This is to name just a few.  The “good” funds were only down 37%!  The declines in many retirement portfolios we have seen were 30-60%, we must ask ourselves why were so many portfolios subject to such losses? We believe that the returns were the result of relying on passive investment management strategies employed in many portfolios.  Many individuals and investment advisors use a passive investment strategy.  At MaxOut Savings Advisors, we believe that an active investment management style would have prevented many of these losses.

The typical investment retirement account we see when people come to us from other advisors is a collection of mutual funds that have not been changed in the last couple of years.  What’s worse is that as the financial crisis unfolded, no changes were made to move the portfolio to a more defensive posture.  The result was that many investors headed into the worst financial crisis in a generation in an overly aggressive portfolio that resulted in large losses.  In an actively managed account, changes would have been made to become more defensive as conditions in the economy and financial system became more problematic.  We believe that your investments should change as the investment environment changes.  This is why we talked about moving your investments into the castle to protect them from the financial crisis last year.

One must continue to use adaptive strategies with active portfolio management.  Using the active investment management approach, you should continue to have many of your assets in the castle.  In this defensive move we would be favoring cash, bonds, convertible bonds, preferred stocks, precious metals and high quality multinational companies.  Our castle should be stocked with quality and income.  Our outlook is that the Debt Bubble will take years to work out; therefore, we want quality companies that can survive and prosper in difficult times.  If you are not sure how to manage your 401-k, ask for help; then make changes.  If you are not sure what to do, start out with small changes and see how they work out.

Income has been one of our major themes for the 2009 investment outlook. We want income coming into the account throughout the year.  There are three basic types of income we can bring into the account: dividends, interest, and capital gains.  Dividends come in from ownership of stocks.  In today’s markets, it is not too hard to find companies yielding over 4% per year.  The primary return from owning a bond is dividend interest.  Yields have fallen but we are still finding great value in the investment grade corporate bond sector.  The final way to bring in income is through capital gains in the sale of stocks.  This income or money flowing into the account philosophy will keep your retirement account growing even in times of turmoil.

There are several ways to boost the income in your 401-k or retirement plan if you can only invest in mutual funds.  The first of course is to buy a bond fund.  At the present time we like the investment grade corporate bond sector and to a lesser extent the floating rate loan mutual sector.  We also like the foreign bonds sector to profit from a decline it the dollar.  When looking at bond funds we would look to the short and intermediate term given our inflation concerns.  Remember, keep the bonds shorter term.

On the equity side, take a look at a growth and income fund.  These funds will give you growth as well as income, hence the name.  A variant of the growth and income funds is a balanced fund that has both stocks and bonds in it.  Another sector that will give you capital gains as well as income is a convertible bond fund.  Convertible bonds are bonds that can be converted to stock as the stock moves higher, but still pay interest.