Saturday, August 18, 2018

Mr Virgin Movie Review: A collection of stale jokes

Out of the three Nepali movies that were released this week, Mr Virgin, because of its trailer, looked promising. But like all movies, it too failed to live up to the hype.

The movie revolves around three men: Dhal Bahadur (Gaurav Parihar), Pavitra Prassad (Bijay Baral) and Kumar Kancha (Kamal Mani Nepal), all of whom are in the mid-thirties are yet to ‘lose their virginity’. After getting poked at by a Chumman Lal (Bhola Raj Sapkota) the three friends decide it was time they made make him eat his words.

The next night they decide to get laid, and in search of girls they visit Thamel, where they meet a taxi driver Pyasi Mohan (Rabindra Jha) who instead of helping them, takes advantage of the trio.

The first half of the movie is average. Director Bisharad Basnet tries to lighten the mood with humour but fails to entertain the audience as all the funny bits were already on the trailer. The jokes were clichéd and inappropriate, especially those involving transgenders.

While the joke kept the audience seated during the first half, there was nothing worth watching in the second as the movie slowly started to lose the audience. The half failed to explain the gist of the movie or the characters which makes the film confusing and not as funny as the makers though it is.

The presentation of the story in both the halves made some in the hall leave their seats.

Parihar, who is known to play serious roles, is poor in the film which makes the audience question his reason to accept such a film. He doesn’t look comfortable in his role which questions his versatility as an actor too.

Baral is another character that has disappointed. He comes out fake and doesn’t seem to have understood his character. His few dialogues like ‘I’m so excited’ and ‘I’m so confused’ are funny but apart from that, there is nothing worth noting about his acting. Nepal, however, has tried to make sure he does his character justice, but the poor script doesn’t help.

Mariska Pokharel, who plays the role of an escort, is another character portrayed in an odd manner. Her acting is strange and the way in which her character is introduced is abrupt. Her concluding scene is just as abrupt which makes the audience question why was she even in the movie.

The only person who has done his role justice is Rabrindra Jha, who plays the role of a taxi driver. His unique dialogue delivery is sure to tickle everyone’s funny bones.

The reason why the actor’s performance is so poor is down to the director who has done his job amateurishly. There is no continuity between scenes and sequences which confuses the audience. The story was unique and could have been presented in a different manner. But even with such a good cast, Basnet failed to entertain the audience.

The background score is poor and the editing is below par. The dialogues, in the end, are too loud.

For a comedy movie, Mr Virgin does not make the audience laugh. Its inappropriate jokes and clichéd dialogue makes the audience cringe throughout the two hours. Overall the movie is a poor watch.

“I am so disappointed.”


Run Time: 130 minutes

Director: Bisharad Basnet

Genre: Comedy

Cast: Gaurav Pahari, Bijay Baral, Bholaraj Sapkota, Mariska Pokharel

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Practical Goal Setting for Finance and Personal Success

Marcus writes in:

I was really intrigued by your goal setting process. Could you walk me through that in more detail?

Quite honestly, I wasn’t sure what Marcus was referring to until he pointed me at this little section in my article early this week about the battle against scarcity:

In a very practical way, the most useful tool I’ve ever found for figuring out what I really valued and turning them into practical goals is the “three morning pages” journaling routine, where I sit down with a notebook and strive to fill three pages of it with whatever comes into my brain. This often turns into an exploration of what I truly care about and what I can do to manifest that in my life, which sets the stage for practical goal setting with goals that are really meaningful to me. When I have goals that are truly meaningful to me, I am strongly motivated to achieve them and I tend to hold onto the results of successful thirty day challenges if they help me move toward that goal in a real way.

I’ve written about goals before on The Simple Dollar – this article about SMART goals in personal finance is probably the best one – but all of those articles start off with the assumption that you already have some sort of goal in mind and you’re just honing it into something that will be successful.

When you step back and think about it, that’s really the fourth or fifth step in the process. A great goal doesn’t just spring out of nowhere. There’s actually a chain of things that go on before you even have any semblance of a goal, and it’s usually because of stumbles in that process that people wind up with goals that don’t really match up with what they want out of life.

So, let’s walk through all of this from the start, step by step.

