Sample Writing
Managing Risk and Your Retirement Portfolio
Your Retirement Watch
Fall 2005

How do you approach risk? Do you head for the highest peaks, knowing that there
will be valleys on the other side, or do you seek out the smoothest, straightest
roads to your destination? Are you prepared to sweat out stressful situations, or
do you take pains to avoid them? Does the prospect of losing everything make
you feel energized or paralyzed? Understanding your
risk tolerance can help you
shape a sensible retirement plan and steer you toward suitable investments. If
you aren’t sure where you stand, you can find risk assessment quizzes online.

When it comes to investing for your retirement, the more you want to earn, the
more risk you will have to accept. Greater returns are your reward for accepting the
risk that you will lose some of your money. This is called the
risk-return tradeoff,
and understanding how it works can make all the difference in how well your
portfolio performs for you.

As a rule, more volatile investments pay better returns. The stock market has
averaged a return of about 10 percent over the last eighty years; those who
invested in it have generally built much larger retirement nest eggs than have
those who stuck with bonds, CDs or savings accounts. The latter investments are
considerably less volatile—as a result, investors usually don’t reap the same
rewards for choosing them.

Here is a look at the way three types of investors approach risk:

Risk-averse investors can’t stomach losses in a given year. They are willing to
sacrifice potential gains in order to keep their principal intact. Their portfolios are
weighted toward cash and bonds that provide the stable, if modest, returns they
favor.

Moderate investors accept some fluctuations in the short term in order to enjoy
higher gains in the long term. Their portfolios are generally the most balanced
and diverse, combining stocks and mutual funds as well as some bonds and cash.

Aggressive investors always seek to maximize their returns, even when that
means living with short-term losses. Their portfolios typically contain the highest
proportion of stocks and growth-oriented funds.

The period over which you plan to invest, or your time horizon, also affects risk
tolerance. The longer it is, the more time you will have to rebuild your retirement
nest egg if your investments nosedive during an economic downturn. With a long
time horizon, even a temperamentally risk-averse investor can afford to be more
aggressive in the early years. In fact, many investors tolerate risk differently
according to the stages of their lives. For example, some choose volatile stocks in
their twenties and thirties, sell them off, and use the proceeds to build a more
stable portfolio of bonds, CDs and less-volatile stocks that they can depend on to
fund their retirements.

In general, a good strategy for managing investment risk is diversification. A
diversified investment portfolio includes investments of varying risk levels. During
rough patches, losses will be limited, because investments that have performed
poorly will be balanced, in part, by more stable investments or by investments
that have performed unexpectedly well. The chief benefit of mutual funds as
opposed to individual stocks is that they are inherently diverse, encompassing a
variety of stocks that vary by risk level. Professionally managed mutual funds
offer personal investors a level of convenience and diversification that would be
nearly impossible to achieve independently.

Risk tolerance reflects your personality and your investment goals. Understanding
where you stand is the key to successful retirement planning. No matter what your
style, remember that prudent investors take on only as much risk as necessary to
achieve the desired reward.
Freecycle
Volume 1
November, 2004

For the ardent waste-reductionist who can’t help noticing how curbs and dumpsters
swell up with perfectly good cast-offs such as futon frames, CD players, and more,
especially every time students move into or out of their apartments, there is a
light on the horizon. A free light, one with over 500 members in Eau Claire alone.
It’s called Freecycle, an Internet-based group dedicated to keeping your good
stuff off the curb and out of the landfills.

Freecycle is a worldwide group (www.freecycle.org) with over 580,000 members.
Since being created a year and a half ago, it has been growing by 1000–2000
people a day. There are about 1600 local chapters, all run via Yahoo groups,
including one for Eau Claire and the Chippewa Valley. The goal of the Eau Claire
group, which you can join by going to the homepage and clicking on “US Central,”
is “to reduce waste by connecting individuals who are throwing away goods with
others who are seeking them.” In a nutshell, if you want to get rid of something,
you post an “offer” ad. If you want to get something, you post a “wanted” ad.
When someone responds to you, you set up a time and place to hand over the
item. Anyone can start a group for his or her region.

