Many UN folks think about investing money for a safe return after they have retired, too late brothers and sisters; it is just too late to experiment with the stock market in the hope of beating it.
Folks who work for the UN must realize that their pension fund accumulation (staff-member contribution plus organization’s contribution) is like an accumulated 401K from the private sector. In the case of the private sector staffer, he/she has diversified their portfolios from younger days and ideally has moved money into safer financial investments that would give them a stream of income during their golden years and play it safe so as not to outlive their resources. UN staffers must not try to play Russian roulette with their hard-earned lump sums. I personally know of many UN staffers who lost it all, lump sums plus the savings they also had before. It is so easy to buy and sell stocks with the click of the mouse. Unfortunately, many viewed this as a new profession in retirement years to great detriment. Wise counsel is advisable, but at the same time, staffers should be extra careful that vultures out there do not take you for a big ride. Therefore, you can also lose it all with expert advice as well.
There are cases where people have entrusted their money to nice people who were wolves in sheep clothing. They would send their clients false statements showing bogus gains on unrealized income. Please see a sample letter from a stock trader that was not very honest. It is a fact this sort of letter went to one employee of a reputable company in America from a stock trader from a reputable investment company in America. That employee was contemplating early retirement and had invested his savings with this unscrupulous stock trader. The initial investments were growing at such a steady pace that John (let’ us give this employee a name) was contemplating taking early retirement and selling all his stock from the 401k. The real case study is that John did indeed take early retirement and sold all his company stock in the 401k account (equivalent of all UN pension fund contributions, yours plus those of the organization) and entrusted it to the stockbroker. Then John went on to receive such nice letters (as shown in the text box) and was duped into convincing some of his friends to also take early retirement and sell all their accumulated in their accumulated company stock in the 401k account and hand the investments to the same stock broker. Unfortunately, many good people fell into the hands of this ruthless stockbroker and the results were pathetic. Willie lost 66% of his accumulated earnings, Andrew lost 78%, Matthew lost 84%, Bertie lost 82% and finally Simon lost 94% (these are fictitious names, but it happened to real people). Now you might think that this can never happen to you. It could if you are not smart enough to know the bad people from the good ones.
Managing money is a profession and there are good people in the business that may be able to do it better for you than you can do it for yourself. I know of one dear friend who entrusted all her savings and the UN pension lump sum to a money manager. Unfortunately, this UN colleague retired just before the 90’s stock boom. When the stock market started booming the UN retiree turned investor.
She started asking the money manager to make withdrawals and on her own started purchasing tech stocks like plucking apples from trees. This was a time when any idiot could have made money in the stock market as the stock market was rising year after year at an annual percentage of over 20%. Therefore, every stock she purchased gave her a quick return. What she did not realize that it was the market doing the work for her and it was not her skills that produced the winnings. It was nice to do the paper work and see the paper profits grow, wow. She was so happy with her success than she kept on withdrawing a little more each time and purchasing a little more stock than before. With each purchase, she became bolder and bolder. She ended up with a tech heavy portfolio of all the famous stocks. Unfortunately, our good friend purchased many of the stocks at very high prices. When the stock market crashed in March 2000, our dear ex-UN colleague lost a few hundred thousands dollars, practically all her 30-year life-savings equivalent to the pension lump sum.
Meanwhile, although Jenny (a fictitious name) had to pay the money manager one percent a year for managing her portfolio, she was still better off having left whatever investments she had with the money manager as he had diversified the investments in to stocks and bonds in percentages appropriate to her age. Here was a genuine money manager. While the stocks plummeted the bonds in her portfolio with the money manager made sizeable gains to offset any losses from the stocks. Furthermore, the money manager placed her funds in mutual funds and diversified the risk. In this story, you can see that our ex-UN colleague would have been better off using a money manager and sticking with his advice. However, does everyone need a money manager?
Nevertheless, all I can say is that investing is a long-term project. Investing should start with a financial plan and each part of the plan must have an objective. Examples of objectives are financing retirement, taking a cruise for your 50th wedding anniversary, funding a child’s college education, or simply accumulating a nest egg as an inheritance for children and grandchildren. Each of these objectives may have different periods and therefore would need different types of investments to realize your dream. For UN retirees though, much of these dreams may be over, yet, I know of some UN retirees who still have young children who are in high school and yet need to fund their college education many years after retirement. All folks in the general population also face these circumstances and may preferably follow some good investment logic to their portfolio.
Investing has become more an emotional thing than logical purpose. No matter how smart you are, you may be just too stubborn to adhere to good advice and take the wrong path even when common sense dictates otherwise. There are enough studies done to show that it is only very few money managers have beaten the market consistently over a long period. Most of yesterday’s stars are today’s losers. In the USA there are great names like Warren Buffet, Peter Lynch and so on, but these are far and few. Therefore, if most of the money managers cannot beat the market could you.
I cannot offer any investment advice, as I am not working as an investment counselor, so I leave it up to you to decide on the best approach that you should take. Nevertheless, since most UN staff thinks investments only after they retire, I might say that you have arrived too late for the party.
At 60 or 62, your investments, if any, should have bloomed to finance your retirement and any other objectives you have had, and that should be with your savings. Your pension is the leading investment to fund your retirement. Of course, if you have savings to supplement your UN pension then you can have a higher standard of living. If you however decide to take your lump sum and invest it, if you live in the USA there are many good firms that sell mutual funds and will do an investment analysis/financial planning for you. Some firms with good reputations are Vanguard, Fidelity and a host of others. The UK, Europe and many other country capitals also offer good investment opportunities. You can visit the various web sites and read up on their offerings both in the USA and overseas. However, beware of any individuals who approach you and offer to play magic with your money. If you go with a magician, you will not only lose your money but you will also lose your shirt.
The objective of this article was just to safeguard my former UN colleagues waiting retirement. Any other reader for that matter may also benefit or add to this posting. It should have been titled “warning”, “beware” or some other word, please suggest one if you can.
Merrill Cassell
SAMPLE LETTER FROM BROKER TO CLIENT
I have enclosed an unrealized gain report on your account. I hope you are pleased with the overall results and will share your success with your friends.
Do you know anyone else working at your company or retired from it that needs a solid investment like yours? We need to help them worry less and enjoy more of their retirement years! Together we both can help them.
What I mean is that you can help me to help them. I am sending you several of my business cards to help your friends. I will be too pleased to send them all the information on my strategy and invite them to my next seminar, lunch and dinner on my account. Please give me a call with their names and addresses, and we can make this world a better place for your friends. When your friends are happy, you will be happy. When my clients are happy I will feel that my job is well done.
Sincerely,
XYZ
END OF SAMPLE LETTER
Notes:
1. Plainly put, unrealized gain is a profit on a stock (or any acquisition) you are holding that has a higher market value than the acquired cost. Only when you sell your holding that you realize the gain. Say you purchase a stock for $10 and it increases in price to $15. You are holding the investment and showing a paper profit of $5 per stock or have an unrealized gain of $5. If you sell the stock for $15, then you make a profit of $5 and realize your gain.
2. 401k is a most popular contribution plan in the USA. It is a retirement plan that permits an employee to set aside a portion of salary in a tax-deferred investment account selected by the employer. Contributions made to the account and income earned by the contributions is sheltered from taxes until the funds are withdrawn.
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