Step 0 – Live Life

A good personal goal comes from the way you live your life, nothing more, nothing less. This is the core of every good personal goal – it emerges from the patterns of your daily life.

This might seem like an obvious beginning, but many people come into goal setting without having done this. They hear about some idea pitched somewhere that appeals to them in some way and decide that this new thing they just learned about is their goal. They dive into it and then it fails, as it inevitably will.

That’s because good goals are rooted in the reality of your life and your experience and who you are as a person, and that’s different from everyone else on Earth. You can’t just wholesale take on a goal that someone else came up with because it sounds good at the moment, because it doesn’t come from you.

Live your life. Don’t pay any attention to what others say and what goals they think you should have for yourself. Live life fully, but with your eyes wide open.

That brings us to the true first step…

Step 1 – When You Notice Something You’re Not Happy With, Don’t Ignore It

Eventually, we all notice something we’re not happy with in our lives. For some, this comes really easy, because we’re immensely dissatisfied with some part of our life. For others, it can be harder, as a generally content person might find it hard to find some real form of discontentment in their life.

Although I’m generally content with my life, I can name several things I’m unhappy with. I am unhappy with my weight (though I’m in a better place that I used to be). I am unhappy with my flexibility. I am unhappy with the state of organization in my office. I am unhappy with how my free time is divided up.

At this point, it’s simply noticing that there’s a problem of some kind in my life. I don’t have any sense of a goal at all, just that there’s something that’s not where I want it to be.

In my own financial journey, I could see this starting to happen about a year before my own financial meltdown. I wrote about it in my journal about nine months before things really moved into crisis mode. Right there, I was already noticing the problem, but the issue then was that I didn’t move on to the next step until things got significantly worse.

In general, once you’ve noticed something you’re unhappy with, the next step is to give it some serious thought.

Step 2 – Think Through the Problem

Once you have a sense that there is something in your life that you’re genuinely unhappy with in a lasting way, you still shouldn’t jump straight to a goal.

A goal at this point would be just a Band-Aid on top of a serious wound. It’s a quick “fix” but it doesn’t really fix the problem in any meaningful and lasting way. The Band-Aid is likely to fall off and not help at all or even make things worse.

Instead, the best approach here is to give yourself some time to think through the problem. I use three key tools for this.

Step 2a – Spare Thoughts

Whenever I have some spare moments in my life, like when I’m driving somewhere or I’m waiting in a line or something like that, I consciously turn my thoughts to what’s going on in my life. I think about things I’ve noticed that I’m unhappy with and I toss them around a little. (I also often visualize upcoming situations and try to come up with a great way to handle them, or replay recent situations and try to figure out how to handle them better.) In general, I’ve tuned my spare thoughts to be self-reflective in a way that I think will make me into a better all around person.

The approach I often like to use with this is what I call the “five whys.” I think about something I’m unhappy with in my life. Why am I unhappy with that aspect of my life? I spell out that reason. Well, why does that make me unhappy? And I answer that. I do this until I’ve asked “why” five times, and usually the final answer is something that’s got me a bit emotionally agitated, but it’s usually something that’s really close to the root of the problem.

This was a thought process running through my head quite a lot during my financial low point. I felt very on edge about everything, and it was through asking lots of “whys” that I was able to burrow down to the core problem, which was that I was failing my family and my own future.

Step 2b – Homework

Another key aspect of thinking through a problem is to study the problem in detail, discovering what others have done to successfully deal with that issue in their life and what researchers have found about good ways of addressing the problem.

For me, this usually involves checking out many books from the library and reading most of them and browsing the rest. When I’m trying to bear down on a specific problem in my life, I become a voracious reader.

What I find, though, is that the more I read and the more I think about a problem, I often find myself changing directions a little bit because I begin to discover that the actual problem that needs solving isn’t exactly what I initially thought that it was.

Step 2c – Freeform Journaling, or “Three Morning Pages”

A strategy I’ve been using in the last year or two that works incredibly well for piecing through life’s problems (and other intellectual problems, like figuring out where I stand on a political issue or working through a new idea) is called “three morning pages,” which I learned from the writings of Julia Cameron.

