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Volume 5 Number 3                               The Latest News on Saving and Investing                             Third Quarter - 2002

Doubling Down                                                                                ior are traits that distinguish successful

Can Pay Off                                                                                  The arithmetic is simple. If you had
                                                                                             $10,000 invested in a fund that has now
                                                                                             dropped to $5,000, you can recover your
                                                                                             loss faster by investing another $10,000.
by Stephen J. Butler                          at the end of 1999. This is a huge loss.       This will reduce your “breakeven point” to
                                              To recover from losing 50 percent, a fund      just a 33 percent gain rather than the 100
A book titled “Is there Life After High       has to now double in value, or gain 100        percent gain requirement described ear-
School?” offers a collection of stories       percent. This may take time. At an aver-       lier. If you invest $5,000 instead of
about how we all remember so much             age compounded return of 10 percent per        $10,000 more, you reduce your
about that intense period of our lives.       year, it will take 7.2 years to generate       “breakeven point” to a 50 percent gain.
Someone who was asked what they               returns that will bring it even again.         When they are hot, these volatile funds
thought was most important about high                                                        can reasonably be expected to generate
school summed it up by saying, “Every-        Generally speaking, however, technology        these gains.
thing was important.” The same is true        funds are volatile and can go off like rock-
with our mutual fund and investment state-    ets when markets turn around. Witness          Investing More
ments at the high point of their value back   the 200 percent cumulative gains that          To review my arithmetic, let’s say you have
on March 31, 2000. We can all pretty          several made in 1998 and ’99. And bear         100 shares of a fund you bought at the
much recall what we were worth at about       in mind that a 200 percent return turns        top of the market for $10 per share. It has
that time, and we wring our hands when        $1,000 into $4,000.                            since tanked to $5 a share. You invest
we look at them now.

Those of us who feel as if we’ve since
been mugged by our formerly red-hot
technology funds and even our S&P 500
index fund can simply come to terms with
what steps to take next. While it is de-
pressing to look at recent 401(k) state-
ments, it may pay to suck it up, display
some fortitude ... and buy some more of
what ails us.