Freecycle was created in Tucson by Deron Beal, who saw it as a grassroots way to
keep perfectly good items out of landfills and thus reduce landfill sprawl. Beal
claimed in August, when membership was only 360,000, that the group’s efforts
kept about twenty tons of waste out of landfills around the world every day. He
said he was “totally flabbergasted” by the very rapid growth in the group’s
membership.

(end of sample)
Dow
Investor Glossary

The term “Dow” is usually used to mean the Dow Jones Industrial Average, an
index of thirty blue chip stocks that serves as the most widely used measure of
the U.S. stock market. The term carries much weight in the stock market due to
its popularity as a market index. To calculate the Dow, the trading prices of the
thirty stocks are added up and divided by a special divisor that is weighted to
account for stock splits and other conditions. There are several other indices with
the Dow name: the Dow Jones Utilities Average, the Dow Jones Transportation
Average, and the Dow Jones Composite Average, to name a few. Dow also refers
to Dow Jones & Company, a major source of financial news. This company
publishes the Wall Street Journal, the largest business and finance publication in
the world. The company was founded by Charles Henry Dow, Edward Davis Jones,
and Charles Milford Bergstresser in 1882.
Save Like a Student, Even If You Aren't One
Dollar Stretcher

Remember the days of college, when you got lots of benefits that non-students
did not? You could probably use the gym for free, get free or low-cost medical
services, and watch movies for very little. Nowadays, you can even get free
Internet access in college. Those days may be gone for you, but the savings are
not necessarily gone. Many institutions of higher learning offer lower-cost services
to the public as part of their training and community service goals. Below are
some examples of how non-students can grab some of the benefits of higher
education.

Many people don't know that they can realize substantial savings on gym
memberships by finding one at a college or university; and they don't always
have to be students. Memberships can be as low as $60 for the semester and
another $40 for the summer. Some activities, like pools and running tracks, may
be restricted due to class use, but if you can find such a college in your area,
consider using it.

Many sport clubs and classes are available to the public. When I was in college, I
belonged to a karate club in which several of the members were not students. The
costs may be higher if you are not a student, but they are likely to be cheaper
than those offered by non-college sources.

You can often get great travel savings by booking through college travel agencies.
You don't always need to be a student, either!

Technical students frequently need the help of the public in their hands-on
training. There is only so much that plastic models can teach them. As part of
their training, dental students will clean your teeth for a huge discount at certain
times of the year. Their professors supervise and check them. Although these
cleanings may take up to two hours, you are assured of a thorough job, as the
student's grade may depend on it! In addition to cleanings, some places offer
X-rays, bite guards and other dental necessities, all for vastly reduced prices.

If it's beauty you seek, you can get a really inexpensive haircut or other beauty
treatment at a technical school. As with dental training, senior cosmetology
students seek the public for low-cost or even free treatments. Instructors
supervise their work. If the service is given to you for free, however, it is
customary to leave a tip.

Do you want to eat four-star food in a college cafeteria? A technical college with a
culinary program may be just your ticket. For a price of about $10 to $20, culinary
students will prepare a multiple-course meal for you, including elegant appetizers,
entrees, desserts and wine. They will usually provide this in a nicely decorated
room set aside just for these meals. There will also be neatly folded cloth napkins
and fine dinnerware. All of this gives them real-world restaurant experience with
preparing and serving classy food.

Graduate students in psychology may offer very inexpensive therapy sessions to
the public. For students who are studying to become therapists, this is a part of
their training. They generally work along with professors or established therapists
when they do this. If you live in a big college town, you may see ads for these
services in community newspapers.

Childcare programs at technical colleges may offer free daycare. Of course,
instructors supervise this care.

In some cases, you may have to pay a little more for various services if you are
not a student, but you will still save.

