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Wall Street Wobbles, Rocking Americans' Retirement Plans

Posted Dec 16, 2008 07:30am EST by Aaron Task in Investing

The drama of 2008 has clearly roiled Wall Street but also played havoc with the portfolios of individual investors, and not just those eviscerated by the Bernie Madoff scandal.

Among "rank and file" investors, the newly retired and soon-to-be retired Baby Boomers are particularly reeling from the damage to their portfolios.

"The pre-retired are saying, 'I was going to put away X amount, now I've got to put away triple-X'," says Tom Eggers, COO of Minyanville.com and former CEO of Dreyfus Corp. "They're going to allocate a lot more assets to make up for the loss they feel in their 401(k) or alternative retirement plan."

But where are the funds going? Judging by the fund flow data, investors are flocking to money market funds. As of Dec. 10, money market assets had climbed to $3.7 trillion and had hit record highs for 11 consecutive weeks, Reuters reports. Eggers notes that a disproportionate amount of those assets — especially from newly retired Boomers — are going into the perceived safest of the safe assets: government money market funds.

Investors' desire for safety is one reason mutual fund assets were down $2.5 trillion from the end of May through the end of October, according to the Wall Street Journal; the other is declining asset values.

One beneficiary of the upheaval are ETFs, according to both Eggers and Jay Pestrichelli, managing director of the trading group at TD Ameritrade.

"Volatility on a daily basis is causing more engagement among active traders, as well as not-so active [traders]," he says. "People are trying to take more ownership [of their portfolios] and are moving out of mutual funds and into ETFs."

But rather than bury the mutual fund industry, Eggers believes ETFs may prove its salvation, noting most mutual fund families offer ETFs as well.

Indeed, ETF assets grew by $104 billion through the first 9 months of 2008, according to ETFTrends.com. But ETFs are becoming so popular some fear the leveraged variety are, in fact, a cause of recent late-day market moves, the WSJ reports.

In sum, all the volatility is driving people into ETFs, which may be causing more volatility. What a world!

Note: This interview is part of a series conducted Dec. 4 at Minyanville.com's "Festivus" holiday celebration and charity auction. Follow the links below for more discussions from the event:

94 Comments

__A_YAHOO_USER__
__A_YAHOO_USER__ - Tuesday December 16, 2008 08:23AM EST

AT THE PRESENT SITUATION,iNVESTOR ARE LOOKING FOR SAFE INVESTMENT..........ETF IS ONE........

- Tuesday December 16, 2008 08:38AM EST

After rate cuts: The Fed's new ball game:to print money

greg
greg - Tuesday December 16, 2008 08:40AM EST

You are not too smart Johnny Ike. A lot of differnt ETF's out there. Good luck .........

J T
J T - Tuesday December 16, 2008 08:44AM EST

WHY hasn't anybody gone to jail yet????? I want payback!!!!

__A_YAHOO_USER__
__A_YAHOO_USER__ - Tuesday December 16, 2008 08:45AM EST

PASSIVE IS BETTER THIS TIME BECAUSE OF NO CROOK MANAGER LIKE BERNIE WHO BUILT A $ 50 BILLION PONZI......BE SURE YOU KNOW WELL THE PROVIDER........OF ETF AND YOU KNOW WHAT THEY ARE HOLDINGS.............

- Tuesday December 16, 2008 08:51AM EST

Fed must help to Retirement Plans , to print money.

__A_YAHOO_USER__
__A_YAHOO_USER__ - Tuesday December 16, 2008 08:54AM EST

OF COURSE THERE IS A LOTOF ETF.... IT IS A MATTER OF CHOOSING....YES, SOME ETF ARE DOWN TOO LIKE, ETF RUSSIA,,CHINA, BRAZIL,GOLD ,GASOLINE,FTSE INDEX FUND,DOW JONES ETF FUN OF FUNDS , ETF TREAUSRY INDEX FUND.FUND , ETF BLUE CHIPS, ETF SMALLER COMPANYFUNDS,ATF OIL EXPLORATION, AND A LOT MORE.....CHOOSE WHICH IS RIGHT FOR YOUR RETIREMENT FAR TOO MANY ETF....CHOICE YOUR PORFOLIO FROM THERE.............

whb
whb - Tuesday December 16, 2008 09:04AM EST

Exactly! No question about "taking care of yourself." All these fund managers take care of themselves by keeping everyone fully invested. I have survived by changing my strategies and it is not ETFs. The action is in options because you can make money no matter what. TD Ameritrade is already a stodgy company with high commissions and NOT a user friendly platform. Try ThinkorSwim for low commissions and a platform with seminars you can understand.

William C
William C - Tuesday December 16, 2008 09:11AM EST

The answer is simple. Don't retire.

you
Yahoo! Finance User - Tuesday December 16, 2008 09:17AM EST

Call your Senator or Congressman and ask if they are affected financially the same way as you. Keep voting the party line and watch everything you own go down the tubes.... way to going American voters.

you
Yahoo! Finance User - Tuesday December 16, 2008 09:18AM EST

Wall Street still don't get it---DON"T BUY ANYTHING--for several reasons: 1) No one trusts the street anymore 2) Until this economy deflates--it can not right itself 3) Be content with 1 or 2% in safe havens 4) Don't expect people to reinvest in risk related equities for a long long time. 5) Once bitten--shame on you--twice bitten--shame on me!!! IT HIEST IS OVER WALL STREET--GO LIVE LIKE THE REST OF US

