“Past performance is no guarantee of future results.”
This is one of those legal incantations of gravity and vague importance that 
have become so familiar that we do not fully appreciate the meaning. “You have the right to remain silent.” is another example.
The past performance phrase is often spotted at the bottom of mutual fund ads. The rest of those ads, of course, generally do little else than tout past performance.
You cannot fault the fund companies for their focus on old return numbers. When you get down to it, there is not that much else to say about a mutual fund that would make good ad copy. Airbrushed glamour shots of the fund manager will not sell many shares.
Alas, the Wall Street Journal’s Fund Track column recently carried the argument, lifted from a recent academic paper, that the past performance disclaimer is obviously not adequate.
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This past weekend the Wall Street Journal managed to concoct a little excitement around something only a nerd like me could find exciting, the rolling over of 401k accounts. The article, variously titled “The Grudge Match Over Your 401(k): Employers and financial firms vie for control of your savings.” or “The 401(k) Wars: Fighting for Investors Cash” uses photos of an NFL player for illustration. (He is quoted at the end.)
The gist of the piece is that after years of acting with relative indifference to ex-employees taking money out of their 401k plans, companies are suddenly trying to discourage this behavior.
A company might want you to keep your assets in the 401k it sponsors because it wanted its plan to be a large as possible, which might lower average costs. This is a fairly modest incentive, however, as evidenced by how long it has taken for most companies to get around to doing anything about it. And for some employers, the cost of keeping an ex-employee in the system might actually be greater than the savings from having a bigger plan.
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This past weekend the Wall Street Journal carried a somewhat confused article on what we hip investor types call cash. Just to be clear, what we refer to is not literally cash, not slips of paper with pictures of dead politicians, but rather highly liquid assets we can use to buy stuff. Like a checking account.
I say the article is confused (and confusing, for that matter) because although it starts with important reminders about how chasing slightly higher yields on cash caused many investors great pain in the fall of ‘08, and then repeats the equally important principle that “the only way to boost yield is to take more risk” it promptly explains how to boost yield by taking more risk with your cash.
Generally speaking, the interest rate you get paid on cash deposits, in money market funds, short term Treasuries, and the like, is very low. It usually approximates the inflation rate, meaning that with a little luck the real value of your cash treads water.
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I have just discovered that Consumer Reports, the go-to place for the lowdown on vacuum cleaner reliability, also gives personal finance advice. Who knew? Today I stumbled across their Money Blog, which carries a post on how 
you should pay off your mortgage before you retire. It is enough to make me worry about their vacuum cleaner wisdom.
Permit me to quote the first two paragraphs:
Back when the stock market seemed to go in only one direction—up— you could make a decent case for keeping a mortgage as long as possible. Why rush to pay off a debt at, say, 6 percent, when the same money, invested in the stock market, was all but guaranteed to return 10 percent?
That kind of thinking may help explain this startling finding in a just-released Society of Actuaries report: Only 48 percent of retirees surveyed in 2009 had completely paid off their mortgages, compared with 76 percent in the group’s 2007 study.
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A search of this site shows that in what is fast approaching 300 posts I have never discussed collectibles. Although it is true that there is relatively little bad money advice out there on this topic, just about everybody who mentions it, 
even in passing, says it is a poor place to invest, it is an area in which people often make money mistakes. So not writing at least one post on it is an oversight that needs correcting.
In particular, I want to talk about a scheme to make money that has, at the very least, occurred to all of us at one time or another. It is the buying, or merely not disposing of, the near-valueless non-collectible in the hope that it will one day become a valuable collectible.
The reason this has occurred to us all at some point is that the collecting world is full of examples of easy-money-in-hindsight. Just spend time on eBay. A quick scan this morning tells me that the first issue of Cigar Aficionado magazine (Autumn 1992) goes for $250. It was $3.95 on the newsstand. That’s an annualized gain of nearly 26% for 18 years. If only I’d thought to buy a thousand copies.
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have become so familiar that we do not fully appreciate the meaning. “You have the right to remain silent.” is another example.
Government, Investing, Media | Frank Curmudgeon | 
April 26, 2010 11:59 am | 
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