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American Morning

A Motley Fool Doles Outs Financial Wisdom

Aired April 17, 2001 - 09:51   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
DARYN KAGAN, CNN ANCHOR: If you're worried about investing your money right now, our guest has some ideas on financial planning. He is an analyst with Motley Fool in Virginia. Bill Mann is in our Washington bureau. Bill, where is the hat? Where is the fool hat? You don't think we'd book you guys just because you're good looking, we book you because we want to see the hat.

(LAUGHTER)

BILL MANN, ANALYST, THE MOTLEY FOOL: I thought I'd throw you a curveball today, Daryn.

KAGAN: That you did. OK, let's get right to the good advice, and that's actually why we like to have the Motley Fools on. I don't know if you've checked your 401(k) lately, but I know a lot of folks around here, a lot of my friends are afraid to even look because it's down so much. Justified fears?

MANN: Well, I would say so. I mean, people have lost 50 and 60 percent over the last year in their 401(k)s, and that's painful. I mean, it really -- there are no other ways to put it.

KAGAN: You're validating their pain.

MANN: Exactly. Own your pain, right.

KAGAN: Yes, absolutely.

MANN: But really, your challenge as an investor and as someone who is saving for your retirement is really to kind of wipe that slate clean and look from today, because people made a lot of mistakes over the last year and two years, and...

KAGAN: Mainly going too heavy on those very attractive tech stocks. At least, they were attractive at one time.

MANN: Yes, I would say going fairly heavily into those kinds of companies. When we look at investing we think of two things, we think of accumulation of wealth and the preservation of capital. We've really kind of gone too far to the accumulation side, and really what's happened is you've seen people who are trying to save for a retirement thinking that they can juice their returns going a year or two more very aggressively, and unfortunately, in this past year, we rolled snake eyes. KAGAN: And it's so ugly, some folks don't want to do their contribution. They want to roll that back. They'd rather have that cash in their pocket rather than seeing it kind of float away in their 401(k). Is that a good idea?

MANN: Well, that's kind of illogical because basically, we talk about the market at the Motley Fool being time versus timing, and one of the beautiful thing about your 401(k) money is that when it guess into the account, it guess in. You're already getting about 30, 30- some-odd percent on that money because it's pretax.

So, putting that money in your pocket, you've already taken out that much money from those long-term returns. So. whether you really like it or not, if you have 401(k) money and IRA money, you are investing right now. And so, I think that that's something that investors need to understand that delaying those contributions is not necessarily the -- although it may feel better right now, it's not really a logical step toward your future.

KAGAN: Bill, time is a key. We just had a piece on about people in their 50s, and how they were kind of disappointed in putting off their retirement. Is it ever too late or even too early to start with your retirement plan?

MANN: Neither, and again, for someone who is in their 50s who maybe has not been thinking about retirement, sure, they have a few more -- they have a few more risks, and they have some more that they need to kind of build into their assumptions because it is a little bit late, and really, the best thing that we have in terms of investing is time.

So, someone who is starting at 20, 25 years of age, if you can even sock away a $10,000 investment, I mean, that's going to compound over time and be worth a lot of money by the time that you are going to need it. For someone who is 50, they still have plenty of time.

I mean, you've got the average person will retire at 65, 66 years of age. So, that's 16 years, and that is a long time to be able to accumulate money. But beyond that, most people who after they retire, they have an expected life of another 20 years. So, if you're 50, you've got plenty of time left to accumulate wealth.

KAGAN: Very good, Bill Mann, Motley Fool. More information at Fool.com. Say hello to all your fellow fools back at Fool headquarters. Good to see you. Thank you.

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