D4 Business 2R SUNDAY, MARCH 6, 2016 MutualFunds FLEXIBLE MANAGER CAN RIDE OUT TROUBLE Your Funds Chuck Jaffe Syndicated columnist Russell Napier is a market historian who sees bad things coming in the near future, and an old­style solution for fund investors looking to push through. Author of “Anatomy of the Bear: Lessons from Wall Street’s Four Great Bot­ toms,” Napier has studied what goes into a market tumbling to where U.S. equities are particularly cheap. The four great bot­ toms — and his definition excludes some market downturns and bad events like the financial crisis of 2007­08 — occurred in 1921, 1932, 1949 and 1982. But in an interview for my radio show, MoneyLife with Chuck Jaffe, Napier said that he expects his new book will soon require an update, with additional chapters to cover a “fifth great bottom,” the one he sees coming in the months ahead. Today’s conditions, Napi­ er noted, are most reminis­ cent of 1929, though he cautioned that he does not expect the massive declines that ended the Roaring 20s and started the Great De­ pression. Rather than focus on the size of the losses, Napier — who has written global macro strategy for institu­ tional investors for two decades — says the similari­ ty lies in the root cause of the downdraft. “The reason I see similari­ ties is that [1929] was clear­ ly caused by deflation, it emanated from a flaw in the construction of the global monetary system, it began in emerging markets from 1927 to 1929 and was evi­ dent there and then was imported to America and began to erupt in the United States,” Napier explained. “The pain in emerging mar­ kets for the last few years is reminiscent ... the decline in equities should not be as gross [as in 1929] … [be­ cause] equities are not as egregiously overvalued.” Napier is far from alone in calling for a protracted market downturn and a scary worsening of condi­ tions that have gotten mar­ kets off to such a miserable start in 2016. In fact, it’s easy to find financial advisers and fund companies either calling for trouble and/or warning investors to protect them­ selves. What typically follows that warning is a pitch for alternative funds, which use modern tricks of the trade to reduce volatility, avoid losses, beat the market or turn profits in all condi­ tions. That pitch sells well, but typically has underdeliv­ ered. The jury is still out on most forms of alternative fund — they haven’t been around long enough to prove that they work or to confirm that the concept doesn’t translate to a consis­ tently above­average fund. Napier, for one, is skepti­ cal that alternatives can work, noting that he’s cau­ tious about any fund that loads up on derivatives, worried about the implo­ sion potential when some­ thing goes wrong. That leads him to a differ­ ent kind of alternative choice for investors looking to ride out the trouble he is forecasting, specifically a fund manager with flexibili­ ty. “The product that people should be looking for is simply a multiasset prod­ uct,” said Napier, who de­ spite his misgivings about the market says he is always somewhat invested in equi­ ties “because I could be wrong.” “This multiasset product — which is a fund manager who can buy for you bonds cash gold and equities and doesn’t have to get into anything too esoter­ ic — is something that was fairly common in our finan­ cial history, but it’s some­ thing which is reasonably uncommon today.” That’s precisely what investors were buying when mutual funds started 90­ plus years ago. Managers could go