Money magazine throws a gutter ball

[kenyan]

Disclosure: I currently subscribe to Money magazine (due to airline miles expiration), and this is my second or third iteration. I sometimes will read their articles online as well. Typically, there is quite a bit of good advice (special mention to Walter Updegrave), but there is also some bad advice mixed in.

Case in point: today's article, written by Sarah Max, on a widow who is trying to save for retirement:

http://money.cnn.com/2013/02/13/retirem ... .moneymag/

The situation:
Newly widowed, liquid assets of $159,000, income of $105,000, newly relocated from NY state to Arkansas. Home listed on the market, with $36,000 in equity (not sure how much of that will survive the transaction costs of selling). Most of her investments, other than a chunk of cash, are in individually selected "growth stocks" that were picked at whim. It is unclear how old she is, but I'd estimate about 50. She feels panicked about her future.

The good:
Jeremy Kisner of SureVest Capital Management in Phoenix recommends she tone down the risk by selling her individual stocks and buying some bonds, as she would've been down 40% in 2008-2009.

The bad:
For safety, Kisner suggests adding 15% bonds, and individual stocks that "grow more slowly but are dependable."

Further recommendations are to jump in and buy a new house before her old one sells using a 3.5% FHA loan, since she believes it will take several years to save up a 20% down payment on a $150,000 Arkansas house. Kisner says that she "deserves to have a place she can truly call home." Given that she has $44,000 in taxable investments and a Roth IRA, I'm not sure why this is the recommendation, but it's not the worst of the bunch -

His fund recommendations are Blackrock Global Allocation, MDLOX, and First Eagle Global Fund, FESGX. "Both carry sales loads, but annual fees are low."

MDLOX: Front-end load 5.25%, ER 1.07%
FESGX: Deferred sales load 1.00%, ER 1.89%

The rationale is that "[f]or relatively small amounts of money, a global allocation fund is easier than choosing a bunch of funds based upon market trends," as if those are the only options. Sadly, the woman is leaping to follow the advice of Kisner.

[NOLA]

Wow, that is just sad should almost be illegal. And are those fees supposed to be low?

Thanks for posting though.

[NYBoglehead]

Wow, that is just sad should almost be illegal. And are those fees supposed to be low?

Thanks for posting though.

The question is, who makes it illegal? The federal government didn't get $16 trillion in debt by being brilliant with finances (both parties to blame). State governments have massive unfunded pension liabilities and use every gimmick in the book to say that budgets are in balance (both parties to blame). So who is this benevolent group that will save us from the idiocy of others?

[Allan Roth]

This is very disappointing. I appreciate the post!

[Alan S.]

Ever wonder what's in it for a person (Ms Bowman in this article) to have all these details about her life printed in a national magazine? One possible benefit is that the recommendations should not be too self serving as the investment mgr is also exposed to public scrutiny, as is the magazine publisher. But perhaps for Ms Bowman this is not working out so well.....nor for Money magazine.

[dianna]

Kenyan, have you thought about submitting a letter to the editor on this one, arguing why these recommendations are poor? That might get some people's attention and be helpful!

[zebrafish]

I've seen some terrible advice given in Money magazine.

They also peddle a lot of individual stock "tips" and actively managed mutual funds.

I read it if I'm getting a haircut or something. Occasionally there is something that is vaguely interesting in there.

[aja8888]

That article, and several other similar pieces of Money's advice, are the main reason I dropped my subscription.

[indyfish]

How do they have an article like this and not mention her age (or at least an approximate age)? I would assume 15% in bonds is on the low side for her age - and I would assume that a difference between 6% bonds and 15% bonds would not make much of a difference in a big downturn in stocks.

Also - it said that she maxed out her 401k last year, but only put 4K out of 5K allowed last year in her Roth, yet invested 11K in taxable? Shouldn't the advice include saying to max out on both the Roth and 401k before investing in taxable?

[SSSS]

His fund recommendations are Blackrock Global Allocation, MDLOX, and First Eagle Global Fund, FESGX. "Both carry sales loads, but annual fees are low."

MDLOX: Front-end load 5.25%, ER 1.07%
FESGX: Deferred sales load 1.00%, ER 1.89%

Maybe those expense ratios are "low" compared to the average ER for load funds?

[Grt2bOutdoors]

Kenyan, have you thought about submitting a letter to the editor on this one, arguing why these recommendations are poor? That might get some people's attention and be helpful!

What makes you believe the editor would a)take it seriously and b) actually publish the retort in a magazine who's advertisers are the ones selling those loaded funds?

[dbltrbl]

It is terrible. Send an email to Jason Zweig. He seems to have good head on his shoulder. Also, by bringing it to Money's attention, such terrible advice they may not ask this advisor ever again or question his recommendations. This will not help this lady but may help some one in future. I am eating fruits of some one who planted the tree.

[Random Musings]

Not the first time Money magazine has thrown a gutter ball. Nor the last.

They sell dreams.......

RM

[Grt2bOutdoors]

Not the first time Money magazine has thrown a gutter ball. Nor the last.

They sell dreams.......

RM

Yes - a pipe dream or is it the American dream?

[dianna]

Kenyan, have you thought about submitting a letter to the editor on this one, arguing why these recommendations are poor? That might get some people's attention and be helpful!

What makes you believe the editor would a)take it seriously and b) actually publish the retort in a magazine who's advertisers are the ones selling those loaded funds?

Fair points, but what is the harm other than loss of time to run the exercise?

[Grt2bOutdoors]

Kenyan, have you thought about submitting a letter to the editor on this one, arguing why these recommendations are poor? That might get some people's attention and be helpful!

What makes you believe the editor would a)take it seriously and b) actually publish the retort in a magazine who's advertisers are the ones selling those loaded funds?

Fair points, but what is the harm other than loss of time to run the exercise?

An unnamed publication has an interesting quotation "All the news that is fit to print". Money is less of a paper and more of an advertising rag - if TW were really interested in providing a quality informational publication, it would be fair to say they research first,verify, before putting ink to paper. Just because you can write, does not mean you are qualified to publish.

[hoppy08520]

I used to subscribe to Kiplinger magazine but dropped it for many of the same criticisms being leveled at Money. I had thought that Kiplinger was a bit more sedate, conservative and sensible (i.e. no get-rich-quick articles), but they still fill each issue with hot stock tips from people like James "Dow 36,000" Glassman, reviews of hot fund managers, etc. They'll throw in a nod to passive investing here and there, but clearly 95% or more of the ink is about actively managed investing.

While I also liked Kiplinger's focus on personal consumer/fiance issues in addition to investing, I got tired of reading all the breathless fund manager profiles so I dropped my prescription.

Just last week, I was at the library and picked up a copy and flipped through it. I haven't looked at the magazine in a year, and in the past year is when I discovered Bogleheads.org and really committed to passive investing. Anyways, leafing through Kiplinger with my new lenses on (figuratively), I felt this serene feeling flow through me: I don't care about all that noise anymore. I don't care about their hot stock tips and their top 10 funds and their articles about how to pick an advisor. I just don't care, and I don't need to care, and I am so glad I am now 100% passively investing.

The fact that Money magazine would publish advice to a retiree telling them to select a load fund just makes me sick. I could not respect such a magazine. I'm just glad I found this asylum from all that garbage.