Increase Investment Returns with no Added Risk

This months Consumer Reports magazine has a cover story about how to increase your returns when owning a 401-k (or any) retirement account. It’s pretty simple: cut fees and expenses.

Cut Management Fees

The sad truth is that far too many people create savings plans for their retirement years, without paying attention to expenses. It seems reasonable for us to trust that our employers, looking out for our best interests, would provide access to a plan that treats investors fairly. Alas, that is not the case.

If you have a savings plan — and I surely hope that you do — then take the time to learn exactly how it works.

    –If you own mutual funds, consider switching to

–no-load funds
–low-cost index funds
–low-cost exchange traded funds (ETFs) that come with passive management

–if you own index funds, be certain that the fees are low (i.e., Vanguard)

–if your savings are all in company stock, consider diversification.

    –if you get to buy stock commission free and at a discount, continue to buy the shares. But periodically sell some (or all) of those shares because you do not want to be depend on the success of one company for both your employment and retirement savings.

–No matter where your retirement funds are invested, speak with your human resources department and consider each of your investment alternatives. Do not choose investments that charge higher fees. Even 0.5% per year makes a big difference in the value of your holdings over a 30-year career.

2 Responses to Increase Investment Returns with no Added Risk

  1. Ben 10/21/2013 at 6:11 AM #

    3 Month RUT Call Strike Prices

    Hi Mark,

    I have a quick and easy question regarding opening a new IC position on the RUT 2000. I’m looking to open new positions as older ones have now been closed out of expired.

    Im looking specifically at 3 month $2/3 premium for $10 spreads. With the RUT now at 1115 ish the highest strike priced call I can see for Jan (and March 14) expiry is just 1200.

    The largest ‘even’ position I can potentially open is Sell 5 Dec13 1015/1025/1190/1200 Iron Condor @ 1.95, or Sell 5 Jan14 1015/1025/1190/1200 Iron Condor @ 3.50 Limit. These would meet my criteria in terms of premium required but only offers about 7.5% safety margin with the RUT.

    Ideally I would like to go with the Jan expiry but sacrifice some premium for additional safety margin (distance from the money). This is not possible with the strikes available.

    I think I am asking the following:-

    1) Do new strike price options become available during an existing cycle? As in will Jan 1250 Calls appear and if so when?

    2) Are you often restricted by the available strike prices when opening new 3 month RUT positions? Or is this just what happens in a slow bull market?

    3) Are there any other suitable underlying indexes which may serve me better? You may remember that I have tried and whinged about QQQQ and SPY before (commissions are too high relatively), you suggested NDX, SPX in the past, I have tried both for the last 3 months and the spreads on SPX are horrendous.

    Keep up the blog, its the best resource out there!

    Thanks

    • Mark D Wolfinger 10/21/2013 at 8:21 AM #

      Ben,

      Do NOT force this trade is if is not what you truly want to own. See below for my best suggestion.

      Yes, new options appear as needed. For options with longer lifetimes, there is no set definition of what ‘as needed’ means. For some people 1200 is still plenty far out of the money. For others, such as yourself, other strikes are needed. If you did not know that you can call the OCC and request new strike prices, then please know that you can do so. They do not always honor such requests, but I urge you to call. -888-678-4667

      I have never been unable to find appropriate strikes – especially with index options (because there are so many strikes). I am surprised that 1200 remains the highest, but I think they would add up to 1300 if someone requested it. If the OCC does not help, then call the CBOE and request it there. When you call, tell the operator that you want to “suggest new strike prices” and she should pass you along to the appropriate person.

      Yes, SPX is horrible, and I too have tried to trade it and given up. The truth is that is you want an index, there are only a few choices. You can take a look at DJX, but there are no others, unless you want to trade the ETFs on such things as the Midcap 400 or the Wiltshsire 5000. Those come with higher commissions.

      Thanks, but it has become difficult for me to write the blog these days.
      Regards,
      Mark