As the latest issue of Money Magazine just arrived in my mailbox (review forthcoming), it occurred to me that a mention of the Money 70 might be in order during Mutual Fund Week here at The Simple Dollar.

What is the “Money 70″? The Money 70 is a list of mutual funds selected by Money Magazine and followed in each issue of the magazine. You can read the full criteria for selection here, but the basic nutshell is that the funds on the list are generally low cost, focused on shareholder interests, and have a consistent investment strategy. It’s really a healthy list of well-run mutual funds from a variety of investment firms with a variety of goals and strategies.

Does this list match your investment philosophy? As I mentioned yesterday, I generally like index funds because they provide diversity without much expense; however, the Money 70 list contains 43 actively managed funds and only twelve index funds. In my opinion, the twelve index funds they show are stellar and the truth is that there are simply far more managed funds out there than index funds because lots of investors either want to beat the market or want a fund that is really conservative that won’t sink in a down market, two things that index funds don’t really protect you from.

I could repeat the contents of the list here, but a simple link to the Money 70 list saves the effort and provides a nice summary table. If you find a fund on that list that looks really interesting, I strongly recommend looking it up at Morningstar, as discussed earlier today.

My most recent issue of Money Magazine arrived in my mailbox late last week, but when I saw the cover, I almost cringed: it’s an issue devoted almost entirely to the baby boomers, and thus it has the “Oh my God retirement is coming I have nothing saved oh my GOD!” sentiment all over it. I should say that of the boomers I know the best (and I made a list of about twelve of them), a full 75% have so little saved for retirement that they will have to work until they’re in their 70s (at least). Of course, the other three are retired (or in a position where they could retire whenever they’d like). So perhaps the premise of this issue is more spot-on than I initially thought…

Anyway, here are the ten things that really stood out at me from the issue:

People are pretending to be hotel concierges to scam people out of their money. Don’t give your info away, ever. I’m even going to blow it up this time for you to read clearly. Never, ever give any personal information to someone who calls you; if you feel compelled, look up their number on your own and call them back. There are so many clever phone scams out there that you simply cannot trust someone at their word over the phone when it comes to your personal information (p. 24).

Don’t just hire a home builder and walk away expecting a perfect house. Many people got lemon houses in the last several years. You should make sure that your builder is licensed, know whether or not they can handle the job, have a lawyer read the contract (especially parts dealing with arbitration - get specifics or strike it from the contract), and visit the job site regularly and look for things that stand out to you (p. 47).

Rebalancing your portfolio is good. If you started out with a portfolio that was 50% in an S&P 500 index fund and 50% in treasury notes in 1989 and left it alone, you’d believe you were a big winner in 1999 when the stock portion had grown faster than the bonds and filled up 70% of the portfolio. However, from 1999 to 2002, your portfolio would have lost 17% of its value and even today you’d be in worse shape than if you had just rebalanced the portfolio to 50% stocks and 50% bonds each year. In short, rebalance regularly or take it on the chin if a bubble bursts or a market goes south (p. 56).

“Finish this sentence: I always wanted to ___________.” My answer was automatic: I always wanted to write a pile of books. I’m working towards that goal more than ever before - and I’ve never felt better about it (p. 98).

UnitedHealth Group is abysmal for health insurance. They deny 14.4% of claims. The industry average is 4.2%. That’s absolutely unacceptable for anyone - UnitedHealth is apparently in the business of taking people’s money, not helping with medical issues (p. 117).

If you check your email more than twenty times a day, you probably have a problem. Email addiction is a serious problem, and it costs you money by making you less productive because of the constant interruptions. I had to make myself cut my email checking down to a regular schedule during the day because I would get nothing done; now I just have a couple email sessions each day and I feel vastly more productive (p. 28).

If your spouse is suddenly earning more than you are and it bothers you, talk about it. By choosing to keep that feeling bottled up inside, you’re setting the stage for marital problems later on. Set some time aside and talk about how that changes things and how that makes you feel (p. 36).

Morningstar is getting better. Their star ratings on mutual funds are getting better as time goes on. Right now, five star funds at Morningstar are generally low-cost funds with stellar returns and aren’t focused on whatever sector is “hot” at the moment like they used to be (p. 62).