Inertia a Positive
The natural reaction of most people has
been to stop throwing good money after
bad and to reallocate inbound retirement
plan contributions to more conservative
investments. Meanwhile, most of us have       “Doubling down” is a term that describes       another $1,000 and buy 200 shares at
been too traumatized to do anything but       the purchase of additional shares of a         today’s $5 price. Now you have 300
hold on to those funds whose substantial      declining stock or mutual fund. The ba-        shares you have bought for a total of
losses have created mayhem in our port-       sic objective is to reduce the average         $2,000. Your average price is $6.67 per
folios. This is one case where investment     cost of all of your shares so that when        share. When the share price rises from
inertia serves us well.                       markets rebound, you will break even           $5 to $6.67 (a 33 percent increase), you
                                              again at a lower share price. It takes         will have broken even. Otherwise, you will
Several technology funds have lost more       nerves of steel to invest in a “loser,” but    have to wait until the stock doubles in value
than 50 percent of the value they enjoyed     nerves of steel and unemotional behav-                                       (continued on page 6)
Wild Market Will Grow Up
by Stephen J. Butler                                accomplish this with a revolving door of       what is now deeply depressed. Re-balanc-
                                                    dysfunctional governments. Similarly,          ing reduced risk in the '90s, but it did not
A father of four teenage sons once told             there are times when our economy can           generate as high a total return as leaving
me that parenting for him was an exer-              operate independently of the excesses          the original allocation untouched and "let-
cise of sitting in his armchair and grip-           of the stock market.                           ting the winners ride."
ping those arms as tightly as he possi-
bly could. There was nothing more he                In the face of what can only be described      Now, with a market reflecting its more nor-
could do. The last quarter's stock mar-             as a blood bath, there are some of us          mal pattern that includes both winners
ket performance has reminded me of this             who feel a need to at least do some-           and losers, the re-balancing exercise is
image. Those of us with money in the                thing. Anything. For anyone feeling this       set to redeem itself as a valuable invest-
market have a reason to feel like the par-          urge, there are a few constructive steps       ment tool. Historically, regular periodic re-
ents of four teenagers. We are trying to            to consider.                                   balancing has been shown to generate
do the right thing, but we have to admit                                                           an additional 1 percent of earnings per
that events are out of our control.                 First, review the spread of investment         year. Compounded over time, this seem-
                                                    types to make sure you have enough di-         ingly small annual increase can lead to
Fortunately, the vast majority of wild              versification among large and small com-       substantial additional gains while reduc-
teenagers turn out just great if given              pany stock funds as well as growth funds       ing volatility or risk.
enough time. In the end, I am confident             and value-oriented dividend-paying funds.
that we will be able to say the same                Ideally, your mix should also include a        On a $10,000 annual contribution, the ad-
thing about the stock market.                                                                      ditional 1 percent can add up to an addi-
                                                                                                   tional $75,000 in 20 years if it bumps the
My high school French teacher once                                                                 return to 10 percent instead of what would
caught some of us goofing off and was sur-                                                         have been 9 percent. In 30 years, the dif-
prisingly lenient because, as she put it,                                                          ference is $350,000.
"The wildest colts make the finest horses."
The same could be said about the market.                                                           Also, with a market that has imploded,
At times like this it is helpful to remember                                                       dividends finally mean something again.
that the market dropped by a total of about                                                        As a group, the dividend-paying stocks of
60 percent from 1929 through 1931, but it                                                          the S&P 500 index have been flat so far
was up by about 66 percent in 1933 and                                                             this year while the total index has dropped
38 percent in 1935, with a further bump of                                                         by 13 percent. Many investors forgot about
24 percent in 1936.                                                                                dividends back in the 1990's when they
                                                                                                   amounted to an average return of about
With the prospect of this much volatility, it                                                      1.2 percent of the S&P 500. Today, they
would be a mistake for someone to bail out                                                         amount to about 2 percent, and this is
at this point. Furthermore, the majority of                                                        money we are paid for holding on to stocks
mutual fund investors are those of us mak-          real estate investment trust (REIT) fund       regardless of whether they go up or down.
ing ongoing contributions to retirement             and a foreign stock fund. Regular read-        Some utilities are paying dividends that
plans. For those short of actual retirement,        ers of this column will recall that I am an    amount to as much as 9 percent when
the current market weakness represents              advocate of maintaining a mix of fund          compared to the stock price.
an excellent time to buy. We should be              types that leads to what I call "the path
praying for these periodic opportunities.           of minimum regret." With REIT funds up         To put it bluntly, the world has not gone to
                                                    about 17 percent this year, and small          hell in a hand basket. It's just the stock
Meanwhile, our economy remains relatively           company funds making some earlier              market that has undergone a major cor-
robust. My travels in the business com-             gains, you can witness the extent to           rection. In the traditional brokerage world,
munity offer plenty of anecdotal evidence           which "every dog will have its day" in the     there is the practice of encouraging clients
of this; but in addition, even Alan Greenspan       securities industry.                           to "sell down to the sleeping point." This is
testified before Congress earlier last week                                                        a practice of selling enough of an investor's
about the signs of economic strength.               Re-balancing your account at this point mid-   portfolio so they can sleep well at night. All
                                                    way through the year can also make sense.      this trading activity is great for the broker,
The stock market and our economy re-                To the extent that these wild market gyra-     but it hardly serves the client. To sell out
mind me of the distinction between Italy            tions have changed whatever your original      now is too late. Instead, it is better to re-
and its government. While that country              percentage allocation might have been, the     main invested and to be content with some
has prevailed as the sixth largest                  act of re-balancing will force you to sell a   minor course-correcting that will capitalize
economy in the world, it has managed to             portion of your winners and buy some of        on some great buying opportunities.

