Alert
Close

Introducing AARP RealPad: The Wi-Fi Tablet That Makes It Easy to Share, Learn, Connect and Play. Learn more

Highlights

Open

10,000 Games Galore Sweepstakes from AARP

AARP Auto Buying Program

Contests and
Sweeps

$10,000 Games Galore Sweepstakes

Sept. 3, 2014 - Oct. 14, 2014
Play AARP Games for a chance to win $10,000!
See official rules. 

Driver Safety

Piggy bank on the road - AARP Driver Safety

Take the new AARP Smart Driver Course!

AARP Books

Visit the Money Section

Enjoy titles on retirement, Social Security, and becoming debt-free.

Jobs You Might Like

most popular
articles

Viewed

Nothing has been viewed

Financial Security for You and Your Family

Transcript of Chat With Carrie Schwab-Pomerantz and Jane Bryant Quinn

Question from Paul Evans: I am retired, with a financial adviser (fee-only), and had everything invested in mutual funds for many years. Performance very satisfactory. Now I was approached by a large, well-known investment company advocating direct stocks, etc., investing because of larger yield and less expense than mutual funds. Your opinion, please.

JBQ: No! No! No!

Individual stocks are much too risky and you can never beat professionals who know more than you do and are trading all the time.

Think of all the widows who thought they were safe with big bank stocks. You are happy with your mutual fund performance. Congratulations for finding a place that has done well for you, and don't let any big-name, so-called advisers peel you off.

Question from a guest: Are bond ladders relevant for retirement in the current interest rate environment?

JBQ: Interesting question. Many advisers suggest bond ladders when interest rates go up.

They prefer ladders to mutual funds because when rates go up, you can see the share values of mutual funds go down. Of course, the market value of the bonds in your ladder go down, too. You just don't see it.

I have two problems with bond-fund ladders:

1. You are buying individual bonds with fixed interest rates, so when interest rates rise you can't get that increase rate income. You have locked yourself into a lower income.

2. If you have to sell any of those bonds before maturity, you will take a big haircut on the price.

Plus a third objection: You need a broker to manage this ladder; not only do you pay commission, you also pay a big markup in price when you buy bonds from a broker at retail.

If you buy a mutual fund instead, the manager is buying at wholesale prices. Your annual fee will be low and you have access to the money if you need it.

CSP: Just to add on to those points ... Jane, I agree with everything you said; another point to consider is when you invest in individual bonds you want it to be a diversified portfolio just as you do for your stocks. And to diversify bonds, you need well over $100,000.

Because interest rates are somewhat tenuous, I would consider a short- to intermediate-term bond fund with maturity of anywhere from [two to five] years so that you can be prepared to reap the benefits as interest rates go up.

What Other Investments Might I Need Besides a 401(k)? >>

Topic Alerts

You can get weekly email alerts on the topics below. Just click “Follow.”

Manage Alerts

Processing

Please wait...

progress bar, please wait

Tell Us WhatYou Think

Please leave your comment below.

The Cheap Life

Jeff Yeager Cheap Life Ultimate Cheapskate AARP YouTube web series save money

Catch the latest episode of The Cheap Life starring Jeff Yeager, AARP's Ultimate Cheapskate. Watch

Discounts & Benefits

From companies that meet the high standards of service and quality set by AARP.

Life insurance: you are covered rain or shine

Exclusive annuities for members from AARP Lifetime Income Program from New York Life.

AARP Credit card from Chase

Members can get cash back rewards on purchases with the AARP® Credit Card from Chase.

Homeowners Insurance
Member Benefits

Join or renew today! AARP members receive exclusive member benefits & affect social change.

Rewards for Good

Your Points Balance:

Learn More

Earn points for completing free online activities designed to enrich your life.

Find more ways to earn points

Redeem your points to save on merchandise, travel, and more.

Official Sweepstakes Rules