My exact NCAA basketball tournament bracket strategy is now being given away in mainstream publications. So I guess I might as well confess. All I do every year is pick the favorite in every single first and second round match. Then for all of the remaining matchups, I pick the team that won the most of their last fifteen games of the season (the conference schedule) until the Final Four, where then I pick the underdog (based on seed) in each matchup. I am competitive year in and year out with this strategy. And it’s basically in print in this issue of Money (p. 20).

Quote of the month (p. 82):

I tell my students that they should study not for their first job but as if they’re going to have six or ten careers.
- Olivia Mitchell, Wharton School of Business

Whenever I read things like this, I worry about the future. All the time, I visit workplaces where things are held together by an individual in his or her fifties or sixties that has been there for thirty years and knows the whole system inside and out. That’s invaluable human capital and it’s being flushed down the toilet. I realize times have changed, but people that have extensive knowledge of a workplace and a system are incredibly valuable people to have around, and the changing culture is making them into dinosaurs.

My subscription to Money Magazine started with the February 2007 issue; I was quite happy to see it in my mailbox, even though it ups my magazine subscription list to eight (The New Yorker, The Atlantic, Harper’s, The Economist, Money Magazine, Wired, Discover, and Consumer Reports). Money Magazine is almost always an entertaining read with lots of little tidbits, and this issue was no exception: a rational and low-hype review of mutual funds, a good discussion of pharmaceutical stocks, a really nice article on small home improvement projects, and the usual collection of family profiles that review real-world personal finance situations.

As usual, I attacked the issue with a highlighter in hand, marking up anything that I want to think about later. Here are the ten most interesting points (from my perspective) that I dug out of the issue:

Health care stocks are potentially undervalued. Two things stuck out here: the S&P Healthcare index is undervalued (in terms of P/E ratio) compared to the average of the last ten years, and health care spending is going to boom in the coming years as the boomers get old.

Installing stone tile in the entryway creates a great first impression for your home - and can thus increase the value. This is a simple enough task that even I can do it, and stone-tiled entryways do look nice. I just didn’t make the connection to an increase in property value.

Exchange rates with South America are much better than with Europe. In other words, if you’re desiring an international trip this year, Buenos Aires is much cheaper than Paris.

For exchanging gifts with your significant other, agree on an annual cap so you don’t spend too much money on silly gifts. This would be a great idea - if I could get my wife to agree to it. She’d probably think I was trying to get out of gift-giving occasions.

If you have a Roth 401(k) available to you, take advantage of it when you’re young. When you’re young, you’re in a lower tax bracket, so you can effectively put less pre-tax money into a Roth 401(k) now (because it’s taxed less) than you will be able to later on in life (when you’re being taxed more). If you reach a salary that you think is higher than your retirement salary, put money in a regular pre-tax 401(k) instead.

If I were to invest in a managed mutual fund, the Vanguard Windsor II looks impressive. I had a lot of fun looking through their mutual fund listing and finding some interesting ones, like this one. It has only a 0.35% expense ratio and beats the S&P 500 both over one year and five years. Too bad it costs $10,000 to get in the front door, so I’ll mark it down as a “someday.”

If you get a windfall, don’t invest it all in something risky. View it as a core of a potential nest egg and invest most of it in a similar fashion to your retirement money. That way, when things inevitably happen, you have money stowed away for the long run.

Are material goods really “abundance” or not? There’s a lengthy article that basically revolves around that question. Are we better off than our grandparents were at our age? We have much more impressive goodies and bigger homes, but does this stuff equate to a better life? I’m not convinced of it, considering the increased job riskiness that workers today face.

For my semi-traditional gift of a box of chocolate to my wife on Valentine’s Day, I might want to consider getting the Harry and David Grand Collection instead of the usual Godiva box. It’s a better deal and supposedly has better chocolate - Godiva has been going downhill lately, so I’ve been looking for another option.

Quote of the month, from Acorn Fund’s Ralph Wagner:

Being disciplined, being honest, having a set of rules and following them no matter what, thinking long term, controlling your emotions - these are all useful. But only so useful and only in part of life. You don’t want to treat your wife or your kids like an investment.