“Three morning pages” is a really simple idea. In the morning, just set aside an hour or so, open up a notebook, grab a pen, and start writing whatever comes into your mind. What happens is that the focus and time it takes to write down one thought often leads to the next thought that sensibly follows it, and so on, which usually ends up leading to greater understanding and a good conclusion. It’s kind of like the “five whys” that I do in my head, but more freeform.

At first, I was really skeptical of devoting this much time to a journaling practice in the morning, but I came to realize that this was an incredibly effective way of “sharpening the axe.” The process almost always left me feeling clearheaded and refreshed, and it almost always helped me integrate the things I was thinking about and the things I was learning into some really powerful conclusions.

What I’ve found is that this “three morning pages” practice often ends up being part of a feedback loop. I’ll end up thinking about some of the conclusions I’ve drawn and then that ends up fueling more reading, which ends up fueling more morning pages. Eventually, I end up reaching a really firm conclusion about what the problem actually is, but it usually takes some cycles of reflecting, reading, and journaling.

I view this as moving from just slapping on a Band-Aid to actually evaluating the disease and figuring out what’s wrong.

A Note About Step 2 – Recognize the Internal Value

Most people care in a relatively shallow way about a lot of things, but they really only care about a few things (beyond their basic needs) enough to really take action on them. Think about how people profess how much they care about a political issue, for example, and then can scarcely “find the time” to even vote, let alone do campaign work or run for a local position.

Here’s a key truth for you: if a goal is not intrinsically tied to one of those things you truly care about on a deep level, it’s probably not going to succeed.

I was aware of my personal finance problem for most of a year, but it took the connection of that problem to something I cared enough about for me to take action – namely, my child’s future and my self-identity as a good father. If not for that, I likely would have kept pedaling in place, frustrated about my finances but not really changing anything about my behavior.

Why is it hard? Usually, we adopt behaviors we don’t like in some ways because we do like them in other ways, and when the habit is established, it’s very hard to break. We have to value something different more than the path we’re currently on plus the effort needed to change it. That’s not easy, especially when we already like aspects of the path we’re on.

That’s not easy. We all care about a lot of things, but very few things meet that threshold, and without that threshold, it’s hard to set a goal that requires major changes in life.

You have to recognize that achieving a goal means giving up something in your life right now. Achieving a goal means you’re devoting some resource in your life to that goal, whether it’s money, time, energy, or something else. That resource is currently being used for something else, probably something you value at least a little.

Part of the reason for carefully thinking about a goal and working through it is to uncover whether or not you really care about something enough to actually make change in your life or whether it’s wishful thinking. For most of us, that means it has to tap into something truly more important and urgent than the reasons why we already spend our time, money, and energy.

Simply adopting a goal isn’t enough. You have to know why you’re adopting that goal, and that’s why the homework and the journaling and the thinking is so important. You have to understand the why.

Step 3 – Stating the Basic Goal

At some point, a switch will flip and it will begin to feel more “right” to actually start making a change in your life than to let things be as they are. That’s when you’re ready to actually develop your goal, and the first step is stating that goal.

This might seem obvious, too, but it’s actually harder than you might think. Most goals that people set for themselves aren’t all that useful – they’re really strong notions that pack a powerful personal punch, but they don’t really lead to any sort of action.

For example, you might want to “get your finances in order,” but what does that even mean?

Start by thinking about what you want to be different in your life as compared to how things are right now. That should be the core of your very basic goal. “I am currently X. I want to be Y.”

For example, you might say “I am currently in debt. I want to be free from debt.”

Or you might say “I am currently overweight. I want to have a normal weight.”

Or you might say “I am currently a bad father. I want to be a good father.”

A good goal starts by distinguishing where you’re at from where you want to be. That way, the change that you need to make becomes clear and then you can start revising that goal into something meaningful.

Step 4 – Making the Goal SMART

A good goal is one that sets you up for something clear that you can do each day to move toward the goal. One way to massage your goal in this fashion is to use the SMART rubric. SMART is an acronym for five elements that a good goal should have.

Spacific means that it is extremely clear what it is that you want to do. Simply stating your goal should make it abundantly clear what it is that you want to accomplish.

Your goal should answer five questions – what? why? where? who? which? Sometimes, some of these questions are assumed, but you should make them either as clear as possible or else rely on them as a very obvious assumption (“where” is often assumed, for example).

