Disturbing news out of sunny Florida this week --93 percent of all stock mutual funds reported negative returns during the second quarter.

Palm Beach Gardens-based Weiss Ratings, Inc., which compiled the report, attributed the nosedive to concerns over accounting irregularities, coupled with disappointing earnings news from companies who reported during this time period.

But anyone who’s been listening to the business news and had the courage to open their 401(k) or brokerage statements during the past year wasn’t really surprised. And those who hewed to the modern portfolio theory and divvied up their holdings into an asset allocation model appropriate for their age and financial goals shouldn’t really be too bent out of shape.

Personally, I’ve seen my 401(k) drop precipitously over the past year, but since I’m more than 25 years away from retirement, I’m not overly concerned.

Sure, it was fun during the go-go 90s to see the flabbergasting increases my portfolio was racking up and secretly congratulate myself on my astute fund-picking. But even then, I knew those 30 percent and 40 percent quarterly returns my funds were generating were aberrations and that it couldn’t last.

At financial planning conferences I attended during those years, advisors all preached the asset allocation mantra to their clients and their peers, and warned that the stock market was bound to take a nosedive sooner or later. Teach your clients discipline now during the good times, they warned, and during the lean years, they will thank you and respect your advice even more.

So forgive me if I have little sympathy for the 55-year-olds I keep reading about in the papers who kept 85 percent of their retirement funds in stock mutual funds and now find that they’ll have to keep working a while longer before they can spend their days fishing and visiting the grandchildren. The stock market is a big gambling hall, and every purchase made is, underneath it all, just a bet. Everyone who invests in the market should know that, and if they don’t, all I can say is "caveat emptor" – buyer, beware.

The way I see it, my 401(k) is back to a more reasonable level, and the dives the market’s taken during the year have given me the opportunity, through dollar cost averaging, to buy more shares of my funds at reduced rates – somewhat cushioning my losses. If, as I expect, the market recovers over the next 25 years, and I keep investing and re-allocating as I get older, I should be in pretty good shape.


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