2       •        •        •         •           •         •         •        •        •        •         •        •         •         •        •
    Mortgage Refinancing Demands
    A Look In The Mirror                                                                by Stephen J. Butler
    The current hysteria regarding the lowest mortgage rates          ment subsidy of tax savings on your deductible contribution.
    in 35 years has prompted some people to lose sight of the         A $1,000 contribution into a plan, for most people, costs
    big picture.                                                      only $640 of “take-home pay.” $360 of the $1,000 is what
                                                                      would otherwise have been paid in state and federal taxes.
    If you have a high fixed-rate mortgage, it definitely makes       To “earn” an immediate $360 on a $640 investment means a
    sense to refinance. Don’t get me wrong. However, the ad-          56% return on your money. How many people are paying off
    visability of paying the mortgage off in 15 years becomes         mortgages and earning a 4% after-tax return while they walked
    less compelling when the rate is so low.                          away from the maximum retirement plan opportunity that
                                                                      would have earned them 56%? If you’re one of them, its time
    Remember. Mortgage payments are tax-deductible. They              to look at the big picture. Financial decisions are never
    are government-subsidized by whatever the tax rate would          made in a vacuum. They always need to consider the tax
    be on the last few dollars of your income. Calculate your         impact.
    total tax with and without your mortgage expense to see
    how much of your mortgage is paid with money that would           In the orgy of refinancing, it also makes sense to consider
    otherwise have been owed in taxes. With this in mind, look        the possible abuses. Don’t use this as an excuse to just
    at what you are “earning” after taxes on the money you            borrow more money. Don’t be seduced by teaser rates.
    save by not having interest payments as you rapidly pay           Avoid up-front points that are simply added to the mort-
    off a mortgage. The answer, for most people, is about 4% if       gage balance and that dramatically alter the effective inter-
    a tax-deductible 5.75% is what their new mortgage rate is         est rate of the transaction.
    scheduled to be.
                                                                      If we learned anything from the recent bubble, it is that
    If paying off the mortgage sooner means that you can’t            excesses in the financial world open the door to abuses.
    fully participate in a 401(k) or other retirement plan, you       The same can be said about refinancing. Let’s not jump
    are walking away from what could have been a 36% govern-          from the frying pan into the fire.

                                                                                                  means that the entire company is valued

What’s Behind
                                                                                                  based on the price obtained for the most
                                                                                                  recent share of stock that was sold. Ap-
                                                                                                  parently, in Tyco’s case, someone started
                                                                                                  an unfounded rumor that the company was

Stock Volatility?                                                                                 going to file for bankruptcy. Later in the
                                                                                                  day, Tyco announced it had recruited a new
                                                                                                  CEO from Motorola with a track record of
by Stephen J. Butler                          employees worldwide to lose a third of its          success. When the rumor started, nobody
                                              value over a matter of hours? How could             wanted to buy, and the stock went into a
                                              millions of investors suddenly have                         free fall. For a short time on one
“Everyone remain calm and nobody will         decided that Tyco deserved to                                     day, the only people who were
get hurt.” The classic command of armed       take a momentary fall? It                                            interested in buying Tyco
robbers should be heeded by all of us with    reminded me of that char-                                             stock only wanted to pay
money in the stock market these days.         acter in the play “The                                                $8 a share.
Recent events have shown us how vola-         Fantastics.” Upon the
tile the world of common stocks can be. It    command, “Die again,                                                   Later in the afternoon, oth-
is reassuring, however, to know what can      Mortimer,” the actor reels                                             ers woke up and realized
cause such sudden, wide swings in value       around the stage and col-                                             that an opportunity of a
that we have witnessed over the past          lapses with great theatri-                                           lifetime was taking place
month.                                        cal effect.                                                          under their noses, and the
                                                                                                                 resulting feeding frenzy drove
Let’s take Tyco International, for example.   There are two major factors                                     the price back to $12, allow-
Recently, its stock price dropped from $12    that create volatility today. The                           ing those $8 buyers to make a
to $8 a share and rebounded to $12 all        first is the process by which all public com-       quick 50 percent return? IN ONE DAY. The
within the same day. What could have          panies are valued. They are valued by a             source of the rumor remains a mystery.
caused a company with almost 250,000          process called “marking to market,” which                                           (continued on page 5)

•        •        •       •        •          •       •        •         •        •           •          •         •         •           •       3
What’s Happening To My
Healthcare?                                                           by Michelle L. King