A goal of “I want to get my finances in order” can be made specific by “I want to eliminate my family’s debt load and set up an automatic plan to save enough to comfortably retire.”

Measurable means that the line between success and failure is immediately clear and usually represented by a number.

For example, with the finance goal above, the “measurable” is already there for part of it – a total debt of zero. The other part probably depends on some calculations – maybe you need to be automatically putting aside 15% of your salary for retirement to say you’ve succeeded. That’s clearly measurable.

Achievable means that it’s a goal you can actually pull off if you work hard at it. It doesn’t rely on things happening that are outside the possibility of your current life.

Debt repayment is an achievable goal for most people. On the other hand, becoming a billionaire isn’t an achievable goal for most people because it requires things that are outside what they have and what can easily be acquired. All the effort in the world won’t make you a billionaire unless you add a great idea, a bunch of skills, and a ton of luck.

Realistic means that it’s actually achievable within the constraints of your life. Everyone’s life is different – something might be achievable for a lot of people, but it’s not realistic for some of them.

A perfect example of this is a goal that is something you could pull off if you didn’t have kids or a husband or a job, but it’s essentially impossible to do with those things gobbling down resources (time, energy, money) in your life.

A good way to check whether a goal is realistic is to think about the people in your life that will be affected by your goal. Will they be able to “flex” enough to make room for the changes needed for you to achieve your goal? What will that require out of them?

Time-limited means that you’re setting a deadline for yourself to achieve that goal, which gives you some constant pressure to work on it. This time limit should be realistic, of course, and within what’s actually achievable (though pushing the edge of what you think you can handle can be a good motivator).

For example, someone who’s losing weight might shoot to lose 1.5 pounds a week for a year, which adds up to a 75 pound weight loss in a year.

When a SMART goal comes together, I find it useful to start constructing a plan almost immediately, and that plan comes from a series of questions. I ask what I can do in a series of timeframes to complete this goal or move forward on it.

What can I do in the next 12 months to achieve this goal?
What can I do before the end of the year to achieve this goal?
What can I do in the next three months to achieve this goal?
What can I do this month to achieve this goal?
What can I do this week to achieve this goal?
What can I do this weekend to achieve this goal?
What can I do today to achieve this goal?

I ask those questions over and over again, almost on a daily basis, which moves us into step five.

Step 5 – From Goals to To-Dos and Reminders

Almost all of the goals I set for myself are made up of some combination of two elements. They consist of to-dos, which are very specific actions that I need to take, and reminders, which are changes in behavior that I need to maintain in my life.

For example, if my goal was to read 20 books on a topic in a year and take notes on them, I would add an item to my to-do list, a repeating to-do that would tell me to read for an hour each day with my notebook and pen beside me. I constantly look at my to-do list throughout a given day and strive to empty it out most days. Having a to-do list that I don’t have to actively think about during the day is a great thing. (Unsurprisingly, my “three morning pages” often clarifies today’s to-do list, adding things and removing others.)

Other goals don’t work quite as well with specific to-dos. For those, I use reminders – more specifically, I use the “triggers” technique that I learned from Marshall Goldsmith’s book of the same name. Each morning, I run through a list of “triggers” – ongoing behavioral changes I’m wanting to work on in my life – and think about how I’m going to nail each one today. In the evening, I give each one a score from one to ten based on how well I pulled it off that day. Almost all behavioral goals I have wind up on this list of triggers.

Going through my trigger list makes up two of the items on my daily to-do list, to be done early in the morning and in the evening.

Again, these to-dos and triggers all spring forth from that series of questions I ask myself about that goal. When that goal is set in a SMART format, I start answering a cascade of questions about it that breaks it down into what I need to do today to move that goal forward, and those things are either to-dos (on my to-do list) or behaviors (on my trigger list).

Step 6 – Even SMARTER – Evaluate and Readjust

Forming a good goal is great. Starting out on the journey to achieving it is great, too. To-dos and triggers are the nuts and bolts of it. But that’s not enough. Your goal will never go perfectly according to plan, ever, and success comes from constantly evaluating and readjusting your goal.

