2
Straight Story: Financial independence
Economics editor Chris Farrell
To view this content, Javascript must be enabled and Adobe Flash Player must be installed.
TEXT OF INTERVIEW
Stacey Vanek-Smith: It's time for the Straight Story. That's where our economics editor Chris Farrell gives us his insights into the economic issues of the day. Hey Chris.
Chris Farrell: How are you doing?
Vanek-Smith: I'm fine, thanks. How are you?
Farrell: I'm doing well.
Vanek-Smith: So it's the Fourth of July weekend and we are celebrating our country's independence.
Farrell: Wonderful weekend. I love it.
Vanek-Smith: Yes. Burgers, beer, fireworks. What's not to like? And the origin of Independence Day is freedom from British taxes, but what about financial independence from the rest of us? What about personal financial independence?
Farrell: Well Stacey, I think that's a great question, because it is Independence Day, Independence Weekend. You know, a lot of people are really stressed out during this great recession. So what would financial independence mean? What would financial independence mean to you?
Vanek-Smith: Well, no more credit card debt would definitely be a good step towards financial independence for me.
Farrell: Well, I think that's for many people. I mean, for a whole generation, personal finance, what it really means is getting out of credit card debt. You know, to my parents' generation, it was burning that mortgage. It was just getting rid of the mortgage. They talked about "Burn the Mortgage" parties.
But I want to take a slight twist here. Getting out of debt is wonderful, but what I want to emphasize is savings. And the reason why I want to emphasize savings is that's the financial independence that allows you to do what you want. If you have savings and you want to take a career risk, you'd like to downsize and spend more time with your family or volunteer in the community. If you have savings, you have freedom of choice. And one of the messages that's coming out of this great recession is the need to save more.
Vanek-Smith: Well, we are saving more.
Farrell: Yes, this is a positive thing. And it's not just positive, because it's good for you. It's positive, because this is how we declare our freedom. We bring about control over our lives. It's not the credit card company that decides, "You go to work, because you have to pay the bill." It's you decide, "You know what I want to do this and I have the savings that gives me the freedom to do that." And that, to me, is financial independence.
Vanek-Smith: Well Chris, thank you so much for your thoughts on financial independence and I hope you're enjoying your weekend.
Farrell: I am and thank you.
About the author
Christopher Farrell is economics editor of Marketplace Money, a nationally syndicated one-hour weekly personal finance show produced by American Public Media.
Current Methods Of Fund Selection Deny 60 Million Mutual Fund Investors Access To Wealth Creation.
Why is there such a disparity between the net real returns of 8-9% produced by the Mutual Fund Winners Spreadsheet (MFWS) www.mutualfundwinnerpicks.com since 1994 compared to the average investor’s net real returns of 1-2% - confirmed by Dalbars recent independent study update - after fees, expenses, taxes and inflation?
Rather than bemoan this sad state of affairs and since it is unrealistic to expect expenses, taxes and inflation to be drastically reduced any time soon, the approach was to find out what controllable factor(s) are responsible for this corrosive drag on performance.
Since fees are controllable, the MFWS is confined only to no-load funds. These funds have no fees and, therefore, incur no additional acquisition costs giving the fund investor an initial, but limited, boost in returns. While this was a valuable contribution, the investigation was not satisfied and probed further and deeper into the problem.
Why should the average investor be subjected to a 95% chance of zero wealth creation over a lifetime of employment?
After 15 years of research using over 200 million data cells and some luck, the culprit was found. It was adverse selection, which is the systematic selection of more losers than winners usually on a 75:25 ratio basis, caused by an overwhelming number of losers. By reversing these odds, mathematically, many times more winners than losers are now easily and consistently picked.
A winner is defined as a fund whose performance consistently outperforms the Standard & Poor’s 500 Stock Index over time.
A loser is defined as a fund whose performance consistently under performs the Standard & Poor’s 500 Stock Index over time.
The MFWS was designed in 1994 to enable investors with no previous fund investment experience (or with loads of it) to pick winners, to overcome adverse selection, to become wealth creators and take control of their financial lives.
Isn’t it time the mutual fund industry stopped relying on gossip, tips, slogans, shibboleths, canards, anecdotes… and begin using basic, proven scientific principles to help at least 60 million fund investors create wealth?
Arthur Regen, Managing Director Regen Associates www.mutualfundwinnerpicks.com RegenAssociates@comcast.net 888.666.8921
The emphasis as you rightly point out is in "savings" as the key to true finanacial independence. How about health care cost as an ever looming IED just witing to blow away our life savings to nothing in a matter of weeks.
should'nt we focus on finding a middle way to fix or deactivate this IED threatening our savings?