anywhere and do just about anything. Inves­ tors wanted professional management at a reason­ able cost; they let managers make decisions about allo­ cating money based on market conditions. The evolution of the rat­ ings companies, however, created problems for go­ anywhere funds. They were hard to categorize and measure, often defying the descriptive categories they were lumped into. Couple that with inves­ tors and advisers who want­ ed to control allocation choices and star managers — household names like Peter Lynch — became nearly extinct. While there are still big names like Jef­ frey Gundlach of Double­ Line or Bill Gross of Janus, they either work in an area without limits (like uncon­ strained bond funds) or are specialists running a niche or sector fund. Kenneth Heebner has run CGM Focus (CGMFX) for nearly three decades, but his star is mostly extin­ guished due to ugly feast­ or­famine results for a de­ cade now. As of Feb. 26, Heebner’s fund certainly looked like a unique performer, just not one most investors could stomach. CGM Focus was tops in its category for per­ formance over one day, one month and 15 years, but was between the 98th per­ centile and dead last for every other standard time period measured by Morn­ ingstar, one month, three months, year­to­date, a year through the three­, five­ and 10­year periods. Surrendering control to the pros is hard enough; riding through such gut­ wrenching swings is nearly impossible for investors no longer accustomed to giving managers such leeway. “Find a [multiasset] man­ ager with a good track re­ cord ... who has just been in, basically four, five or six fairly simply asset classes and hasn’t had to resort to anything too esoteric [like derivatives],” said Napier. Chuck Jaffe is senior columnist for MarketWatch. He can be reached at cjaffe@marketwatch.com or at P.O. Box 70, Cohasset, MA 02025­ 0070. Copyright, 2016, MarketWatch Fund Tracker Weekly spotlight on mutual fund performance Winners and losers: A mutual­fund scorecard Fund Wkly % YTD % obj return return Biggest funds American Funds A AmcpA p American Funds A AMutlA p American Funds A BalA p American Funds A BondA p American Funds A CapIBA p American Funds A CapWGA p American Funds A FdInvA p American Funds A GwthA p American Funds A IncoA p American Funds A ICAA p American Funds A N PerA p American Funds A SmCpA p American Funds A WshA p BlackRock Instl StrIncoOpp BlackRock Instl GlbAlloc r DFA Funds IntlCorEq DFA Funds USCorEq2 Dimensional Fds EmMCrEq Dimensional Fds USLgVa Dodge&Cox Income Dodge&Cox IntlStk Dodge&Cox Stock DoubleLine Funds TRBd I FPA Funds FPACres Fidelity Freedom FF2020K Fidelity Freedom FF2030K Fidelity Invest Balanc Fidelity Invest BlueChGr Fidelity Invest Contra Fidelity Invest GroCo Fidelity Invest LowP r Fidelity Invest Puritn Fidelity Invest TotalBd Fidelity Spart Adv 500IdxAdv Fidelity Spart Adv TotMktAd r Frank/Temp Frnk A IncomA p Frank/Tmp Frnk Adv GlbBdAdv Harbor Funds CapApInst Harbor Funds Intl r MFS Funds I ValueI Metro West Fds TotRtBdI Oakmark Funds I EqtyInc r Oakmark Funds I Intl Oakmark Funds I Oakmark PIMCO Instl PIMS AllAsset PIMCO Instl PIMS TotRt PIMCO Funds Instl Income Price Funds BlChip Price Funds CapApp Price Funds EqInc Price Funds EqIndex Price Funds Growth Price Funds MidCap Price Funds N Inc Price Funds Ret2020 Price Funds Ret2025 Price Funds Ret2030 Price Funds Value Schwab Funds S&P Sel Vanguard Admiral BalAdml Vanguard Admiral EqInAdm n Vanguard Admiral 500Adml Vanguard Admiral GNMA Ad Vanguard Admiral