For me, this loops back to the journaling I mentioned early in this post. I do evaluation of my goals constantly in my thinking and in my three morning pages. Is this goal going well? Is it going poorly? What do I need to adjust, if anything?

I usually try to give a goal a month in its current implementation before I make changes. Quite often, the first few weeks don’t show any real results and I want to give it some time. Meditation as a daily practice, for example, didn’t show me any real results for the first three weeks, but now it’s a daily practice of mine; without giving it a month, I would have missed out.

Once a month or so, I go through my ongoing goals carefully. Is this going the way I want it to go? Why or why not? I also re-ask all of those goal breakdown questions and make sure all of the answers still make sense for me.

Again, this seems like extra work at first glance, but this kind of thing is the definition of sharpening the saw. Spending some time making sure that you’re doing sensible things and that you’ve got the tools you need to do them and that everything is in place almost always makes the whole task go far easier, and usually it ends up taking way less time and energy (even including the prep work) than just going about it in a haphazard and unconsidered way. Appreciating the power of sharpening the saw is one of the biggest steps forward I’ve made in my life in the past few years. If you spend time setting yourself up to knock things out of the park by thinking them through and getting ready for them, you’re going to end up with better results in less overall time and with less overall effort than you would have by just attacking them head on without any prep work.

Final Thoughts

I wish I could say that I had packaged all of this together so neatly during my own financial turnaround, but the truth is that my own turnaround was a lot more haphazard than this. I spent a long time sensing that there was a problem without really delving into it until I almost stumbled completely off a financial cliff, then I fell into a panic mode of homework and haphazardly throwing different tactics at the wall to see what stuck.

It worked solely because I was driven by something I cared deeply about – my sense of responsibility to my own future and that of my child. That pushed me to keep stumbling forward, but it was a stumble for a long while.

Knowing what I know now, the whole process would have been much smoother and much more efficient and less trying in places. If I had worked through the above process as soon as I began to sense something wrong, I would have been in a much better financial position much faster.

Another advantage of this process is that it has often kept me from diving into major goals that won’t end up panning out. I often care about something and want to work on it, but I realize that I don’t care enough to take on the changes in my life and those around me that it would require. Recognizing that early on has saved me from feeling like a failure about not achieving some ambitious goals that I cared about but not deeply enough.

If you have this nagging sense that something is “wrong” in your life – your finances, your relationships, your health, your career, whatever – start working through this process, right from the top. Start by “sharpening the saw” and thinking about what’s actually wrong, and when you’ve figured that out, try to transition it into a goal and see whether or not it fits into your life. It might turn into a life-changing goal, but even if it doesn’t, the process will bring you to a better place where you understand the realities of your life much better than before, and that’s well worth it.

Good luck!

The post Practical Goal Setting for Finance and Personal Success appeared first on The Simple Dollar.

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Friday, August 17, 2018

How Does a Target Retirement Fund Actually Work?

Tim writes in:

Question for the Mailbag: how exactly does a target retirement fund actually work? Every time I read about it it makes less sense.

This did start off as a question in the mailbag, but the answer became so long that it seemed sensible to give Tim’s question its own article.

Let’s start off talking about risk and reward.

There are a ton of different investment options out there. They differentiate themselves in a bunch of different ways. Some are really low risk, but don’t offer much return, like a savings account. Even in the best online savings account, you’re going to earn only 1% to 2% a year, but there is essentially zero chance of losing money.

Over the course of 10 years, an investment like this might see returns each year of 1.5%, 1.5%, 1.5%, 1.5%, 1.5%, 1.5%, 1.5%, 1.5%, 1.5%, and 1.5%, giving an average of (you guessed it) 1.5%. While the average is pretty low, notice that there is no individual year where money is lost. There is no time in which it is “bad” to have to rely on your investment, because this investment is as reliable as can be.

As you start adding risk, you generally start adding more return, like, say, VBTLX (the Vanguard Total Bond Market Index Fund), which offers a better average annual return (around 4%), but has a chance of losing money in a particular given year.

Over the course of 10 years, an investment like this might see returns each year of 4.5%, 3.3%, 4.8%, 4.9%, 4.5%, 4.3%, -0.5%, 4.7%, 4.8%, and 4.7%, giving an average of 4%. The annual returns are fairly consistent, but note that -0.5% year. In that year, the investment lost money, and there will definitely be years like that over the long haul.

