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Featured Advisor

Srbo Radisavljevic
Managing Principal/Investment Advisor

Edge Portfolio Management


State: IL

At Edge, a low client to advisor ratio allows for personal and customized service for each individual.  Our goal is to work as a team for each client to provide not only portfolio management but wealth coordination and financial planning.  We make every effort to have frequent communication with our clients and to provide timely response to calls and emails.  I also enjoy spending time with my wife and three kids, following Chicago sports, enjoying ethnic cooking, and serving as a school board member for Norridge School District 80.

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Retirement Funds Falling? Need to Diversify?

Steep losses in retirement funds highlights benefits of diversifying investments. Is your portfolio property weighted?

| BY Adriana Reyneri

Steep third-quarter losses in retirement funds can be as a wakeup call for investors unaware of  the level of risk posed to their retirement savings - and the benefits of diversification. 

“Investors often select retirement plans without doing much research or seeking the advice of a financial professionals,” said Catherine McBreen, president of Millionaire Corner. “As a result, they don’t always fully understand the level of  risk they’re assuming. Investors who are surprised by recent losses to their retirement funds may be invested more aggressively than they realize.” 

The bulk of U.S. retirement funds – more than $6.1 trillion - are invested in employer-sponsored 401(k) plans, according to Millionaire Corner research. The plans typically offer a menu of mutual funds invested in stocks and bonds. Employees pick from this menu and allocate a share of their assets to selected funds, depending on their investment goals and appetite for risk. More aggressive, growth-oriented portfolios can have a larger share of equities, while more conservative plans can be more heavily weighted to bonds and money market funds. But even funds labeled as conservative can hold a percentage of equities, which fluctuate in value. 

As of this September, 60 percent of 401(k) assets were invested in equities, according to an index compiled by Aon Hewitt. This weighting led to significant losses in the third quarter when markets gave their worst performance since the depths of the recession. The S&P 500 fell 13.9 percent in the third quarter of 2011. The Russell 2000 – reflecting companies with smaller capitalization – fell 21 percent, and the EAFI, an index compiled of companies in Europe, Asia and the Far East, lost 19 percent. 

The comparable losses in retirement funds compounds the deep concerns Americans express about their golden years. Only half of Main Street Americans ages 55 to 64 expect to have enough money to live comfortably in retirement, according to a Millionaire Corner survey conducted in March. Younger Americans with $100,000 to $1 million are even more pessimistic abut retirement. Forty-three percent of the investors ages 54 and younger say their household is not saving enough to meet their financial goals.  Thirty-six percent say that because of the current economic environment, they will be delaying their retirement, and 66 percent worry about being able to retire when they want to.

 Investors can address their retirement concerns with a plan that includes increased savings, maximizing contributions to retirement funds and investing across a broad selection of products. This practice, known as asset diversification, reduces overall portfolio risk by spreading the risk across multiple investments. A properly diversified portfolio will be positioned to perform under a range of market conditions.

 A small percentage of investors reports taking early, taxable withdrawals from their retirement funds. Most of the withdrawals taken in 2010 went to pay day-to-day expenses, according to a Millionaire Corner study on the retirement market. Large unexpected expenses are the second most common reason for early withdrawals.