HlthCr Vanguard Admiral IntGrAdm Vanguard Admiral ITAdml Vanguard Admiral ITGrAdm Vanguard Admiral LtdTrAd Vanguard Admiral MCpAdml Vanguard Admiral PrmCap r Vanguard Admiral STIGrAd Vanguard Admiral SmCAdm Vanguard Admiral TtlBAdml Vanguard Admiral TStkAdm Vanguard Admiral WellslAdm Vanguard Admiral WelltnAdm Vanguard Admiral WdsrIIAd Vanguard Fds TotIntBInv Vanguard Fds DivdGro Vanguard Fds STAR Vanguard Fds TgtRe2015 Vanguard Fds TgRe2020 Vanguard Fds TgtRe2025 Vanguard Fds TgRe2030 Vanguard Fds TgtRe2035 Vanguard Fds TgtRe2040 Vanguard Fds TgtRe2045 lion British thermal units are finally retreating. For the second time in a Gas futures at a 17­year month, U.S. natural­gas low are forcing cuts in pro­ stockpiles shrank by more duction, offering a ray of than traders expected — a hope for bulls. Hedge funds surprise that caused prices have held a net bearish of the fuel to spike, averting position in U.S. gas for over a 20­year low. a year as mild weather Why was the market so limits demand and output off about last week’s inven­ from a reservoir in Appala­ tory drop? One explana­ chia, America’s most prolific tion: It failed to account for shale play, pushes stock­ a 1.2 billion cubic­foot­a­ piles to a seasonal record. day slide in gas production. The failure to predict last That’s how much output has week’s inventory drop was fallen in the U.S. Northeast “a combination of both a since Feb. 5, according to supply and demand miss, data from Bloomberg New but if I had to guess, I think Energy Finance. we’re more weighted on the After years of growth, supply miss,” said Het Shah, drillers facing the pressure an analyst at Bloomberg’s of prices below $2 per mil­ New Energy Finance. By CHRISTINE BUURMA Bloomberg News +3.1 +2.1 +1.8 ­0.1 +2.4 +3.9 +3.2 +2.9 +2.3 +3.3 +3.7 +3.8 +2.4 +0.1 +2.3 +5.2 +3.6 +8.0 +3.7 +0.5 +7.7 +3.5 NA +3.0 +2.5 +3.3 +2.1 +2.3 +2.1 +2.6 +3.2 +1.6 +0.5 +2.7 +3.0 +3.5 +3.2 +2.2 +4.3 +2.7 ­0.2 +2.7 +7.4 +4.1 NA +0.2 NA +1.7 +1.7 +3.9 +2.7 +2.1 +2.2 0.0 +2.5 +2.7 +3.0 +2.7 +2.7 +1.7 +2.6 +2.7 0.0 +0.5 +4.8 ­0.4 ­0.2 ­0.2 +3.5 +2.0 ­0.1 +4.7 ­0.2 +3.0 +0.8 +2.0 +3.5 ­0.1 +1.3 +2.4 +1.8 +2.2 +2.6 +2.9 +3.1 +3.4 +3.6 ­2.2 +0.2 ­0.4 +1.4 +1.0 ­2.3 ­2.2 ­5.1 +0.2 +0.2 ­4.6 ­6.0 ­1.1 ­1.0 ­2.1 ­3.2 ­1.4 +1.9 ­2.3 +0.3 ­5.5 ­3.3 NA ­2.2 ­1.6 ­2.5 ­2.2 ­7.4 ­4.2 ­8.6 ­1.2 ­3.0 +1.4 ­1.7 ­2.2 +0.5 ­1.0 ­8.5 ­1.7 ­0.4 +1.3 ­1.1 ­4.0 ­3.5 NA +0.4 NA ­7.9 ­0.4 ­0.1 ­1.8 ­7.8 ­4.0 +1.3 ­1.0 ­1.4 ­1.8 ­2.0 ­1.8 ­0.4 +0.3 ­1.7 +1.5 ­8.9 ­4.8 +0.8 +1.4 +0.6 ­2.3 ­4.9 +0.5 ­2.2 +1.8 ­2.1 +1.1 ­0.6 ­2.0 +2.4 ­0.4 ­1.7 ­0.1 ­0.5 ­0.8 ­1.2 ­1.5 ­1.8 ­1.9 +10.9 +9.7 +8.9 +3.4 +6.2 +5.8 +9.5 +9.8 +7.5 +9.9 +7.1 +5.6 +10.7 +2.7 +3.2 +1.3 +9.4 ­3.8 +9.8 +3.4 +0.7 +9.6 NA +6.4 +4.6 +5.2 +7.6 +11.4 +10.6 +11.8 +9.8 +7.6 +3.6 +11.0 +10.4 +4.2 +2.2 +11.3 +1.2 +10.5 +4.7 +5.8 +3.5 +10.5 NA +3.4 NA +12.4 +10.3 +7.6 +10.7 +11.6 +10.6 +3.3 +6.1 +6.5 +6.8 +10.5 +10.9 +7.9 +11.8 +11.0 +3.4 +18.1 +2.1 +4.8 +4.7 +2.0 +9.6 +11.8 +2.1 +8.6 +3.5 +10.5 +7.4 +8.1 +9.4 NS +11.8 +6.6 +5.7 +6.1 +6.3 +6.5 +6.6 +6.8 +6.8 Best performers Rydex Dynamic InvSP5St H Leuthold Funds GrizzlyShrt Rydex Dynamic InvNasdSt H Rydex H Class InvRusSt C&OMkOpp Comstock Partners CapVlA GAMCO Funds MathrAAA AQR Funds MgdFutSt I Rydex Investor InvS&P5St Rydex Investor InvNasdInvs Sequoia AQR Funds MultStrAlt I Federated Instl FPruBearIS Hussman Funds StrGrowth ProFunds Inv Cl USGovPlus Vanguard Instl Fds ExDurTreas Rydex Investor GovBdStrat Rydex Investor MgdFutSt t Fidelity Invest SAI LTTrs Wasatch USTryFd Fidelity Spartan