Mutual Funds are a very common investment vehicle. They are easy to buy, relatively simple to understand, and commonly offered as the primary investment vehicles in most 401(k) plans. The problem is that the only time most people take a look at the results of a mutual fund is when they buy it. Most "investment professionals" will encourage investors to pick a fund and then keep adding funds into it periodically, and bank on the fact that the market (and thus the fund) will grow over time.
Well, statistically speaking, they are right. If you look at the market throughout its history, it grows over any 10 or 20 year stretch. And if you are 30, 40 or 50 years old, and have several decades to retirement, you should be okay, right? Well, tell that to the baby boomers who had the same thoughts 20 years ago, watched their portfolios grow slowly but surely through the 80s, 90s and the 00s, until 2008 wiped out 40 - 60% of their retirement funds. Many of them followed this "plan" for the majority of their working life, and are now trying to figure out how they are going to be able to fund their retirements.
What will you do if the market is not where you want or hope it will be when you retire? Can you afford to make the assumption that when you are ready to leave the daily grind behind and enjoy your "golden years," the market will be at a point that allows you to financially survive the rest of your life?
According to the US Census Bureau, in 1960, the average life expectancy was 69.7 years. In 1980, it increased to 73.7. In 2006 average life expectancy increased to 77.7. How long do you plan to live? If you retire at 65 with $500,000, could you make it to 80? After 40+ years in the workforce and preparing financially for retirement, would you be able to live on roughly $30k a year (not to mention, what will $30k really be worth then)? What if you live to 90 - what do you do then?
Working with a financial advisor (which is better than investing blindly) will more likely ensure their retirement than it will yours. You need to educate yourself financially, so that you can make better decisions now - decisions that can ensure you a comfortable retirement, no matter how long you live. You need to be able to take control of your own finances. Buy and hold (aka "Buy and Hope") is dead. A little education can go a long way towards maximizing your retirement dollars.
If you are like most people, and you picked a few funds for your 401(k) or IRA based on the returns they were getting the couple of years prior, ask yourself, "How long has it been since I reviewed my portfolio?" Years? Decades? What are they doing now?
