Hi, Evie.
Unfortunately, our educational system generally makes no effort to teach students about the proper handling of money or investments. Many of those in lower-paying jobs are in those positions because they lack the education and/or intelligence to do better for themselves. What makes you think those folks have the ability to make informed investment decisions for themselves? In an ideal world, everyone could -- but life isn't fair, and
not everyone has the knowledge, ability, or inclination to handle their own investments.
>>Your argument about the cost of this investment is also specious.<<
You show your ignorance. Most brokerages have a graduated scale of commissions, based on total assets with the company. Quick and Reilly, for example, charges $29.95 per trade for those with under 100k in assets, $24.95 for 100k-250k, $19.95 for those with 250k to $1 million, etc. Some mutual funds have "Loads," some don't. (The "load" is money that isn't actually invested for the investor, but is instead in effect a commission for the fund). Those that do again have a variable load schedule based on size of account -- the larger, the lower. My proposal -- only truly no-load funds should be allowed as privatized SS accounts. No such language in the Republican plan. The fund gets an nnual management fee that's a %age of net assets, so the "no-load" company is still making money, just not taking as much from the investor. Of course, the fund industry association spends a lot of money trying to claim that load funds are worth the extra money, but in all but a few very specialized instances, Morningstar data show that's simply not true.
>>Anyone who ignores the constant message of diversification from every angle does so at their own peril. <<
Three points. First, until fairly recently (when the practice was banned) many companies forced folks to have primarily company stock in their 401ks, and inertia is a powerful force, especially when things seem to be going well. Even today, the company "match" for K's 401k is in the form of company stock, which she can then exchange into a diversified investment. (In her case, there's no exchange fee; with some 401ks, there is) Secondly, there's a powerful incentive in the tax code to keep a major part of assets in company stock -- the setup should be changed, but there's no move to do so. Assets in a 401k are taxed as ordinary income at distribiution, even though much of their value may represent capital gains. The one exception is company stock -- if you keep careful records and take your 401k as a lump sum in company stock at retirement, you can pay the ordinary tax rate on the ORIGINAL COST of the shares in the year you retire, and then pay the much lower capital gains tax rate on sale of the shares. So even savvy investors are being tempted NOT to diversify by that ridiculous tax policy. ALL assets in 401k plans should receive that tax treatment, not just the company stock. And finally, the company leaders were all lying through their teeth to the employees about how marvelously their company was doing and what a great investment the shares were, while quietly dumping their own. That's why the whole bunch of them (including Ken Lay) should be in jail for a good long time -- they're just as much thieves as if they'd held up the employees and investors
at gunpoint.
-- Dave K, Speakeasy Moderator
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