SOME GOOD NEWS ABOUT MARRIAGE IN THE SECOND HALF

Charles Dickens’ A Tale of Two Cities begins, “It was the best of times, it was the worst of times.” Although he was referring to France during the Revolution, he could’ve been referring to our marriages especially as we enter the Second Half. At first it is the worst of times as both spouses find their lives disrupted since one of them is now in the house, not in the office or some other workplace. This places stress on the relationship as both parties seek to adjust to a range of issues including where they will live, how much they can spend, and who will pay the bills. However, the evidence suggests that if couples can successfully work through the many issues associated with retirement, the odds are that it can be the best of times for their marriage. In fact, many couples claim they are happier and more fulfilled in the Second Half than at any other time during their marriage. One of the reasons is that with children out of the nest couples have more time to focus on each other’s needs.

According to Wendy Scarf in her book September Song, there may be another reason, time. Here’s what she discovered after interviewing a number of divorced and still married couples. Scarf says most marriages resemble U-shaped curves. They begin on a high note with the honeymoon then inevitably the couple becomes more familiar with and more critical of each other. They often struggle with financial and family issues; they become less satisfied; and some begin to stray. Eventually, they reach the bottom part of the U curve and for an extended period of time are dissatisfied with the marriage. During this period, divorce becomes an option. However, those who avoided divorce and stayed together through difficult times reported they were happier and more fulfilled in their marriages in the Second Half than at any other time. Ironically, Scarf found that after five years, the individuals who were unhappily married and divorced reported they were unhappier than their counterparts who also were unhappily married but remained with their spouses. Scarf’s conclusion: one of the benefits of increased life expectancy over the last thirty years is that if we remain in our marriages long enough there is a good chance we will outlast the bad times. Admittedly, it takes a lot of effort to build or strengthen a relationship. But the rewards are worth it, because as the research shows, having a happy marriage can ease one of life’s difficult transitions.
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Which begs the question, why do people who are unhappily married persevere in their marriage? According to Scarf, some individuals believe divorce is immoral. Others remain out of loyalty—e.g., their spouses helped them while they were in school or their spouse supported them emotionally during a crisis. Still others remain in an unhappy or unsatisfying marriage because the financial cost of divorce is too great; they choose money over happiness. In some cases, couples who chose to remain in unhappy marriages live parallel lives and might as well be divorced. Regardless of the reason couples stay together, the implications of Scarf’s research is clear: if your marriage is experiencing turmoil and conflict as you enter the Second Half, ride it out rather than get a divorce. Odds are you’ll be a lot happier if you do.

IF MONEY DOESN'T BUY HAPPINESS, WHAT DOES?

In an earlier post I suggested that money doesn't buy happiness. I know this is hard to beleive especially when we have less of it than we did a year ago. But I am sticking to my guns.

So,what does buy happiness? You'll be happy to know there is remarkable consensus among psychologist about the subject. Most beleive our ability to achieve happiness results from several factors including, having a set of core values and beliefs, maintaining a loving, stable marriage, developing meaningful relationships, engaging in altruistic behavior, making a commitment to learning and growing, and maintaining a healthy lifestyle.

Possessing Core Values and Beliefs

Why am I here? What’s important in my life? How should I behave? Are three of the most significant questions we wrestle with throughout our lives. Many people in contemporary American culture find the answers to these questions by observing other people rather than from independent theological or philosophical inquiry and personal reflection. As result, our beliefs are often ephemeral changing with the times and situations in which we finds themselves. For starters we all need a reason to get up in the morning especially during our Second Half when we no longer go to work. Stephen Covey says we need to find our True North. Without it one is likely to wander aimlessly through the Second Half making trivial things important often turning to alcohol and other vices to escape the inevitable boredom and pain. Not surprisingly, people who lack purpose are more likely to suffer from depression, have a higher incidence of illness and have lower life expectancy than people who have a sense of purpose. If you believe happiness research on as we mature and enter the Second Half if we need to find our purpose, decide what is important in our lives and develop a set of values address to guide our behavior.

Maintaining a Loving, Stable Marriage

Another important ingredient for achieving happiness and well being in the Second Half is having a loving and supportive spouse, or significant other. Sustaining a healthy marriage takes a great deal of effort on the part of both parties. There must be mutual support, respect, understanding and no small measure of forgiveness. Sadly, most studies reveal that marriages are often fraught with conflict and disagreements over children, in-laws, money and sex. The ones that last do so because both parties reach a point where they acknowledge that being together is preferable to being alone and are able to accept each other’s imperfections. Once this level of understanding is attained the focus becomes less upon what one’s partner is doing, or not doing, and more on how both parties can communicate better and become more focused on each other’s needs.