You will get even greater savings if you sign up for a one-credit class at your local
college or technical school. Weigh the price of it against the savings on services
you will get as a student. You may come out ahead this way. Depending on the
school you go to, you may qualify for a free bus pass, free Internet access from
home, and free health services, including testing and doctor visits.

Call up your nearest college or technical school and ask what low-cost services it
provides the public. Or check its website for this information.

Finally, if you graduated from a university or college, consider joining the alumni
association. There will be a fee, but it may get you discounts on movies, travel,
courses, and professional services, such as career placement assistance.
The price of everything

THE DISMAL SCIENCE:
How Thinking an Economist Undermines Community

By Stephen A. Marglin
376 pp. Harvard University Press $35.00

Reviewed by Mike Marcoe

The “dismal science” used in the title of Harvard economics professor Stephen A.
Marglin’s new book is a Victorian-era term allegedly coined in response to the
writing of Thomas Malthus, who famously predicted that starvation would be the
result of population growth exceeding food supply. The economist’s role has
often been forecaster of the dismal, and economists themselves have long been
derided for “knowing the price of everything and the value of nothing.”

Economics is a social science that studies the production and consumption of
goods and services. Stated this way, it is hard to see “how thinking like an
economist undermines community,” as the rest of the book’s title states. Yet this
is Marglin’s thesis. To support it, he first differentiates between economics as a
descriptive undertaking and as a constructive agenda; his argument depends on
this distinction. He states that “... the apparatus of economics has been shaped
by an agenda focused on showing that markets are good for people rather than
on discovering how markets actually work.... Undermining community is the
logical and practical consequence of promoting the market system.” For Marglin,
the agenda that drives economics is the maximization of individual well-being.
Modern economics does not serve the well-being of an individual’s community,
which is what we’ve been told for the past four decades.

This agenda is the focus of much of the rest of this complex, richly analytical
book. Professor Marglin is clear, keen, and very detailed in his assertion that
modern economics is the result of a myth 500 years in the making. To
understand it, we must take a trip through four chapters of western European
history, through the fall of feudalism to the beginning of market economics.
Along with this he includes the Reformation and the Puritans, the latter of whom
saw worldly success as evidence of membership in the Elect.

The Reformation, the Enlightenment, science, the limitless lands of the New
World, and technology each conspired in its own way to carve the path of the
market in western culture. Western culture is also marked by its elevation of the
individual and his interests. Philosophers from 1600 onward celebrated the
pursuit of selfish interests as good and noble. Though they did not have folks
like Charles Keating and Gordon Gekko in mind, Marglin points out that these
latter-day symbols of the market gone awry could be the only inevitable result of
it. A the time, though, individualism was shaped by the Protestant work ethic,
which set boundaries around the pursuit of wealth to ensure that it was pursued
for the good of the individual.

Against all this, we eventually end up with the quintessential capitalist, Adam
Smith, whose concept of human nature was that of the calculating, self-interested
individual. By the time we enter the 20th century, we get to a place where
someone can say “greed is good” and hardly raise an eyebrow. The effects on
community have been devastating. Economics has been held hostage by an
ideology of selfishness. That selfishness, the author concedes, has done its
share of good: it has led to the vast increase in standard of living that the West
has experienced and with which the overpopulated East is now catching up.

For all the talk about community in the book’s thesis, it’s in short supply in the
book itself. It’s scattered throughout and used largely for illustrative purposes.
Whilethe reader might wish to visualize communities broken apart and citizens
suffering in disturbing ways, the examples in the book are largely summary and
abstract. The village required to raise a typical child doesn’t factor in the book as
much as the book’s analysis begs it to. Nevertheless, Marglin does use familiar
examples from around the world, such as migrating sweatshop workers who lose
their ties to their communities because they are simply not there as much.
Among his favorite examples are the Amish, perhaps America’s best-known
counter-example to economic individualism. Though most of us would pass on
living like them, we admire them from afar for their dedication to their
community. The Amish are doing just fine without modern economic theory,
thank you.

