the transition a smooth one.

    Economic considerations: Before making the jump into a new career it's a good idea to have a solid understanding of the job/market prospects in the field, especially relating to where you want to live. Friends or family in the field may be able to give you a better idea. Another great option is to find a business mentor in the field to provide these answers and help guide you in your new endeavor.

    Education/Training considerations: What are the education, training, and licensing requirements for the new career? Depending on the requirements, you may be able to obtain some or all of these before completely making the jump to a new career. With night and online classes so readily available it may be possible to continue working while acquiring the needed education or licenses.

    Financial considerations: This area can vary widely based on the specifics of your situation and the requirements of the new career. It can also be one of the biggest factors determining how smoothly the transition goes. In no particular order:

    Understand the cost of new education/training/licensing as part of the transition.

    Understand the typical pay structure in the new field. Will income change or the way you are compensated?

    Be realistic and create a budget. Also a good time to consider reducing expenses and outstanding debt.

    Establish an emergency fund. This is very important so that unforeseen financial expenses don't prematurely derail you in the career change process.

    With the cost of healthcare these days, the availability of benefits is important as well.

    Finally, avoid the temptation to use your retirement accounts to finance the transition. Your long-term retirement goals are very important as well and using the funds prematurely can be costly.

    The process of making a career change can be overwhelming, but a little planning can make it much easier. If the new career is where you want to be, it could be well worth the effort.

    Your Turn: Did we miss anything? What other considerations did you have when you changed careers? Let us know in the comment section below.

    Randy A. Schaller, CFP®

    Investment Advisor

    Photo credit: Ben Chaney

    Return to the Smart401k Blog homepage>>

    About Smart401k

    Smart401k is a web-based investment advisory service providing unbiased recommendations to help people invest in employer-sponsored retirement plans. Smart401k provides service to nearly 11,000 clients who collectively have more than $2 billion in assets. Plan participants receive personalized, fund-specific investment recommendations and the support of professional investment advisers available to discuss all investment questions. Based in Overland Park, KS, Smart401k is online at Smart401k.com.

    Jun 06 3:24 PM | Link | Comment!
  • Digging Out Of Debt – Only Part Of A Plan

    Credit cards, student loans, car payments, personal loans, and mortgages, are but a few contributors to what can become a crushing debt burden. In a rush to alleviate the burden and get your head above water it can be easy to lose sight of the bigger picture.

    Sure, nobody wants to find themselves under the weight of overwhelming debt. But if you do, it does not mean your financial plan should focus on nothing else. It's tempting to pour all your energy and resources into eliminating debt. Much satisfaction can be derived from the systematic whittling down of your outstanding balances each month.

    Don't forget, you still want to retire someday. Also, once you're out from under this debt you want to make sure to avoid the things that got you there in the first place.

    What type of debt are you dealing with and what are the interest rates being charged? Credit cards are notorious for high interest rates. So all of your resources should go toward paying these off as quickly as possible right? Not necessarily.

    Unfortunately, life doesn't stop just because you are focused on paying off your debt. It's a good idea to establish a rainy day fund so you don't find yourself swiping that card to pay for the unforeseen car repairs or other sudden cash needs. As you climb out of the "debt hole" it's important to make sure you don't slip and fall further down.

    Your long term goals are important too. Some would argue that high interest debt should be eliminated even before focusing on retirement savings goals. After all, look how high that interest rate is, an investor would have to earn an even greater return on their investments to justify saving over paying off the debt first.

    Well, what about your work retirement plan? Some employers offer a generous matching contribution to their participants. This matching contribution can provide an outstanding return on an investment in your own future. Depending on the employer's contribution and your own contribution this could amount to a 25%, 50%, or even 100% boost in your return, which is too good to pass up.

    So, what should you do when digging out of your "debt hole?"

    • Establish an emergency fund to cover unexpected expenses
    • Remember your longer term goals. Take advantage of the employer match.
    • Explore options to reduce rates on high interest debt. You may be able to negotiate a payment plan at a lower rate or transfer the balance. With certain loans, it might be beneficial to refinance if eligible for a lower rate. Focus on the highest rates first.

    It never hurts to contact your debtors and explain your situation; you may be surprised by their flexibility if you simply ask. The important thing is to avoid tunnel vision when it comes getting out of debt. Your debt repayment plan is simply one piece of a sound personal financial plan.

    Randy Schaller

    Investment Adviser

    Photo credit Images_of_Money

    Return to the Smart401k Blog homepage>>

    Smart401k is a web-based investment advisory service providing unbiased recommendations to help people invest in employer-sponsored retirement plans. Smart401k provides service to nearly 11,000 clients who collectively have more than $2 billion in assets. Plan participants receive personalized, fund-specific investment recommendations and the support of professional investment advisers available to discuss all investment questions. Based in Overland Park, KS, Smart401k is online at Smart401k.com.

     

    Apr 13 4:05 PM | Link | Comment!
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