Developing Meaningful Relationships

One of the things we lose when we leave work and enter the Second Half are relationships with other people. Some of us are exceptionally good at net working and make it a point to stay in touch with close friends as well as being very adept at making new friends. This is important to our happiness and well-being for a number of reasons. Friends help us see the world differently, they help us from becoming isolated and lonely, and they are a source of solace and comfort during hard times. Friends keep us honest and accountable by telling us what we need to hear, not what we want to hear. Good friends cushion us against the vagaries of life and the slings and arrows of outrageous fortune. When we have friends we are less self- absorbed with our focus directed toward their needs. This is the reason friends are a source of happiness and well being in the Second Half

Engaging in Altruistic Behavior

The evidence strongly suggest that becoming involved in altruistic activity is a key factor in achieving happiness and well being in the Second Half. This includes performing volunteer work, or finding a second career in a community service role or healthcare business, or even becoming a social entrepreneur. We are built to serve. It is an integral part of our humanity. It is very easy in as we enter the Second Half to become obsessed with our own needs. When we do it can lead to social isolation, cynicism and negativity, ingredients that can lead to a host of mental and physical breakdowns as we become older.

Making a Commitment to Learning and Growing

“Tis a healthy mind that makes the body.” rich said Shakespeare.
Some years ago a fund raising advertisement reminded us that a mind is a terrible thing to waste. How true especially in our Second Half if we want to be happy and fulfilled. This is one of the reasons colleges and universities are offering a hundreds of courses and programs to retired Boomers. Classes range from how to poach salmon to understanding the Laffer curve to why the English lost the American Revolution. I know one person who attended law school and earned his degree at age 70. Without making a commitment to learning and growing during the Second Half we become cynical and stale retreating into old ways of thinking and doing that prevent us from enjoying life.

Maintaining a Healthy Lifestyle

Avoiding a sedentary life style and being physically active has a host of benefits especially in the Second Half. One doesn’t have to join a health club or gym despite the fact many are offering programs for older citizens. There are numerous opportunities for exercise in the normal course of one’s day including cutting the lawn, working around the house, walking in the neighborhood or local mall. Among many benefits, exercise slows down the aging processes, reduces stress, boosts the immune system, improves mental acuity and improves sleep. Most of all, a healthy regimen of exercise coupled with a healthy diet helps keep our weight down which in and of itself is a key factor in life expectancy.

Dr. George Vaillant who led the remarkable Harvard Study on Aging noted with a great deal of optimism that all the factors that lead to successful aging are controllable. As a result, there is every reason to believe with some effort and the appropriate behavioral change model each of us can find the happiness and well-being we deserve in the Second Half.

A MEANINGFUL RESPITE

I just returned from vacationing in Florida with my wife. No children. One was in school in Philadelphia. The other was in lacrosse camp also in Florida. Before leaving I decided not to bring my laptop as a way of breaking my addiction to the internet. The downside for me at least, I was unable to blog. Perhaps as a consequence I had an opportunity to reflect on my good fortune amidst the rubble left by Wall Street and a negligent body politic and the serious damage they both did to our retirement portfolio and my self confidence.

The first thing I realized the minute I arrived in Florida was that I have a wonderful wife. I discovered that the things which attracted me to her when we first met at a faculty party in Chapel Hill over thirty years ago were still there. She was fun, she was caring, she was loving and she was easy on the eyes. Unfortunately, with the hurly burly of career, home, kids, bill paying, social obligations and the like I became inured to her qualities and all to often focused on the negative aspects of our relationship. I now realize more than ever, as I mentioned in a previous blog, relationships don’t fail because two people fall out of love, they fail because of neglect. This is the reason we all need schedule time alone with our spouses whether it be to travel, have dinner, go for a long walk or have a glass of wine by the fire. In a sense when we retire and enter the Second Half we must reintroduce ourselves to our spouses and awaken or rekindle what was lost due to the fact we often placed greater emphasis on our careers and what it gave us and less emphasis on our relationships with our spouses.