Those lower-than-average years – and particularly those losing years – are problematic. Let’s say you’ve had a run of above average years and you’ve decided you have just enough money in your investment to make retirement work. Then, as soon as you retire, that investment spends the next year losing money, throwing off your math entirely and making retirement look real dicey. While it’s not too bad in the case of this investment, the riskier you get, the more likely this scenario is to happen. Those year-to-year variations are often referred to as volatility – an investment is volatile if it has a lot of those variations.

Let’s add some more risk and look at the Vanguard Total Stock Market Index (VTSMX). It has an average annual return since inception of 9.72%, which seems sweet, right? Let’s look closer.

Let’s look at the last 10 years of annual returns for it in reverse order: 21.05%, 12.53%, 0.29%, 12.43%, 33.35%, 16.25%, 0.96%, 17.09%, 28.70%, and -37.04%. Three of those ten years are worse than a savings account. One of them involves losing more than 37% of your investment.

This investment is even more volatile. Consider that you’re just starting your retirement and you have your money all in this investment and you hit one of those 40% loss years. That’s going to change the math of your retirement drastically. You’ll be pulling money out to live on as the market drops, which means that you will have depleted a much higher percentage of your retirement savings than you should in a single year and you’ll probably have to do that for the next two or three years while you wait for the market to rebound. This leaves you with a permanently depleted retirement savings, which either means very lean living late in life or a return to the workforce.

Want to see what that looks like in numbers? Let’s say you have $1 million invested in this and you retire, deciding to withdraw $50,000 a year to live on. That’s 5% a year, which is pretty risky, but you believe in that long term average return. Well, during the first year, the investment loses 40% of its value. It drops to $600,000… but you took out $50,000 to live on, so it’s actually just $550,000. Going forward, if you take $50,000 a year out of that, you’re going to go bankrupt in about 15 years (if not sooner, depending on volatility).

You can keep adding more and more risk and get a higher average annual return, but the key word here is average. You can look at things like the VSIAX (the Vanguard Small-Cap Value Index Fund), which has a very high average annual return but is primed to take an absolute beating the next time the stock market declines, meaning it’ll lose a large percentage of its value as those businesses struggle during an economic downturn (causing some investors to sell) and other investors flee to safer investments. You eventually reach investments that are tantamount to gambling, like cryptocurrency, which is so volatile that you might triple your investment or lose half of it in a month or two.

So, what’s the message here? If you have a lot of years before you retire, you want your money in something pretty aggressive that has really good average annual returns, but might have a few individual years that are really rough. If you don’t need the money anytime soon, those individual bad years don’t really matter to you – in fact, they’re kind of a blessing for you because it’s cheaper to buy into an investment when the market is down.

As you start getting close to retirement and actually retiring, those individual years start to become much more important. Unless you have a very large amount in your retirement account, you can’t afford one of those big down years that are somewhat likely to eventually happen with an aggressive investment. If it happens, you’re going to be right back in the workforce.

The solution, then, is to be aggressive with your retirement investments when you’re young and then, when you approach retirement, move your investments to less aggressive and less volatile investments that you can rely on more.

The best way to start understanding what a target-date index fund does is to look at some people who are on the road to retirement.

Angie is 25 years old. She’s not intending to retire for 40 years. Because her retirement is so far off, she can afford quite a lot of risk in her retirement savings. She can afford to invest in things that have a pretty good average annual return that’s paired with the risk of enormous loss. She might put her money into the Vanguard Total Stock Market Index and/or the Vanguard Small-Cap Value Index Fund. Her goal is to build as much value as she can over the next 40 years and chasing a high average annual return is the best way to do that.

Brad is 45 years old. He’s not intending to retire for 20 years. He’s probably still going to be pretty aggressive, but the idea of going less volatile might start popping up in his head. He still wants a very high average annual return, but there will come a point soon where he needs to make some changes.

