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Dear Mr. Berko: I鈥檓 66 years old. I retired at 59 with $682,000 in a roll-over IRA, which is now worth $417,000; my wife and I take out $1,000 per month to supplement our two pensions. But in the last year, we stopped taking money from this account because it has done so badly.

We鈥檝e had two brokers in the last seven years, both nice young men who use their companies鈥� research to manage my IRA. Their advice was terrible from the beginning, and for the past 13 months.

I鈥檝e been managing my IRA but doing no better than the two stockbrokers before me. My only successes were the bank preferred stocks you recommended last year, most of which have doubled. And while I鈥檓 getting 15 percent to 18 percent interest, I invested only $33,000 because I was unsure and nervous about buying them. I also bought some stocks from the 鈥渓ist of 20鈥� low-priced issues, which have done well, too.

I鈥檓 about 80 percent cash and don鈥檛 know what to do. I feel I may have missed the market, and the money market funds and CDs pay so little. Frankly, I鈥檓 afraid to invest and afraid not to invest, and the newest broker who wants to manage my account thinks that I should invest half my money in REITs and the other half in energy stocks. What do you think of this portfolio management plan? It seems to make sense to me. What do you think I should do with my portfolio?
G.S.
Kankakee, Ill.

Dear G.S.: I think that new broker鈥檚 advice stinks. That鈥檚 not account management; that鈥檚 gambling and guessing.

Now, I can鈥檛 tell you how to position your account because I don鈥檛 know a darn thing about you. What is your risk tolerance? What are your income sources and how secure are they? What are your specific assets and their values? What are your short- and long-term goals? Are you and your spouse healthy? What are your debts (home, credit card, personal loans, etc.) and other personal obligations? Do you wish to leave assets to your children (if you have any) relatives, charities, etc.? Looking at your request another way … if you want to build a home, you must tell the builder how you wish to live in it.

Meanwhile, your fear is too common. Today, especially, many investors are like deer frozen in a car鈥檚 headlights: paralyzed by fright and afraid to jump left or right, dreading that any decision may be the wrong one. That鈥檚 understandable. And it鈥檚 unsettling for folks like you who must rely on a young stockbroker who has been in the business less than 10 years, who may not have $20,000 in his IRA, who may be above his shoulders in credit card debt, who has three kids in school, who is paying $1,500 a month for two auto leases and has a working wife to help meet family financial obligations. Relying on the average stockbroker with this common background is like asking a blind man to perform an emergency appendectomy. Many brokers are adequately trained, which would be fine if adequate advice is all you need. But if you want more, then you should find a professional who is closer to your age, with whom you can identify and who can understand where you鈥檙e coming from and where you need to be. You need a professional money manager who has been in this business for decades and whose maturity can give you comfort and whose goals are similar to your own.

For most folks, going it alone, especially at your age and stage, can be frightening and catastrophic to their financial health. You must employ an experienced money manager who has had decades of experience making portfolio decisions, a better-than-adequate track record and an ability to emotionally identify with you. You must employ a professional manager who has a record of good judgment, and is mindful that good judgment comes from experience and that good experience often comes from bad judgment. This is not the time for you to rely on amateurs. This is the time to depend on a professional whose years of past experience will provide the comfort, security and professional expertise you need for the coming 20 years.

Address your financial questions to Malcolm Berko, c/o The Daily Journal of Commerce, P.O. Box 8303, Largo, FL 33775, or e-mail him at [email protected].
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