I also found out that less really can be more. We secured an amazing internet rate of $127 for a room in a hotel on the beach outside of Miami Beach. It was modest in every respect. The rooms were circa 1960’s kitschy with garish bedspreads and wall hangings. The bathroom was the size of a hall closet. The room TV had no more than twelve channels and the reception was grainy with a double image to boot. Breakfast was served on Styrofoam plates and plastic forks. But, the place was spotless, the staff polite and attentive and most important the sun and the sand were exactly the same as the Ritz Carlton up the street which was four or five times more expensive. We had a great time and can’t wait to book a room next year no matter what happens on Wall Street.

While in Florida we had an opportunity to renew acquaintances with old friends who had moved from the New York metropolitan area where we live. We were struck by how quickly relationships pick right up even though months and even years go by. I realized that the ties that bind are truly hard to break and that in itself is good news. Because, the evidence is overwhelming that having a network of friends is a critical factor in promoting happiness and well-being as we get older. As a result it is important that we go the extra mile to stay in touch with friends who have moved away. Like our marriages, relationships die from neglect. In order to avoid this there is something called the Rule of Seven which states that in order to maintain relationships we should try to make contact seven times a year through emails, phone calls, mailing news clippings, sending candy grams, etc. It takes effort but we’ve committed to giving it a try.

Finally and perhaps best of all, I realized that all my worrying and concerns were a waste of time because whether my mental image of the future was positive and optimistic or negative and pessimistic I am really lousy and making predictions. This hit home as I was laying in the sun and day dreaming about what was and what might be and I concluded that the personal events in my life that had the greatest impact both negative and positive, for example, the career I chose, the person I married, the place where I lived as well as larger socio-economic, political events such as 9/11 and the current economic crisis all occurred seemingly out of left field. It struck me that my entire educational background was predicated on the idea that the more we know the better we are at predicting the future. When in reality, what we don’t know is far more important. For example, we didn’t know about credit default swaps or that Mohammed Atta was learning to fly but not land a jumbo jet. Had the collective “we” known about them,the future would have been quite different. If you doubt the veracity of what I am saying that’s ok but for the heck of it, list the events in your life that had the greatest impact and see if you predicted them.

Scott Peck in The Road Less Traveled wrote a wonderful chapter on “Grace” which he defined as God’s unmerited favor. Getting away for a week helped me realize that my relationship with my wife, our ability to enjoy a more simple vacation, the renewing of old friendships and the realization that trying to predict the future is foolish are in the final analysis are examples of grace and worthy of thanks and praise. I hope you will reflect on your good fortune in these tough times and find that there is much to be thankful for as well.

LOWER YOUR STRESS, COMMUNICATE WITH YOUR SPOUSE

When couples enter the Second Half they have many pressing issues to deal with including, the aging process, finances, medical problems, where to live, relationships with children and other family members, making legal decisions and other issues that can strain even the best of marriages. The key to dealing with these issues is communications. Here are some ideas about how to communicate more effectively with our spouse:

-Figure out what you want to say. Before you talk with your spouse about something, make sure you know what you want to tell him or her to minimize possible misunderstandings.

-Decide what you need from your spouse. You are more likely to get your needs met, whether it be a hug or an answer to a question, if you know what you want.

-Use good judgment in timing. Is your spouse sick or preparing for a big meeting at work? Consider your partner’s state of mind when choosing a time to talk.

-Make eye contact. Your spouse will be more likely to listen and hear you if you are looking right at each other.

-Get your spouse’s undivided attention. You will not be heard if your spouse is thinking about something else when you are trying to talk with him or her.

-Be a good listener. By being attentive to your spouse, you will have a more productive discussion.

-Don’t get into heated arguments with your spouse when you are talking on the telephone. Conflicts are much better resolved in person.

-Confirm that you were heard. Ask your spouse if he or she fully understands what you just said. Then, and only then, will your spouse be able to respond properly.

-After your spouse has told you something, rephrase what he or she has said. This will let your spouse know for sure that you’ve heard what he or she is saying.

-Schedule a better discussion time if necessary. Sometimes it’s just not possible to get your spouse’s attention at the exact moment that you want it.