Don’t be too surprised if, at your next open enrollment, your         Our wonderful new, comprehensive coverage was being paid for
employer presents a significant change to your company spon-          by our employers. Once we lost the financial incentive to be
sored health plans.                                                   conservative, we got more careless with our health and more
                                                                      carefree about healthcare. That brings us to today’s health care
As premiums continue to sky rocket, employers are trying to           cost crisis. Now its time for the pendulum to swing the other
find ways to control costs. One good option is switching from         way.
HMO coverage to a higher deductible PPO health plan. Unfor-
tunately, it sounds negative to employees when it is first pre-       Insurance companies are seeing higher costs due to our in-
sented. In fact, many employees will be so busy worrying              creased usage of health plans. To cope with the costs they are
about the changes that they won’t listen to the facts. We need        charging our employers higher premiums. In order for the em-
to understand that letting go of HMOs might lead us to a better       ployer to control costs they need to give us incentives to be
way to receive excellent health care and control the costs.           more frugal with our health care choices. So we may be return-
                                                                      ing to a model closer to what we had in the 50s and 60s. This
Let’s start with a quick look at the current health care environ-     time we can add a little flavor of the HMO by using the PPO +
ment: Over the past 20 years we have developed a “co-pay”             deductible design.
mentality. Many employees in the work force today have only
experienced HMO coverage. Anytime we have an ache or pain,            An employer who currently pays the employee’s portion of the
we run to the doctor because “its only five bucks”. The prob-         premium for HMO coverage could save hundreds of dollars by
lem is, that it isn’t just “five bucks” to the doctor or the insur-   moving to a PPO plan with a modest deductible ($250-$500).
ance company.                                                         What we don’t realize is that employee, who has to pay for his/
                                                                      her dependent’s coverage is also going to save hundreds of
I was recently talking with a physician who told me that, when        dollars on their portion of the premiums! This allows all of us to
she bills a 15 minute office visit to the HMO, she gets a check       have more control over our costs.
for $41. That plus your “five bucks” gives her $46 for 15 minutes
work. Sounds great doesn’t it? Or does it? Her operating cost         Here is an example:
for that 15 minutes (electricity, water, rent, office equipment,
office supplies, etc.) is well over $20. Then she has $26 left to     Let’s assume that HMO coverage costs $100 per person per
pay her receptionist, her nurse, and herself, and we haven’t          month, and that PPO coverage with a $500 deductible costs
even started to talk abut paying for health insurance, retire-        $75 per person per month. Let’s also assume that our em-
ment benefits, vacation/sick time, etc. She actually loses money      ployer will pay for our coverage, but we have to pay for our
every time she sees an HMO patient.                                   spouse and our two children.

Back in the 50s and 60s families had to pay their health care                                   HMO     PPO
providers at the time services were provided, and then submit a                               Monthly Monthly
claim to their insurance carrier for reimbursement. Many times                                Premium Premium
the health plan had a sizeable deductible so there weren’t any
“reimbursements” unless you had some pretty big expenses.              Employee Coverage        $100        $75      $25 to employer
Insurance at that time was designed to deal with catastrophic          Family Coverage          $300       $225      $75 to employee
illnesses and injuries. Families were responsible for budgeting
                                                                       Total Monthly Cost       $400       $300
for the toothaches and sniffles just like they did for food, mort-
gage, and PG&E. They knew they needed to take care of them-
selves if they wanted to save money, and that there was a finan-      This $500 deductible we are so worried about would save us
cial impact every time they went to a doctor.                         $900 a year in premiums!

In the 70s and 80s medical inflation created a need to control        If you have a family that needs a lot of medical services, you
costs. Thus was born the HMO. The idea was that we would be           can “put aside” the dollars you’re saving on premiums and use
in a “managed care” environment. This would allow the insur-          that money to cover the new deductible and co-payments. If
ance companies to control our services, service providers, and        your family doesn’t have much in the way of medical expenses,
reimbursement amounts for those providers. In return for loos-        you can rest assured that you will be covered if anything does
ing some control, we gained the “co-pay”. What was not con-           come up. Meanwhile, you can enjoy paying less for your cov-
sidered was how easy it is to spend “other people’s money”.
                                                                                                                         (continued on page 5)

