Retirement

NEW YORK Money -- Question: I plan to retire in about two years, but I've lost a lot in my retirement savings account. Currently my money is spread out over small and midcap stocks, growth shares and safe investments. But I'm thinking of moving my balance to an account that tracks the Standard & Poor's 500 index, riding the upswing until the S&P hits 1,100 or 1,200 and then diversifying into something safer. Do you think this is a good plan? --Alan W., Raleigh, North Carolina
Answer: I find that many of the people whose 401(k)s and other retirement accounts got hammered by the stock market's meltdown fall into one of two camps.
The first (and I suspect largest) is what I call the "foxhole" camp. These are the people who, having watched their balances dwindle and fearing even deeper losses, have moved or are contemplating moving their money to investment options that will staunch the bleeding: bonds, stable-value funds, money-market funds, CDs and the like. They plan to hunker down in these secure investments until conditions improve. At that point, they'll consider investing in equities again.
The second group is what I think of as the "Hail Mary" camp. These are the people who, sitting on losses of 20% or more, reckon the best and fastest way to recoup those losses is to throw the investing equivalent of a "Hail Mary" pass into the end zone. They think that by loading up on stocks, they'll catch the market's rebound and get back to even. Assuming that happens, these investors figure they can then return to a more prudent game plan. You are obviously thinking about joining this camp.
I am not an advocate of either of these camps. The problem with entering the first one is that it's hard to know when to leave. Every time stocks make a decent move, you have to wonder whether the rally has legs or it's a bear market trap. Then you've got to ask yourself, as The Clash so famously did in its 1982 album Combat Rock, should I stay or should I go?
Leave too late and you miss the usually explosive early gains of a new bull market. Leave too soon and you get burned, which probably sends you back into the foxhole until you go through the same process again, only this time second-guessing yourself even more.
0:00 /4:54Investing for long-term growth
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My quibble with the second camp is that you open up yourself to much more risk. What if the stock market takes another steep dive from here before it eventually rebounds? By investing far more aggressively in a desperate attempt to recover losses, you could find yourself in a deeper hole that will be even harder to climb out of. And what would you do at that point? Ratchet up the risk even more? Pick up and move to the "foxhole" camp?
So what camp do I think you should be a member of? Well, I guess if I had to put a name to it, I'd call it the "Optimistic But Realistic" camp. I say optimistic because I think people need to feel confident that there are things they can do that will actually improve their finances. Otherwise, what's the point of doing anything?
But you've also got to be realistic enough to know that there are no panaceas. And you've got to understand that some actions have a higher probability for success than others.
If you join this camp, the first thing you would do is take a step back and ask yourself what you're really trying to achieve here. If you mull that question seriously, I think you'll agree that, while limiting further losses over the short-term would certainly be nice, that's not your ultimate aim. Nor is recovering any losses as quickly as possible. Your fundamental goal is to be able to retire and maintain a reasonable standard of living for the rest of your life.
The "rest of your life" part of that goal is important. It means that even though you are approaching retirement, your investing strategy still has to be focused on the long-term. That doesn't mean your investing strategy will be the same as a 20- or 30-year-old's. You don't have as much time as youngsters to bounce back from big declines in the value of your retirement investments.
But just because you're a few years from retirement doesn't mean you should be adopting the same investing strategy as somenone who is investing money for a down payment on a house he or she plans to buy in a few years. That person really does have a short-term planning horizon. Your money, on the other hand, will likely remain invested a good 30 or more years after you leave the workforce.
So essentially you want to adopt an asset allocation strategy that balances the need to protect your nest egg from big hits from which it will be difficult to recover with the need for enough growth to help you maintain your standard of living throughout what could be a very long retirement.
People can disagree on what the appropriate asset allocation for someone in your position should be. But I think a reasonable guideline is a 50-50 mix of stocks and bonds. If you've got lots of other resources to fall back on - a pension, other investments, a nice home equity cushion, cash value in life insurance policies, etc. - you could consider bumping up the stock portion of your portfolio by another five to ten percentage points. Or if you have little in the way of other assets, you might dial back your stock exposure a bit. Whatever stocks-bonds mix you initially settle on, you would then gradually shift more into bonds as you age and require more stability in your portfolio.
The point, though, is that the best way to deal with the inherent uncertainty of the financial markets isn't to engage in a futile guessing game of moving your money around. It's to set an allocation strategy in advance and then, with the possible exception of a few minor tweaks, stick to it.
Diversifying this way won't immunize you against market losses. But if you set your allocation correctly, you'll be much less likely to incur losses so damaging that you'll be tempted to join the "foxhole" or "Hail Mary" camps.

Scum Tools (or Lack thereof)

Let me just say that on the tool front, Scrum leaves something to be desired. I know everyone says you only need a spreadsheet for the product backlog, sprint backlog, and burndown chart, but I don't wish to spend a day learning the finer points of excel.

I downloaded an excel spreadsheet by Craig Murphy , but it is taking me more than 15 minutes to figure it out, so I probably won't use it. The white board is starting to look pretty good.

Does anyone know any good tools or understandable spreadsheet templates? I guess I could sit down and figure out excel, but lets hope not...

Applying Scrum Gradually

I have been thinking about how I can implement Scrum at work without everyone on the project getting religion. I have some people interested, but no one has time (so they say) to change the way they do things at the moment.

So what I am doing in the short term is scruming myself. I know that sounds silly, but my plan is to be my own scrum master. To write the answers to the three questions every morning.

What did you do since the last Scrum?
What are you doing until the next Scrum?
What prevented you from doing work?

I am hoping when everyone else sees the progress I am making on tasks, they will want to jump in (with some gentle prodding).

If any one gone through this sort of thing, comments are welcome.

I will let you know how it goes (both of you ;) )

Anarchy vs. Democracy: What is Self-Organization

I was reading Macro Abis's BrainScrum and he has an article on Self-Organization. Some of his friends attended ScrumMaster Certification training and after the event the comment "I like the idea but I'm a control freak, I cannot leave he team in anarchy."

Macro's response to this is "I don't see self-organization as anarchy even if I agree that different situations ... need different degrees of independency."

Just to throw my two cents into this, Self-organizing groups of people are not anarchists. The most useful definition of anarchy in this context is "Absence of any cohesive principle, such as a common standard or purpose." Sounds like my last job ;)

On the other hand, a similar definition (again in this context) of democracy reads "The common people, considered as the primary source of political power." In other words, the common people organize themselves into a common political power. Self-organization, as it were.

So if you are scared of giving up control (personal problems aside), don't. As far as I can tell, at least politically, self-organization has worked out pretty well for me.

Why Scrum in the Army

Scrum, in my experience, is a powerful method of developing software in small, flexible groups. However, I am currently working as the software lead over fifteen developers on a communications project for the Army PEO-Missiles & Space. I am attempting to apply the principles of Scrum and agile methods in general to our project.

If you have never worked for DOD, let me tell you, that is not an easy goal.

Having the customer on-site is difficult, since "who is the customer" is a little vague. The user (or soldier in this case) is more specific, but often they are in Korea or Fort Bliss. Co-location with a Patriot battalion is a little difficult.

Now the three question daily Scrum is certainty doable, if we could get a task list solidified. With priorities changing daily, it is hard to get "the customer" to nail down what they want the system to do in the near term.

Also, the documentation we have to generate is almost a law from congress (and in some cases actually is). So I would like to get the computer to do as much of that as I can. If anyone has suggestions, I welcome them.

What I would like this blog to be is my lessons learned and (hopefully) some of your lessons learned. If you have worked Scrum in a DOD type setting, let me know how you did it. No use reinventing the horse.

Here we go...