Remember that communication is a two-way street. If both of you follow these steps you will strengthen your relationship with your spouse. As I mentioned earlier, poor communications lies at the heart of most of the conflict and stress couples have as they enter the Second Half. It results in increasing doubt and uncertainty about the future. This, in turn, increases the level of stress. The best approach for dealing with stress is to focus on building mutual trust and empathy by becoming a better listener. So, when you are having a discussion with your spouse be present. Give them your full attention. Make eye contact. Don’t let your eye or your attention wander. This is an essential part of effective communications and bears repeating.

In addition to being a better communicator there are other things you can do to build your relationship with your spouse. One of the things men feel when they retire is a lack of respect from their spouse. This is often results in the husband becoming disengaged or angry. If you feel disrespected tell your spouse then forgive them and move on. Keep in mind, you have little power to change your partner but great power to change yourself. Determine what you can do to be a better spouse then spend time and energy moving toward that goal. Take responsibility for creating a good marriage with the full knowledge of the difficulties involved. A good practice is to schedule one hour a day for time together to communicate mutual needs and wants, to affirm and validate each other, to be each others best critic and, most important to take the opportunity to be romantic and loving towards each other. Remember, marriages fail from neglect not from one or the other partners falling out of love.

YOUR MIND, IT'S A TERRIBLE THING TO WASTE

Disraeli, Prime Minister of England during Queen Victoria’s reign, said, “Nurture your mind with great thoughts.” Studies have consistently shown that Disraeli’s exhortation is good for our health, our happiness and our sense of well-being. As it turns out mental gymnastics are as important as physical gymnastics because anything that requires us to think and concentrate challenges our brains and helps wards off the effects of aging. As a result, if you like to play chess, bridge or a musical instrument, do not let old age stop you. And if you don’t, here are a couple of other suggestions for you to ward of father time!

Continue Your Formal Education

Almost every college and university in the country offers courses and degrees for adult learners. Courses can range from the classics to history to foreign languages to more practical subjects such as financial and retirement planning. There are numerous on line courses offered by both traditional brick and mortar institutions as well as new online, virtual “universities.” I have a friend who earned a law degree on line at age seventy who subsequently served as an intern in Mubai, India. He is aging well.

Keep a Daily Journal

I’ve been doing this since I retired and entered my Second Half. I generally do it early in the morning after reading the Bible and praying. I write about things I need to do in my Christian walk as well as reflect on my experiences the day before. I also use my journal to put down goals I want to achieve then refer back to those goals later to see if I achieved them. Reflecting and questioning keeps me engaged spiritually and mentally.

Commit Favorite Poems or Famous Passages to Memory

I attended an off Broadway one man show in which the actor Alec McGowan recited the Gospel of St. Mark without notes or a script. He’d committed the entire work to memory. If you can repeat his feat I am sure it’ll help your brain function more effectively because it’s like a muscle that gains strength when exercised. Committing a poem or address to memory, even memorizing the lyrics to a favorite song is good for the brain. Start with something that’s not too long then gradually work your way up to lengthier pieces.

Read Great Books

Reading books that are challenging or which stimulate interest in new things is a good form of mental stimulation. I've made a list of the great books and hope to make a dent in the list by the end of the year. I have a friend who bought Will and Ariel Durant’s eleven or twelve volumes, oops I can’t quite remember, on the rise of western civilization. I have another friend who became an expert on a particular type of German clocks. In both instances the two people remained intellectually engaged and stimulated in well into their Second Half

Do Puzzles

A number of researchers have argued about the virtues of doing crossword puzzles and other word games as a way of exercising the brain. I am assuming the harder the puzzle the greater the benefit. My personal favorite would have to be the crossword puzzle in the New York Times Sunday magazine. My best effort was somewhere around 5% completed!

Use the Opposite Hand

Try, brushing your teeth, using a fork, dusting the furniture, writing a letter with your opposite hand. Believe it or not, using your opposite hand i.e. if you are right handed use your left hand, to do simple tasks is a very good brain exercise because it forces you to focus and concentrate more intensely.
Other activities for improving mental acuity are learning a foreign language, taking piano lessons, leaning how to cook.

Remember, one of the best ways to slow down the aging process in the Second Half is to exercise the brain by using it. As the saying goes the mind is a terrible thing to waste! So don’t procrastinate (the subject of an earlier blog) and get started exercising your mind. You’ll ward off the effect of aging and be happier and more fulfilled.