4       •        •        •        •        •        •        •         •        •        •       •        •        •          •             •
Itemizing Versus Pre-Tax Medical                                                                              Open
Reimbursement Account                                                                                         Enrollment
                                                                                                              Is Coming!
by Michelle L. King                              taxes on those same expenses. These
                                                 savings increase as your income, and tax                     For many of you, the end of the calen-
Do you itemize your medical expenses             bracket, increases.                                          dar year signals that it’s time to start
on your tax return instead of using a Pre-
                                                                                                              thinking about your flex plan elections
Tax Medical Reimbursement Account                For those of you who may have exten-                         for next year.
through your employer’s Flexible Benefit         sive medical expenses, beyond the maxi-
Plan? Do you think you are getting the           mum allowed by your employers Medi-                          Remember—spending account elec-
same tax advantage either way?                   cal Reimbursement Account, the tax                           tions DO NOT roll-over automatically,
                                                 credit may still be the way to go. But for                   you need to complete an enrollment form
I can tell you that you’re not, and here’s       most of us, the decision to “not worry                       during your company’s open enrollment
why:                                             about it now, I’ll do it on our taxes in April”              period if you don’t want to be left out.
                                                 may be costing hundreds, if not thou-
If your combined household income is             sands of dollars of spendable income,                        For those of you who have never used a
between $56,500 and $71,000, you will            every year. Don’t you think it’s worth a                     Flexible Benefit Plan, its time to start
have to spend $4200 - $5300 (7.5% of             few minutes of your time to look into your                   thinking about it! Look back at the ex-
your adjusted gross income) on medical           Employer’s Flexible Benefit Plan?                            penses you have already had to pay this
expenses before you can even begin
                                                                                                              year. Add it up and I’ll bet you’ll be sur-
getting a tax credit. With the Pre-Tax           For more information on Flexible Benefit                     prised! If you’re not sure which expenses
Medical Reimbursement Account you will           Plans please go to our website at                            would qualify—please visit our website
have already saved $1400 - $1800 in                                         at and
                                                                                                              look up the list under “Flex FAQs”
                                                 seems to be created by programmed
Volatility...              (from page 4)         trading. This is a tool used by major fi-                    Participating in your Flexible Benefit Plan
When a private company decides to make           nancial institutions to buy or sell broad-                   could save you 35-45 cents on every
its stock available to the public, it gets in    based blocks of many stocks all at once.                     dollar you spend for medical care (and/
bed with the devil. Suddenly, changes in         A flood of these huge orders amounts to                      or work related daycare)—it might just
the company’s value can hinge on events          aiming a magnifying glass at the marked-                     be worth checking out this year.
that can have little to do with the cash flow,   to-market mechanism and accelerates
profits, or general well-being of the underly-   the rising or falling price at which the
ing organization. Instead, stock values can      trade ultimately takes place. Pro-
depend on such factors as an investing           grammed trading in the past month rep-                      Healthcare...                   (from page 4)

public and its Wall Street “servants” who        resented 40 percent of the daily volume                     erage and use the extra cash for other
are together preoccupied with their respec-      of the New York Stock Exchange, so it                       expenses.
tive vacation plans right now. This leads to     is a significant factor that bothers many
what has always been known as “the sum-          people in the industry.                                     The truth is, most employers want to take
mer doldrums” on Wall Street, and stocks                                                                     care of their employees and provide the
generally become “thinly traded.”                Programmed trading was invented during                      best possible benefits that they can af-
                                                 the early 1980s as a computerized mecha-                    ford. I think we will start to see the devel-
When fewer stocks are traded, the                nism for buying or selling stocks automati-                 opment of “defined contribution health
marked-to-market mechanism for deter-            cally when overall market performance sig-                  care”. In this type of arrangement the em-
mining value generates more extreme              naled a need to move in either direction. To                ployer would give each employee a set
volatility. Marked to market means that,         this day, there has been no clear explana-                  amount of “benefit dollars” to spend on
in theory, even a few shares of Tyco stock       tion for why the 1987 crash took place, but                 health care each month. From that allot-
changing hands at some price at the end          some blame the severity on program trad-                    ment the employee can choose to pay
of the day would determine the share price       ing that sent successive waves of computer-                 the high premiums for the “Cadillac HMO”
for all of Tyco at that moment. The last         generated selling orders into markets where                 plans, or can choose to pay lower premi-
trade of the day determines the price we         there was no one to buy. Fortunately, pro-                  ums for the PPO + deductible plan and
see the next morning in the paper. A thinly      grammed trading works both ways and                         put the extra “benefit dollars” toward
traded stock leaves more room for market         helps to explain the one-day gain of more                   something else (retirement, vacation, pre-
inefficiencies. The public markets work the      than 6 percent in the Dow Jones industrial                  tax spending accounts, etc.). Using this
best when stock prices are a reflection of       average a couple weeks ago.                                 approach, the employer can control their
the largest possible ongoing auction.                                                                        own costs while giving their employees
                                                 In an effort to control a phenomenon that                   the ability to customize benefit choices
A second component of inefficiency                                               (continued on page 6)       to better suit individual needs.

•        •         •         •             •     •       •         •         •           •               •          •        •         •         •       5
                                                   basis. For this new money, the concept
Doubling...              (from page 1)