NoJonesTax in Arlington
NoJonesTax in Arlington - Tuesday December 16, 2008 09:21AM EST

Issue every retiree a color printer and a PC with stock currency paper. Every retiree should be allowed to print $10,000 per month. Look at the benefits of this scheme. 1. Printer and PC production will go up and create an economic recovery in the manufacturing, high tech and retail sector. Then the economic multiplier from these. 2. The money spent by the retiree will create an economic engine of growth. EVERY ONE WINS ha ha ha

william
william - Tuesday December 16, 2008 09:23AM EST

Heard anything lately about capitulation :)

you
Yahoo! Finance User - Tuesday December 16, 2008 09:30AM EST

With Abe Lincoln Jr. at the helm and his Chicago entourage we are all in good hands. Our retirement funds are safe, our future is safe, our markets are safe, our nation is safe; the election produced safety and change; CHANGE ANYONE?

brenda
brenda - Tuesday December 16, 2008 09:36AM EST

Well everyone bought into the BS and no one uttered a peep until the chikens came home to roost. I want to see some serious cage time too for the "supposed leadership" that had better business educations than me and who were very fully aware of the inherant risks involved with what they were doing. If a different stata of society were to be involved in similar activities fraud charges would be filed. I fail to see the logic or the fairness of the average American being expected to have to maintain a higher standard of behavior than the business and govermental leaders. I was under the impression that thhis was supposed to be a government by, for and of "the people". If an average person fouls up their credit worthiness, they get cut off. It seems to me that the same should apply going uphill.

Steve
Steve - Tuesday December 16, 2008 09:40AM EST

If you have extra money, pay off any outstanding debt. Minimum, you save 5%. Good, solid safe ROI. Why would anyone invest, when they owe?? 1/2 of American millionaires have a second mortgage. Guess what. If you have a second mortgage, you aren't as rich as you are trying to portray.

ANTHONY
ANTHONY - Tuesday December 16, 2008 09:40AM EST

AS LONG AS GOVERNMENT "USES" YOUR INCOME AS A SOLUTION TO ALL "THEIR PROBLEMS ".ITS GOING TO BE A "RAT RACE"TO THE AVERAGE WALLET. LOOK AT ALL YOUR BILLS.THEIR RIDDLED WITH ,"TAXES",MANDATES" PROFITS,CHARGES AND AND GOVERNMENT WASTE. AT ALL LEVELS, FED,STATE AND LOCAL.. THE VELOCITY OF MONEY MOVEMENT IN AND ESPECIALLY "OUT"OF YOUR WALLET IS SUPER FAST,TODAY "THE AMERICAN DREAM" IS DOWN TO A 30X30 HOUSE IN RURAL AMERICA, HOPE FULLY UNDER GROUND ,AND LITTLE SPENDING .....ANYTHING ELSE IS"2 CORPORATE BANKRUPCIES" "2 MANDATES". " 2 LAWS,""2 TAXES " AND ONE JOB LOSE AWAY FROM "YOUR EMMINENT DISASTER"..ITS A HOUSE OF 3 DECKS OF CARDS,,FED,STATE,LOCAL , ,..OR SO IT SEEMS

ANTHONY
ANTHONY - Tuesday December 16, 2008 09:40AM EST

AS LONG AS GOVERNMENT "USES" YOUR INCOME AS A SOLUTION TO ALL "THEIR PROBLEMS ".ITS GOING TO BE A "RAT RACE"TO THE AVERAGE WALLET. LOOK AT ALL YOUR BILLS.THEIR RIDDLED WITH ,"TAXES",MANDATES" PROFITS,CHARGES AND AND GOVERNMENT WASTE. AT ALL LEVELS, FED,STATE AND LOCAL.. THE VELOCITY OF MONEY MOVEMENT IN AND ESPECIALLY "OUT"OF YOUR WALLET IS SUPER FAST,TODAY "THE AMERICAN DREAM" IS DOWN TO A 30X30 HOUSE IN RURAL AMERICA, HOPE FULLY UNDER GROUND ,AND LITTLE SPENDING .....ANYTHING ELSE IS"2 CORPORATE BANKRUPCIES" "2 MANDATES". " 2 LAWS,""2 TAXES " AND ONE JOB LOSE AWAY FROM "YOUR EMMINENT DISASTER"..ITS A HOUSE OF 3 DECKS OF CARDS,,FED,STATE,LOCAL , ,..OR SO IT SEEMS

you
Yahoo! Finance User - Tuesday December 16, 2008 09:48AM EST

The financial markets are in a turmoil do to the governments meddling in the free markets. The bailouts are not working. After January 20-th the messiah will start the second "new deal" and it will prolong the second "great depression". "Buddy can you spare some Change".

d c
d c - Tuesday December 16, 2008 09:50AM EST

Wall street is the worst of the wild wild west, with an absentee sheriff (Dubya) and judges and commissioners in the pay of various groups of outlaws (SEC, Paulson, Fed Reserve, Congress, Cheney). And everyone else (the rest of us) are sheep to be fleeced, suckers to be bent over and driven. Even without Wall St's turpitude a system with huge net ouflows of the hundred of billions in the form of trade deficit has never been sustainable -- this is what killed the British empire -- running out of gold. Maybe the trade deficit won't be the main cause, but all leading empires are eventually driven into the ground from the inside after they reach a certain age and size. This is not prophesy, this is historical fact. Is our time finally up?

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