IT'S TIME FOR BOOMERS TO HIT THE RESET BUTTON

In a recent post I made the obvious point that these are tough times for Boomers. We have far less in our bank accounts, 401ks, IRA’s and piggy banks than we did last year and there is there is no one who can predict with any certitude when the hemorrhaging will stop! Given this stark reality we can become passive victims and wring our hands or we can hit the reset button and change the circumstances of our lives. I suggest the latter. We have to reset our focus from doing more to being more. We have to reset our value system. And, we have to reset our expectations.

One of the hallmarks of our Boomer generation was the idea if we worked hard we could have it all. This was driven by the belief that our self worth was based on achieving the Good Life as measured by the money we possessed, the houses we lived in, the cars we owned, the vacations we took, the youthful countenance we preserved, the schools our kids attended, the status and power we enjoyed, and much more. The drive to acquire these accouterments of the Good Life was fueled in great part by the advertising/marketing/ mass media complex which bombarded us with messages reinforcing the idea that doing more would lead us to having more and then being more. They did their job so well that millions of us funded our Good Life on a mountain of debt that many now believe got us into the pickle we’re in. What is ironic, as mentioned in an earlier post, the evidence suggests achieving the Good Life made us no happier because we were on a hedonic treadmill and couldn’t get off. Now we are forced to at least slow the treadmill down or get off completely. To do this we will have to reset how we measure our self worth.

One measure of our self worth resides in our ability to act out our lives consistent with our values and beliefs. This is what being more is about. Shakespeare put it best saying, to thine own self be true. Values are the beliefs we hold about what is good and true and should be the foundation upon which we think, act and behave no matter the circumstances. Take Lillian Hellman, the writer, for example, who when called to testify and rat out her friends during the McCarthy hearings refused to do so saying “I will not cut my conscience to fit today’s fashions.” She lived her values. Summing up the importance of values and beliefs one writer said, “How different our lives are when we really know what is deeply important to us, and, keeping that picture in mind, we manage ourselves each day to be and to know what really matters most.” Lillian Hellman knew the answer.

What should matter most to us at a time like this? A look back into our history gives us a clue. When the early settlers pushed West and faced hardship beyond anything we’re currently experiencing they adapted and survived by embracing such values as trustworthiness, frugality, integrity, hard work, self reliance, inventiveness, risk taking, community, sharing, belief in God. Had these values operated in contemporary culture life would be very different. We’d undoubtedly have had less stuff but gained a greater sense of well-being. As you ponder your circumstances is it time to do a value check? What do you believe? What is good and true? Is it time to hit the reset button on your value system?

I remember during the early days of Nixon’s administration some one said it was time to stem the tide of rising expectations. Although they were referring to the expectations of the underclass—Nixon and his henchmen wanted to cut back on entitlement spending, I believe we need to apply the concept to ourselves and reset our once rising expectations about how we spend money and what we get in return. One way to escape the cycle of conspicuous consumption and get off the hedonic treadmill is to reject fads, fashion, the latest technology, bells and whistles we don’t need on the cars and PC’s we purchase, professional services we no longer need—start with elaborate financial plans, expensive resort vacations and a host of other considered purchases. In the new world, less really will be more. We should demand quality, durability and value for money from whomever we do business with and boycott those who continue to exist in the conspicuous consumption marketplace believing as one ad proclaimed, image is everything! We know better.

One last word, as I mentioned in an earlier paragraph, one of the basic values this country was founded on is belief in God. I am a person of faith and initially believed that a blog helping Boomers navigate their way through their Second Half shouldn’t have spiritual or religious overtones for fear of turning off people who may not share my beliefs. As I was editing the first draft of this post and thinking about my personal response to having less money and diminished expectations about living the Good Life I realized it was impossible for me to leave God out of the equation. I offer no apologies. You see I believe God is trying to get our attention. He warns us throughout the Bible that if we worship money and make it our God instead of Him it will destroy us not physically but spiritually. St. Paul in one of his epistles warns us to keep our lives free from the love of money. Having or accumulating money is not in itself wrong. What is wrong is making it our God, the thing that we spend most of out time thinking and worrying about. I believe God is quite clear that we are called to love Him and love our neighbor. He isn’t calling us to love money and love things. If we keep this in mind this may be the best reset of all.

