Lately, I have seen a variety of articles touting the benefits of using target-date funds (also known as Lifestyle or Life-Cycle funds) to reach your retirement goals.

One write-up in particular started out by intelligently stating that “low contribution rates could leave investors with a retirement shortfall.”

Duh!

If I don’t contribute to anything, I’ll be facing some kind of shortage in the future. It doesn’t take a mathematician to arrive at that conclusion. That would apply to any type of investment account, wouldn’t it?

The problem I have with Lifestyle funds is that the investing public is lulled into a false sense of security by believing that this type of fund, if regularly contributed to, will be a “safer” investment than a “regular” mutual fund.

This is absolutely not true. Lifestyle funds go down in value during bear markets just as much as other funds. I wrote the article “Do Lifestyle Funds Provide Greater Security” some 4 years ago, just before the U.S. bear market was running out of steam.

You can read it at: http://www.successful-investment.com/articles11.htm

Whether you decide to use Lifestyle Funds, or any other vehicle for that matter, using a prudent approach by staying out of the bear trap (via a sell stop discipline) will do more for your financial health and your future retirement than the investment itself.

My latest No Load Fund/ETF Tracker has been posted at:

http://www.successful-investment.com/newsletter-archive.php

Subprime loan concerns pushed the markets down severely last Tuesday and, while the major averages received, they ended the week slightly down.

Our Trend Tracking Index (TTI) for domestic funds moved lower and now sits +2.93% above its long-term trend line (red) as the chart below shows:

The international index slipped as well and currently sits +6.02% above its own trend line, as you can see below:

Two weeks ago, when the global markets tanked, the blame was squarely placed on what happened in the Chinese stock market. I am sure that we can find a scapegoat willing to take the heat for today’s 2% drop in the major averages.

As I looked around, I came to the not so unique conclusion that the fault is clearly found in our own business backyard. Especially, in that part of the mortgage industry that “prides” itself on subprime lending. To see an almost similar repeat of the Savings and Loan crisis some 20 years ago represents nothing but greed based on stupidity and ignorance of subprime lenders.

During the height of the real estate boom, a couple years back, some of my clients in the mortgage industry boasted that they could make a real estate loan to anybody who could write the words “stated income” and was able to fog up a mirror.

That’s it!

Credit scores or actual means of repayment were of no importance. Everything was based on the fact that real estate would go up forever and refinancing was an ever present option. It was la-la-land for mortgage brokers.

Sure, why not go for the upfront money with a marginal borrower. If you can make a couple extra points right now, why should you care whether payments can be made later? It’s money in your pocket. Besides, your company gave you those products to sell, so you’re doing the right thing.

I don’t blame the individual sales person for bringing home the bacon; I fail to understand how an entire industry can jump on this apparently unregulated band wagon without ever considering the potential fallout from such reckless lending activity.

While the jury is still out as to the total spillover effects, not only on real estate but the economy as a whole, the end result will most likely be very costly to the tax payer—again. Just like after the S&L; crisis of the 80s, a lot of jaw boning will take place, some participants will get their hands slapped while others will go to jail for direct fraud.

Lending regulations will be tightened but, after a few years, when all is forgotten, it will be business as usual.

Sad but true.

My latest No Load Fund/ETF Tracker has been posted at:

http://www.successful-investment.com/newsletter-archive.php

The markets stabilized after last week’s sharp sell off and the major indexes gained slightly.

Our Trend Tracking Index (TTI) for domestic funds inched higher as well and now sits +3.71% above its long-term trend line (red) as the chart below shows:

The international index also recovered and currently sits +6.84% above its own trend line, as you can see below:

Last week’s severe market drop was felt around the world. Despite a solid rebound today, it’s still too early to say with any certainty if the correction is behind us.

Many investors feel that proper diversification will protect them from sharp corrections in the market. Last year’s drubbing during May/June 06 and last week’s global down turn had one thing in common: There was no place to hide. Even traditional hedges such as gold (IAU) and commodities (DBC) were down for the week -6.06% and -1.71% respectively.

Looking at extremes, the worst performer was Malaysia (EWM), down -12.04%, while utilities (XLU) dropped only -1.32%.

The point is that the world, and with it all financial markets, has become such an intertwined place that there is no longer a safe haven to move your money into.

Your best bet is to have a sell stop discipline in place that will get you out of the market and into the safety of a money fund, should a trend reversal occur. This will at least give you a chance to avoid serious damage to your portfolio rather than staying invested and simply hoping for the best.

The best part about having a readership of over 18,000 to my weekly No Load Fund/ETF Tracker is that I get a lot of commentary and feedback, which always seems to broaden my horizon.

After last week’s global market meltdown, reader Don had this to say:

“Ulli: I’m not sure what your political nature is, but I thought it was a poor move on the part of CNBC to have Hillary Clinton on national TV at the height of a market downturn exploiting the dire economical conditions of our economy and how we are owned by foreign investors.

Everyone who invests knows there is a huge influx of foreign capital in our markets and government investments. I fail to recognize why CNBC would allow this type ‘political outrage’ solely for the purpose of allowing someone to campaign for our highest office. This certainly didn’t help quiet the markets toward a 400+ point downturn.”

While I did not see the interview, I have to agree with Don’s observations. This moment of crisis should have given someone the opportunity to rise above petty politics and make a classy statement about the underlying strength of the economy or the resolve of the American people to deal with whatever adversity might come along.

Seems that even former Fed chairman Greenspan only managed to utter the dreaded “R” word (as in Recession), and thereby fueling the fire, instead of leaving center stage to those who have assumed his high office.

Freedom of speech is a great thing, but with it comes a certain responsibility once you have climbed up high enough in the political food chain. That’s my view, what’s yours?