Connor is 60 years old. He’s thinking of retiring in five years. He’s got almost enough to retire in his retirement savings. At this point, he really can’t afford to have everything in an aggressive investment that might drop 40% of its value. So, he might leave some of it in stocks, but the rest might be moved to bonds. His average annual return might be lower, but he’s no longer running the risk of losing 40% of his entire retirement savings.

Dana is 70 years old. If her retirement savings keeps growing in a slow and stable fashion, returning just a few percent per year but not losing a bunch of value in any given year, she’ll be fine. She probably wants to be mostly in the Vanguard Total Bond Market Index and maybe even have some in a money market fund (akin to a savings account with very little risk).

As you can see from these stories, as you get older and closer to retirement, it makes a lot of sense to gradually shift your investments from highly aggressive investments to more conservative ones. The issue, though, is how does one know when to start making those transitions? Furthermore, will you remember to do it, and to do it right? Those aren’t easy questions for individuals saving for retirement. It’s not entirely clear when to do this or how to do this, and many individuals aren’t going to put in the research and time to do it. People just want to put away the money and then have money when it’s time to retire.

That’s where target retirement funds come in. They do this automatically.

Let’s look back at 25 year old Angie. She aims to retire in about 40 years. So, theoretically, she wants to choose a pretty aggressive investment to put her retirement savings into. However, when she’s in her late forties or early fifties, she might want to begin slowly making things more conservative, and this gets even more true as she reaches retirement age and then retires. She doesn’t want a nasty shock when she’s old.

That’s what a target retirement fund does automatically. If Angie is 25, she’s going to retire sometime around 2060, so she might buy into a Target Retirement 2060 fund with her retirement savings. Right now, that target retirement fund will be really aggressive, but as the decades pass and the 2040s arrive, it’s going to slowly become less aggressive, and in the 2050s, it becomes even less so. It cuts out the volatility in exchange for a lower average annual return as it gets closer to its target date.

How does it do that? A target retirement fund is just made up of a bunch of different funds, and as time passes, the people managing the target retirement fund slowly move money out of some of the funds inside of it and move it into other funds.

So, for example, a Target Retirement 2060 fund might today be made up of 50% VSIAX and 50% VTSMX – in other words, it’s really aggressive, entirely invested in stocks, and some of those stocks are small companies that will either grow like gangbusters (big returns) or flame out (big losses). That’s okay for now – volatility is completely fine when you’re that far from retirement. What you want is a big average annual return over the next 25 years or so.

However, at some point down the road, probably in the mid-2040s, that fund will start becoming less aggressive. The money within the fund will be moved by the fund managers into things like bond funds or real estate, things that don’t have quite so high of an average annual return but aren’t going to see years of big losses, either.

By the time 2060 rolls around, all of the money in that fund will be in pretty safe stuff, which means you can rely on that fund to be stable in retirement.

That’s what a retirement fund does: It’s made up of a bunch of different investments that are gradually moved from highly aggressive things to less aggressive things as the target date approaches. When the “target” year is many, many years in the future, the fund will be really aggressive and really volatile, aiming for big returns over the next two decades at the cost of some really rough individual years. As the “target” year gets closer and closer, the fund gets less and less aggressive and less and less volatile, becoming something you can rely on.

That’s why, for people who aren’t really involved in managing the nuances of their own retirement savings, a target retirement fund with a target year pretty close to their retirement year is a really solid choice. It just manages that gradual shift for you without you having to lift a finger.

Good luck!

The post How Does a Target Retirement Fund Actually Work? appeared first on The Simple Dollar.

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New law will bar recruitment companies from mobilising individual agents

Kathmandu, August 17

The government is preparing to amend the existing foreign employment law, which will effectively restrict rights of recruitment companies and protect aspiring migrant workers’ rights.

Whereas the companies will be barred from employing and mobilising individual agents, they will be allowed to open branches at the district level if they want to expand their business.

The government is currently mulling over the bill to amend the existing Foreign Employment Act. If the Federal Parliament endorses the bill as it is now, the ‘manpower agents’ who are blamed for their deception will lose their legal right to practise the business.

Till the date, the government has been distributing licences to such  agents after collecting a collateral of Rs 200,0000.

Stakeholders had been lobbying for such a provision since a long ago.

On the other hand, recruitment companies owners had also demanded the provision of mobilising agents as they vilified the image of their business.


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