TWELVE LESSONS FOR BOOMERS ABOUT INVESTING LEARNED THE HARD WAY

Let me say upfront, I am not a financial planner, I am a Boomer who became a consumer of financial services out of necessity. After much research and study I concluded that no one will look after my finances more diligently than me. The same applies to you. Admittedly I have made some good calls and some really, really stupid ones. But then, so has Warren Buffett as he admitted in his recent address to shareholders of Berkshire Hathaway. We’re all going to make mistakes. The smart ones amongst learn from them, so should you. So, quit beating yourself up if you’ve screwed up. With this collective "Mea Culpa" out of the way, here are twelve lessons about investing that I Iearned the hard way that hold true in good times and bad. Hope they help you as much as they helped me

Rule # 1: Be Thou Ever So Humble

In 1999 my portfolio outperformed the indexes by a very healthy margin. I felt like a master of the universe. The following year my portfolio went into free fall and crashed. I was crushed. The internet bubble burst and I wondered if I’d recover my ego as well as the money I lost. As a first step in my recovery I read every thing I could get my hands on about investing and portfolio management. I realized that when you make money in the market you’re never as good as you think you are and when you lose money you’re never as stupid as you think you are. The fact of the matter is that eight out of ten stocks follow the market. When the market goes up so do they, and vice versa. So be humble and never lose sight of this fact of investment life.

Rule #2: You Will Lose Money in the Market

If everyone was guaranteed they would make money in the market Las Vegas would go out of business. Once you decide to buy stocks expect to lose money at some point. When this happens don’t panic and pull out. Stay the course because over the long term you will make money in the market. The challenge is to manage your emotions. To put things in perspective your return from 1970 through 2007, according to Fund Advice.com, had you invested only in stocks you would have realized a gain of 13.7% but lost money in seven of those years. The loses we are experiencing now are unprecedented in our lifetime. No one expected it. To keep things in perspective, however, if the market can lose half its value in six months it can regain it in six months.

Rule #3: Take the Long Term View

It is very difficult to avoid constantly checking the market thanks to the proliferation of cable channels offering financial news including second by second tick of the major indexes. I have to constantly remind myself that I am a long term investor not a day trader and daily market fluctuations whether to the upside or downside should have little or no impact on my state of well-being. Put it this way, I have to be more like Warren Buffet and less like Jim Cramer. So must you if you are to avoid becoming addicted to financial porn. Most experts still agree that the stock market will grow close to a healthy eight percent over the long term which means stocks will outperform all other securities including bonds and money market funds. So, if you want to avoid getting an ulcer turn off the financial cable channels and watch Oprah or Dr. Phil. You’ll sleep better!

Rule #5: With Reward Comes Risk

I know every investor understands that with reward comes risk. But here goes any way. Risk and reward is the relationship between possible risk and possible reward which holds for a particular situation. To realize greater reward one must generally accept a greater risk, and vice versa. This is referred to as the risk/return tradeoff. From an investment perspective this means that when we chase higher returns for example, purchasing an emerging market mutual fund that has produced historically high returns, we have to prepare ourselves for greater risk on the downside. In other words, the greater the projected return the higher the risk.

Rule #6: Pay Attention to Asset Allocation

Studies show that 90% of a portfolio’s return is determined by the mix of stock, bonds, cash equivalents. Broadly speaking it also includes real estate, precious metals and other investment categories. The underlying rationale for asset allocation is to balance risk and reward because different asset classes behave quite differently. For example, when stocks go up, bonds typically go down. More significant, bonds are more stable than stocks but not as financially rewarding. The lower the ratio of equities to fixed income the lower the return and the lower the volatility. If you are not sure how much to put in fixed income follow John Bartle’s advice, he’s the founder of Vanguard Investments and the father of index funds, and allocate an amount equal to your age. For example, if you are 65 allocate 65% to fixed income securities and 35% to equities.

Rule #7: Choose Index Funds Over Managed Funds

Over the long term index funds are safer and outperform managed funds. Did you know that in any given year only 25% of managed funds outperform the market? There is no guarantee that a fund that beats the index will replicate the feat the following year. Yet the average expense ratio for managed funds is 1.5% of the funds assets. This is charged regardless of its annual return. In contrast the typical fee for an index fund is around .25%. Vanguard’s S&P 500 Fund has a fee of only .18%. Adding to the cost of managed funds is their annual turnover, put at around 95% which drives up annual transaction costs. Taking this into account, over the long term index funds which mirror a given market, e.g., S&P 500, emerging market, international value, and US small cap funds will out perform, have lower risk and be less expensive than managed funds.