(100 percent gain) before you find yourself
even again. This all assumes, of course,
                                                   of doubling down on some former losers
                                                   may prove to be a better strategy than
                                                   our natural instinct to invest this money
                                                                                                  Cool Stuff
                                                                                                  by Lindsy Golden
that you bought your fund at the high. (We         conservatively.
all tend to remember the highest past value                                                                     Indexes
of our accounts.) In fact, you probably
bought it in stages and benefited from at          Volatility...            (from page 4)
                                                                                                           Prime Rate – 4.75%

least some of the increase in value. The           is not fully understood, the NYSE now pro-               Fixed Mortgage
average price of all of your shares is prob-       hibits program trades whenever the Dow                    30 Year – 5.96%
ably less than the $10 we remembered as            Jones has experienced a downturn of at                   15 Year – 5.42%
being the top of the market.                       least 180 points.
                                                                                                           Home Equity Loan
Mutual funds offer a safer alternative for         It is possible that markets may not be as                    6.95%
doubling down than individual stocks be-           efficient as they once were now that
                                                                                                       New Car, 48 Month Loan
cause funds generally go up again sooner           small investors in the aggregate have
or later. Individual stocks, on the other          turned to mutual funds. What was once
hand, can go down, stay down, and even             a huge universe of individual investors has                Internet Sites
become worthless. Years ago, for ex-               effectively become an institutional inves-  
ample, RCA took almost 40 years to re-             tor, and people like Warren Buffett now             An easy to read dashboard
cover from its high in the 1920s. A fund           see this as a situation in which nobody               for the U.S. economy.
offers plenty of diversification compared          is doing their homework anymore. Fund
with an individual stock, and you can count        managers generally want to follow the herd  
on something like the technology indus-            and struggle to keep up with indexes.            A great financial planning website
try as a whole to rise in value sooner or                                                                       for women.
later. If you do elect to use individual           As Buffett said back in the ’80s, “a
                                                                                                          Dow Jones Averages
stocks, a general consensus is that a              growing number of investors have been
                                                                                                           October 1995 - 4,755
collection of about 40 stocks offers enough        taught that thinking is a waste of en-                  October 1996 - 6,029
diversification to generate the best results       ergy which just leads to greater ineffi-                October 1997 - 7,552
with the least volatility.                         ciencies.”                                              October 1998 - 8,592
                                                                                                          October 1999 - 10,729
Inside a retirement plan, you can ignore           I don’t think it’s reasonable to expect ama-           October 2000 - 10,971
tax considerations. For assets subject to          teur investors to recognize inefficiencies,             October 2001 - 9,075
taxes, however, you can add another level          but we can keep our heads down, stick
of sophistication to the process of dou-           to the basics, and make this current                   Dow Jones 6 Forecast
bling down. You can sell the fund shares           market work for us. Many people will say                  October - 9,150
and buy them back 31 days later and pro-           that their best investment is their house                November - 9,536
                                                                                                            December - 10,363
ceed with your program to lower your av-           and that they’ve always lost money in the
                                                                                                             January - 10,302
erage cost. Now, you have a tax loss that          market. That’s because, unlike their
you can use to offset other gains or to            stock investments, they kept making
carry forward into future years. Remem-            house payments and didn’t panic when           401(k) Today is published by Pension
ber that lowering taxes is just as valuable        housing prices dipped.                         Dynamics Corporation on a quarterly
                                                                                                  basis. All articles are written by
as making a profit on an investment. You
                                                                                                  Stephen J. Butler, Michelle L. King and
can reinvest any money that otherwise              The reason for exploring the causes of         Lindsy Golden.
would have been owed to the government.            stock market volatility is to offer reas-
                                                                                                  To read more articles about saving and
                                                   surance that the stock market will con-
                                                                                                  investing, please visit our web site at
Nattering nabobs of negativism are al-             tinue on as one of our most useful in- and
ways quick to point out that the period            vestment tools. Of all investment types,       click on This Week’s 401(k) News.
from 1964 to 1981, a 17-year period, re-           the stock market historically has proven
                                                                                                  These weekly articles by Steve Butler
sulted in just a 1 point gain in the Dow.          to be the most profitable but only for         are published by the Knight Ridder
However, this obscures the amount of               those who had the fortitude to stay the        newspapers and appear in the Contra
money that people made who continued               course and earn the “risk premium.” As         Costa Times as well as other major
to save and invest by dollar-cost averag-          investors, a portion of what we will enjoy     newspapers in that national chain. An
ing throughout that period. Unfortunately,         as our long-term rate of return is attrib-     archive of all past articles are also
there weren’t many because most people             utable to our reward for the abuse we          available at This Week's 401(k) News
beat a hasty retreat from the market at            have experienced over the past two             on the PDC web site.
the time. This time it’s different. Those of       years. Meanwhile, today’s environment          Newsletter design and website
us saving for retirement have new money            offers some great buying opportunities         maintenance by Lauri Nicolosi.
rolling into our accounts on a monthly             for those who have long-term goals.

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