To those accustomed to operating under a purely descriptive understanding of
economics, the author’s thesis requires a stretch of the imagination. They see
the real culprit as the economists rather than economics. Just as people, not
guns, kill people; so economists, not economics, undermine community.
Wherever you place blame, if you’ve ever wondered why our economy seems so
callous at times—especially leading up to times of crisis—this book will explain
why that is and why so may people accept the theories of the economists.

The Dismal Science is among a crop of books published in the past ten years
that sharply critique not only business practices, but economics itself. It is time
for an overhaul of the great Western myth, these authors argue, because
individualism is destroying its very own requirements. Professor Marglin stops
short of arguing for an overhaul. What he does do is lay out the development
and symptoms of the Western myth that claims individualism is good for the
community. In 2008, as we all curse at the gas pump and the grocery store, we
owe it to ourselves to at least understand the system that has robbed one part of
us to pay another.
Save Like a Student, Even If You Aren't One
Dollar Stretcher

Remember the days of college, when you got lots of benefits that non-students
did not? You could probably use the gym for free, get free or low-cost medical
services, and watch movies for very little. Nowadays, you can even get free
Internet access in college. Those days may be gone for you, but the savings are
not necessarily gone. Many institutions of higher learning offer lower-cost services
to the public as part of their training and community service goals. Below are
some examples of how non-students can grab some of the benefits of higher
education.

Many people don't know that they can realize substantial savings on gym
memberships by finding one at a college or university; and they don't always
have to be students. Memberships can be as low as $60 for the semester and
another $40 for the summer. Some activities, like pools and running tracks, may
be restricted due to class use, but if you can find such a college in your area,
consider using it.

Many sport clubs and classes are available to the public. When I was in college, I
belonged to a karate club in which several of the members were not students. The
costs may be higher if you are not a student, but they are likely to be cheaper
than those offered by non-college sources.

You can often get great travel savings by booking through college travel agencies.
You don't always need to be a student, either!

Technical students frequently need the help of the public in their hands-on
training. There is only so much that plastic models can teach them. As part of
their training, dental students will clean your teeth for a huge discount at certain
times of the year. Their professors supervise and check them. Although these
cleanings may take up to two hours, you are assured of a thorough job, as the
student's grade may depend on it! In addition to cleanings, some places offer
X-rays, bite guards and other dental necessities, all for vastly reduced prices.

If it's beauty you seek, you can get a really inexpensive haircut or other beauty
treatment at a technical school. As with dental training, senior cosmetology
students seek the public for low-cost or even free treatments. Instructors
supervise their work. If the service is given to you for free, however, it is
customary to leave a tip.

Do you want to eat four-star food in a college cafeteria? A technical college with a
culinary program may be just your ticket. For a price of about $10 to $20, culinary
students will prepare a multiple-course meal for you, including elegant appetizers,
entrees, desserts and wine. They will usually provide this in a nicely decorated
room set aside just for these meals. There will also be neatly folded cloth napkins
and fine dinnerware. All of this gives them real-world restaurant experience with
preparing and serving classy food.

Graduate students in psychology may offer very inexpensive therapy sessions to
the public. For students who are studying to become therapists, this is a part of
their training. They generally work along with professors or established therapists
when they do this. If you live in a big college town, you may see ads for these
services in community newspapers.

Childcare programs at technical colleges may offer free daycare. Of course,
instructors supervise this care.

In some cases, you may have to pay a little more for various services if you are
not a student, but you will still save.

You will get even greater savings if you sign up for a one-credit class at your local
college or technical school. Weigh the price of it against the savings on services
you will get as a student. You may come out ahead this way. Depending on the
school you go to, you may qualify for a free bus pass, free Internet access from
home, and free health services, including testing and doctor visits.

Call up your nearest college or technical school and ask what low-cost services it
provides the public. Or check its website for this information.

Finally, if you graduated from a university or college, consider joining the alumni
association. There will be a fee, but it may get you discounts on movies, travel,
courses, and professional services, such as career placement assistance.