Rule #8: Create a Balanced Portfolio

Once I was sold on index funds and asset allocation I developed a balanced portfolio consisting of 60% equities and 40% fixed income. I split equities 50-50 between US and international funds. Then, within each I further diversified equities between small and large cap and between growth and value funds. In this manner, I had a portfolio that gave me growth while simultaneously lessening some of the down side risk inherent in investing for the long term. That being said, my portfolio declined in 2008 and is not doing so hot this year. In the last twelve months it has declined 25% which is gut wrenching but it would have been at least twice as bad had I not created a balanced portfolio.

Rule #9: Don’t Try to Time the Market

In an ideal world we’d love to know when the market is going up and when it is going down so we can determine when its time to buy or sell. There are traders who use technical analysis who claim they can predict when the price of individual stocks will rise and fall. Others say predicting the rise and fall of stocks is a crap shoot at best. The evidence suggests that buying shares in first rate companies or buying a diversified basket of index funds and holding on to them for the long term is the best approach. The reason is, the market is unpredictable. The big question we are facing now is knowing when the bottom of the bear market will be reached. The answer is impossible to predict. We do know that bear market bottoms are often followed by swift recoveries. If you get out and stayed out of the market while it it's going down chances are you will miss the first few days of the upturn and not recover some of the ground you lost. Again, no one knows the direction of the market so if you can avoid a swift pull out you may be better off staying put.

Rule #10: The Past Won't Predict the Future

When I began investing I chased returns by looking for the hot stocks and hot funds touted by the many financial publications and websites catering to the amateur investor. I remember funds exclaiming they beat the Lipper or Morningstar or some other benchmark for the previous 12 months. These funds are just as likely to under perform the next year. In 2007 Standard and Poor’s found that over a five year period mutual funds that outperformed their benchmark index often failed to repeat their performance the following year. Another study found that random chance played as big a role as any factor, e.g. fund manager’s experience, fund family, in determining their ability to outperform their relevant benchmark! So pay very little attention to past performance. But, if you must you are better of looking at a longer horizon of five or even ten years.

Rule #11: Don’t Play With House Money

Gamblers love to play with house money. I’m referring to another type of house money, the money you need to keep in ready cash to pay for annual living expenses. I believe it makes sense to keep three years living expenses out of the market during this traumatic time. I did. When the market starts its recovery it will be tempting to leverage as many dollars as you can to recoup from steep losses. Try not to. Keep money you will need to pay for necessities including food, clothing and shelter in reserve. If you are in your Second Half have a bigger cushion than if you were employed. Err on the conservative side.

Rule #12: There is No Free Lunch

The final lesson I Iearned is one of the first laws of economics is, there is no free lunch. Everything has a price, nothing is free. I remind my children of this whenever I can. My son told me he was given a free PC by his college at the beginning of his freshman year. I used his comment as a teaching moment advising him that I was quite sure his $45,000 tuition bill included the price of his “free” PC. Nothing is free, and if something seems free look for the back door entrance through which you are being charged. For example, a redemption fee if you purchase a no load mutual fund.

As I was writing this post it occurred to me that someone may suggest there is only one investing lesson DON'T! At the risk of sounding Pollyannaish, although these are tough times we will come out of it bigger, better and stronger. I believe this deeply. After all, aren’t we the most entrepreneurial, productive, innovative and hard working nation on the face of this earth? That’s the main reason for investing in the market in the first place even though it is a stomach turning time for all of us. So put on your helmet, tighten your chinstrap, tie your laces and hitch up your pants and get in the game because there are better days ahead.

ALTRUISM: IT'S GOOD TO BE GOOD!

Did you know that if you are a retired Boomer it is good to be good? Keeping this sage advice in mind, during this economic crisis most Boomers including myself will be a lot happier if we avoid becoming preoccupied with our situation and remember there are people around us who are far worse off. As each day brings news of layoffs across every industry and region of the country with many families no longer able to meet basic needs there are many opportunities in our communities to help. I know where I live many churches and synagogues sponsor food drives for needy families and depend on volunteers to collect deliver food to those who need it. There are undoubtedly similar opportunities to serve others in your community.

