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401-K Investors Must Fight Back By Charles Payne

There is a section of Americans, a very large list, which should be lighting torches and demanding changes. People pouring a portion of their paycheck into 401-K retirement plans with very few options must stand up and demand wider opportunities for their hard earned money. Consistent contributions add up, but after fees and poor performance there isn't much difference from a regular savings account unless there is an employer match. For those that continued to contribute through the meltdown it paid off well. According to Employee Benefit Research and Investment Company Institute, the average value of 401Ks with steady contributions from 2008 through 2009 climbed to $109,723 from $83,161.

There is no breakdown as to how much was a return in the market and how much was principle contributions. These two companies cover 21 million plan participants, 51,852 plans and $1.21 trillion in assets. Wow, almost 52,000 different plans. There is no reason for investors to have a plan that limits what you can do with your money. If this sounds like your company then look to rattle some cages. There are committees at every business, let them know you want greater choice not just a slate of mutual funds that really aren't different and a handful of stocks picked with a greater hope they don't go down rather than being picked for upside potential.

Sure, these mutual funds invest in household names in large industries, but it seems that size matters more than the ability that can drive a superior return. The idea that you can buy a bunch of mutual funds and lock them in a magic box and ride off into the sunset is preposterous. They aren't like Chia Pets where you just add water and watch them grow. On the other hand, during the course of this Great Recession so many people dipped into their retirement funds that they're going to need outsized returns as they are making up for lost time along with the hits they've already taken. That brings me to the piece in the WSJ a couple weeks ago.

Only 8% of Americans have the amount in their 401Ks, which when coupled with social security benefits and pensions, would provide for comfortable retirements. This is based on the assumption a household needs 85% of median income, or $75,545. The average 401K holds $149,400, and that would get you $9,073 a month in retirement coupled with $35,080 from social security (a number I find high) and $26,500 from a fully funded pension, and you would still be $3,892 short. And, for many Americans, this is a best case scenario.

No matter how you invest, these there are critical rules:

> Diversify
> Continuously Invest
> Don't Borrow/Cash Out

I recently did a portfolio review and found the investor holding four different funds from a mutual fund company. Checking out the top ten holdings of these funds I found what I always find. This investor who felt diversified was anything but. He's not alone; just about every portfolio we review reveals the same thing. People are just pouring money into the same names over and over believing they have a balanced approach. In many ways, it's not just heartbreaking but an outrage that must be addressed. Consider the portfolio review I'm referring to. This investor could have been invested in 40 different companies but instead he only had exposure to 11. Only 11 names in four separate funds!

Of these names, only three (AAPL, GE, and BAC) beat the Dow Jones Industrial Average over the past two years. I bet this is the same for almost everyone reading this piece right now.

I'm a bigger fan of IRAs, and especially Roth IRAs, because you have greater control and I like the tax treatment. If you are in a 401K program at work and you have a full match then take advantage, but make sure they give you real options. I happen to believe people should be allowed to invest their social security contributions in the stock market. I know many would say during the meltdown retired people would have been decimated. That's simply not true. First off, the overall market would have been in strong hands so the selloff would have been mitigated to start with. Secondly, fresh money would have cascaded into the market, buying the absolute lows.

Forget the Comfort Names

You are not going to be ready for retirement doing it the way the commercials tell you to do it. You better take greater control of your retirement. I think an active portfolio is the best way to go about this, and while I'm not talking day trading, I'm also not talking about parking your life savings in lumbering giants that limp along eating up your time and opportunities. I actually think it's disingenuous to buy only names that seemed to have peaked as far as outsized growth knowing it might bring comfort but little in return to investors. Of course, the fund's fees get paid through ups and downs, and wasted opportunities.

Tiki and Runaway Spending

The official number comes out next week but it looks like February will be another record for government largess and irresponsibility. Our federal government has outdone itself, big-time, with a $223.0 billion deficit in February. The Administration managed to overspend more in a single month than President Bush did in any given year. This is really shocking, but it's no longer considered "man bites dog" and most people have no clue about how deep and red this ink runs and weighs on their lives. For those that gush we can do this damn near indefinitely, they are aiding and abating what will one day be like an economic nuclear bomb exploding in America. Sure, that explosion is further away than the worst prognostications, but it's still mounting.

For those so arrogant and selfish as to actually relish this out of control and reckless spending, I submit Tiki Barber. A report late yesterday says the former running back is coming back to the NFL. In a statement, he apparently pointed to the fun his brother is having as the reason for wanting to strap the chinstraps back on. I met him once and he was a little standoffish at the time, the hot TV prospect with a great smile and big-city connections. His TV career was already disappointing when he left his pregnant wife for an intern at NBC. His wife was giving birth to twins while he was chilling with the younger intern, and this was a deathblow. Citing a morality clause in the contract, NBC cut Barber loose.

Tiki had it all, and put it on cruise control. Surely he must have weighed the pros and cons, at least for a couple of minutes, but gushed he could do no wrong. Now he's broke and persona non grata in lucrative businesses like TV and marketing (although he might have a shot at the old Charlie Sheen role on "Two and a Half Men"). He had a great year the last time he played back in 2006, when he rushed for 1,662 yards and five touchdowns. But, at 36 years old he's going to find it an uphill climb.

The same is in store for America when it finally has nowhere else to turn except making an uphill climb. The country will have to take vicious hits, get knocked down, and find its greatness of yesteryear will do it no good when it's grinding it out loaded down by debt and despair.

Today's Session

Stocks appear cautious and timid this morning, although I thought NASDAQ futures would be down a lot. There are many factors slowing the market into this tiptoeing position. Overall, the market is worried, but not afraid per se. Investors are scrambling to find new places to park cash and also to slower moving niches, while higher beta names continue to pullback. We are going to have a couple of low beta names for you, but today I have a truly undiscovered growth name that fits with a couple of critical themes in the world... food and sustainability along with growth potential.