What the experts say
Cashing in on scandal; Feuding over 401(k)s; Wrong questions, wrong adviser
Cashing in on scandal
Rupert Murdoch’s loss could be your financial gain, said Jennifer Schonberger in Kiplinger’s Personal Finance. Corporate scandals like the phone hacking at Murdoch’s News Corp. can “taint a stock for years,” but may also present a “buying opportunity.” Such investments are no occasion for rash action, though; first, “let the dust settle.” Then take a hard look at whether “the problem is fixable,” and whether the stock price has declined below what the fundamentals of the company would indicate. Investors who bought BP in the summer of 2010 believing that “the oil spill had done more damage to BP’s stock than to its business” have been “well rewarded.” On the other hand, scandals can reveal bigger systemic problems; just ask Toyota. There’s a case that News Corp. “may be a bargain now,” but unless you’re certain, stay on the sidelines.
Feuding over 401(k)s
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Don’t be blindsided by confusing rules governing who gets your 401(k) account when you die, said Carolyn T. Geer in The Wall Street Journal. A “patchwork of federal and state laws” could allow someone other than the person you name on your beneficiary form to get your assets, “especially in cases involving divorce and remarriage.” According to federal law, your spouse is the “presumed beneficiary” unless he or she waives the right to the assets. A federal court in Louisiana recently denied a dead man’s three adult children his 401(k) assets, despite their being the listed beneficiaries, because the man had recently remarried. IRAs generally provide investors with far more leeway. But in any case, keep your paperwork up to date.
Wrong questions, wrong adviser
If your financial adviser asks you only two questions—how much you need for retirement and what risk you’ll tolerate—“you should run for the hills,” said John F. Wasik in Reuters.com. Chances are you’ll get a strategy via some “off-the-shelf portfolio software” that doesn’t “take into account life’s many curves.” Duke University behavioral economist Dan Ariely says “trained monkeys” could give you the same answers. His research shows that people “often regurgitated what advisers told them they should save for retirement, yet were often much too low on realistic estimates.” For a more “customized approach,” consider hiring a fiduciary adviser, who must take “legal responsibility for his or her recommendations.”
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