Each of us has a set of unique talents and abilities developed over the course of a lifetime. During these difficult times we have an obligation to utilize those skills to help others in need. All it takes is a willing heart and the realization that when we act on behalf of our best intentions we benefit at least as much and probably more than those we serve. Almost every research study I have read, most notably the Harvard Study on Aging, agrees with this point suggesting that altruism is one of the key factors promoting happiness and well-being especially for seniors, i.e. Boomers in their Second Half. Altruism is good for us because when we are helping others we become less absorbed in our daily troubles and concerns which, when compared to the plight of others can seem trivial and unimportant. And, for you hedonists out there, altruism makes us happy because it’s wired into the brain. This was the conclusion of a study conducted by the US Government National Institutes of Health in which volunteers were asked to imagine two scenarios. One was keeping a large amount of cash for themselves another was giving it away. The study found that the more generous scenario activated a primitive part of the brain that usually lights up in response to food or sex!.

Alexis DeTocqueville, who traveled throughout the United States in the early 19th century, observd that we were a nation who believed neighbor should help neighbor during tough times whether it meant lending a shoulder to help push a wagon out of the mud or share flour when food ran out or console a wife whose husband died from fever. According to DeTocqueville, helping was more than a matter of survival it was a moral obligation and part of the American character, lest we forget. So if you find yourself endlessly ruminating about the economy and the market and putting yourself in a lousy mood get up, get out and get going and do something for your neighbor. And while you are doing it remember what Albert Schweitzer said, “I don't know what your destiny will be, but one thing I know: the only ones among you who will be really happy are those who will have sought and found how to serve others.”

TOUGH TIMES FOR BOOMERS

For most Boomers in their Second Half these are the times that tries men’s souls. With retirement portfolios heading south the economy in the tank and the job market even for so called "survival" jobs shrinking Thomas Paine’s dictum rings painfully true for many Boomers who now have to put their hopes and dreams for the Second Half on hold as they figure out what to do next. As for myself, my portfolio has taken a beating and the retirement plan I developed now looks naively optimistic. My initial response was anger, fear and loathing. But after months of lousy news I have adjusted to the new reality and am now trying to get things on track. Here is what I am doing.

An important lessons of Victor Frankl’s account of life in a death camp, Man’s Search for Meaning is one of the last great freedoms is our ability to chose what we think. That insight enabled him to survive Auschwitz and will enable us to survive our present trials, which pale by comparison. It is very easy for us to create doomsday scenarios if we believe everything we hear from some of the shrill, hysterical so called reporters on cable TV. As a result I quit watching cable news. Instead, I try to replace negative, self defeating thoughts when they occur with positive ones and remind myself that I can control what I think. As the saying goes, its not what happens that matters, its what you do with what happens that matters.

Once that hurdle was made, I decided to focus on what else I could control. An obvious area were my costs. I learned in business when revenue goes down, costs follow. Bearing this in mind, I went through my annual expenses and classified them as fixed and variable. For example, I classified my mortgage, my kid's college tuition, and property tax as fixed expenses and the lawn service, vacations, telephone as variable costs. Once I completed classifying my expenses I looked for ways to either reduce or eliminate variable expenses. Thus the lawn service and vacations were eliminated and a phone line cancelled thereby reducing phone expenses.

The third thing I did was search for opportunities to apply the skills I developed as a college instructor, corporate executive and management consultant to generate additional income to supplement my retirement portfolio. I concluded I didn't need to find a “survival” job at this time. Instead, I decided to develop a seminar business to equip retired Boomers to deal more effectively with important areas of their lives including their finances, marriages, health, mental development and relationships with other people. I concluded seminars would be more affordable for people who wanted help rather than one on one coaching sessions which tend to be more expensive.

The last thing I did was abandon my belief in models predicting the future, especially financial planning models. Nassim Nicholas Taleb in his book the Black Swan positing that we are not very good at predicting major events because we are more focused on what we know and fail to take into account what we don’t know. Consequently, those who were responsible for protecting us failed to predict 9/11 just as those who were responsible for managing the economy failed to predict the recent implosion on Wall Street. All the propeller heads and quant mathematicians in the world with all their fancy models can’t put Humpty Dumpy back again. So, no more financial plans for me!

Where does his leave me, or you if you agree with me? I am simplifying my life by living within my means. I am practicing what I preach about the role of money in my life-- it’s not my life. Even though,I am still hoping that what goes down eventually goes up. And I am paying more attention to my intangible assets especially my values and beliefs and trusting that David Halberstam was right when he wrote in Breaks of the Game::

Fame is a vapor
Popularity an accident
And money has wings
The only thing that endures in life is character”