The New Commonsense Guide to Your 401(k): Rebuilding Your Portfolio From The Bottom up

Chapter 37. Expert One

YOU PROBABLY want to know what the experts did. To find out, I called Don Phillips, whom I've known professionally since 1986, not long after he rolled out of graduate school and into a job of founding Morningstar Mutual Funds, a company that revolutionized the fund industry. Some claim Morningstar's rating system of giving each fund a star rating of one to five—five being highest—was the key to opening fund investing to the rest of us.

Morningstar revolutionized mutual funds because Phillips and his colleagues began telling us the truth about funds. Before Morningstar's ratings, we had marketing materials from the fund companies and information from the Investment Company Institute, the industry trade group, and from data services that were paid by the mutual funds themselves. If I was working on a story and thought I had the dirt on some mutual fund, I could trust Phillips to confirm or tell me I was off-base. Never did I think he told me that because of some secret agenda.

"The basics of financial planning have not changed," Phillips says. He says that if you go to a financial planner at any time in your career, you will get this two-part advice: Save and invest. When you start out in your career, you should build up a nest egg that would last you for six months. At the time of retirement, you should have savings (or cash equivalents) to last three to five years. Phillips says that people talk about how terrible the market is, how they plan to retire this ...