Question:

I live in Australia and have listened to your weekly podcast for several years. Your recommendations seem to be limited to funds that U.S. investors can buy, but I have a different problem. Australia has compulsory retirement savings. There’s a strong trend toward do-it-yourself investment management through Australian mutual funds. Do you have any advice for Australian investors? If not, do you know of a service like yours that serves the Australian market?

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Question:

I am considering a fixed annuity, but have heard they have excessive costs including fees and penalties.  I would like your view point.  Thanks.

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Question:

I am not sure I understand the difference between your tax-managed portfolios and your tax-deferred portfolios. Does tax-advantaged just mean using index funds? I have an all-equity taxable portfolio at Vanguard that includes large, small, international, growth, value and REIT funds. I’ve got at least 20 years before I can even think of retiring.

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Question:

My well-diversified portfolio is down 30 percent from October of last year. I took a similar beating in 2000-2002, but back then I was not well diversified. I thought things would be better this time, and I’ve taken your advice by not buying or selling anything so far. However, my losses are more critical to me right now. In the 2000-2002 bear market, I was still working. Now, I am 20 months into retirement and I cannot keep adding money from earnings. Is buying and holding still appropriate for me?  I have an acquaintance whose adviser moved him into cash, and he is down only 7 percent instead of 30.

I know there are people who have lost more than I have. But the math looks daunting. It takes a 50 percent gain to recover from a 33 percent loss, and a 100 percent gain to recover from a 50 percent loss. Under today’s market conditions, it’s anybody’s guess how long that might take, especially since I am taking 4 percent withdrawals from my IRA based on the previous year-end balance.

I have had to reduce my withdrawals by about 20 percent and am looking at another 15 percent reduction starting in January. At that level, I will be hard-pressed to meet my reduced cost of living.

My question: Is there some threshold beyond which it is foolhardy to keep hanging on and losing money? Looking back, I wish I had cut my losses at 10 percent or 15 percent. I recently saw a Jim Cramer video clip in which he said it is not too late to sell because the market could still get a lot worse. I’ve followed your advice since I attended a workshop earlier this year. I wonder if I should move to cash now and save what’s left of my portfolio. Or should I hang on and hope things get better?

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Question:

I am trying to manage the risk in my portfolio following your suggestions. I chose a 60 percent equity portfolio, since I think that is about right for me. But as the value of my equity funds has fallen, the equity/fixed-income ratio and asset class percentages have become quite distorted from my original plan.

Instead of 60/40, I’ve now got a 45/55 portfolio. Since equity prices have fallen so much, I have decided to move some of my fixed-income holdings into equity funds. (I have also rebalanced the asset classes within my equities.) If the market keeps dropping, I’m planning to convert another 5 percent to 10 percent of my fixed-income funds into equities.

This is very painful; it feels as if I am putting more of my money at risk. But I no longer contribute to my IRA and this rebalancing process is the only other way I know to “buy low.” I have faith that these moves will eventually pay off when the market begins recovering. I will have more equity shares, bought at a lower average cost, and that should enable me to recover faster.

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Question:

I’m a healthy, 60-year-old woman, still working, with a modest retirement portfolio worth about $40,000. I will soon receive a lump-sum tax-free pension settlement worth about $25,000. After I max out my Roth IRA for 2008 and 2009 and pay off some credit cards, I’ll have about $10,000 left. I intend to keep this as an emergency fund, though I don’t think I will need it in the future. How should I invest this money to keep it growing but also protected from a major loss? Bond funds? Certificates of deposit?

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