FINANCIAL ADVICE FOR THE NEW YEAR

Here are some excerpts from an interview with Bill McNabb, CEO of Vanguard, the investment management company:


What is the overarching lesson you think investors should take from the past year's turmoil?

. . . it's important to live, or invest, within your means. Many people have different opinions on the root cause of the crisis, but leverage - overindebtedness - certainly played a huge role. My hope is that investors take to heart that too much leverage, whether in investing or personal debt, is not a good thing . . . saving money is critical. It's not easy to hear that you may have to work longer, save more, or reduce spending, but it is the truth . . . I believe it has given everyone a strong dose of reality.

What should investors be doing right now to position themselves well for the future?

This is a good time for investors to ensure they understand their long-term objectives, reassess their time frame and risk tolerance, and make sure they have an appropriate investment plan. Most of all, investors need to save more. It's a real mantra for me. As investors, we relied too much on asset inflation, some of which proved to be a bubble, to bail us out of a low savings
rate . . . Americans need to save 14% to 15% of their income for retirement.