SpLTTrAd r Vanguard Admiral LTsyAdml Dreyfus UST Lng Hussman Funds StrIntlEq Price Funds USTLg Fidelity Selects Pharm Amer Century Inv ZrCpn2025 Fidelity Spartan IntTrAdv r ProFunds Inv Cl RUSDollar Amer Century Inv EqMktNtrl ­2.7 ­0.1 ­1.7 +11.0 ­2.1 +10.6 Fund Wkly % YTD % obj return return SQ SQ SQ SQ NR SE LT LT NR NR SV SV NR NR LT SV LT SV NR XG SC XC NR NR NR IL PR AU NR AU +37.7 +34.6 +19.2 +18.5 +16.9 +15.8 +14.7 +14.5 +14.0 +13.8 +13.5 +13.2 +12.1 +12.1 +12.0 +11.8 +11.5 +11.3 +11.1 +10.9 +10.6 +10.5 +10.3 +10.0 +9.9 +9.8 +9.6 +9.6 +9.5 +9.4 5­yr % return +25.7 +25.0 +2.2 +2.7 +2.3 +5.1 +14.4 +14.9 +1.1 +1.8 ­7.4 +14.3 +0.4 ­10.6 +8.5 +7.6 +4.9 +3.2 +5.6 +2.2 ­2.1 +7.8 +0.5 +1.0 +1.2 ­2.7 ­7.1 +40.5 ­7.3 +37.6 ­32.0 ­30.4 ­18.2 ­16.9 ­13.5 ­21.3 ­12.3 ­10.2 ­9.9 ­10.2 ­3.4 ­0.6 ­9.6 NS ­12.8 NS ­14.5 NS ­12.7 +8.0 ­1.2 ­0.9 ­11.1 ­10.3 ­18.2 ­3.3 ­0.3 ­19.5 ­0.6 ­22.5 Fund Wkly % YTD % obj return return 5­yr % return ProFunds Inv Cl UltLatinAm Direxion Fds LatAmBull ProFunds Inv Cl UltEmMkt Direxion Fds EmgMBull p Rydex Investor EnrgySer Direxion Fds NatRBull2X Price Funds LatAm Deutsche Trust LatAmrEq Fidelity Selects NtGas Invesco Funds A Energy p SchdSmCV r AegisValFd Rydex Investor Energy Oppenheimer A StlpthAlpha x BlackRock A LatAA r CM SCVal I Fidelity Invest LatAm Invest Managers TowleDpV Frank/Temp Frnk A NatResA p HodgesFd Pacific Advisors SCapValA t CMAdvisorI t Fidelity Selects EngSv Guinness Atkinson GlbEnrgy r BlackRock A Eng&ResA Third Avenue Fds IntlVaInst r Eaton Vance A GrIndia t Frank/Temp Frnk A GoldPrM A Oppenheimer Y Alpha Y x US Global Investors WldPrcMn Worst performers +5.3 +2.7 +3.0 SQ SQ SQ SQ SQ SQ SQ SE SQ SQ XG MP SQ SQ GT LU GT SE LU LU LU LU LU IL LU HB LU LU WB SQ ­5.4 ­5.1 ­4.6 ­4.2 ­4.2 ­3.8 ­3.1 ­3.0 ­2.7 ­2.3 ­2.2 ­2.1 ­2.0 ­1.9 ­1.6 ­1.6 ­1.6 ­1.5 ­1.3 ­1.3 ­1.2 ­1.2 ­1.2 ­1.1 ­1.1 ­1.0 ­1.0 ­0.9 ­0.9 ­0.8 +1.2 +3.0 +8.0 +3.4 ­5.6 +0.4 +1.0 +1.0 +0.8 +4.3 ­6.4 ­1.8 +1.7 +3.2 +8.6 +9.9 +8.7 ­0.5 +7.0 +7.2 +6.7 +6.6 +6.1 +0.5 +6.4 ­9.8 +4.5 +3.0 ­1.7 +0.4 ­25.7 ­10.6 ­31.2 ­12.2 +3.7 ­14.4 ­7.2 +3.5 ­13.0 ­15.9 +9.1 NS ­13.2 ­6.1 +11.6 +15.7 +13.0 ­2.0 NS +11.8 +9.5 +9.5 +8.7 ­2.0 +8.7 +16.3 +8.8 +4.5 +2.4 +2.2 Footnotes: e: Ex capital­gains distribution. f: Previous day{rsquo}s quote. n or nl: No upfront sales charge. p: Fund assets are used to pay for distribution costs. r: redemption fee or contingent deferred sales load may apply. s: Stock dividend or split. t: Both p and r. x: Ex cash dividend. NE: Data in question. NS: Fund did not exist at the start date. NA: No information available. Key to abbreviations and footnotes: Fund objectives: AB: Long­term top­grade corporate and govern­ ment bonds. AU: Gold oriented. BL: Balanced. EI: Equity income. EM: Emerging markets. EU: European region. GL: Global (includes U.S.). GM: General municipal bond. GT: General taxable bond. HB: Health and biotech. HC: High­yield taxable bond. HM: High­yield municipal bond. IB: Intermediate­term investment­grade corporate bond. IG: Intermediate­term Treasury/government debt. IL: International (outside U.S.). IM: Intermediate­term municipal bond. LC: Large­cap core. LG: Large­cap growth. LT: Latin American. LU: Long­term Treasury/government debt. LV: Large­cap value. MC: Mid­cap core. MG: Mid­cap growth. MP: Mixed portfolio (stocks and bonds). MT: Mortgage. MV: Mid­cap value. NM: Insured municipal bond. NR: Natural resources. PR: Pacific region. SB: Short­term investment­grade corporate bond. SC: Small­cap core. SE: Sector (specific industries). SG: Small­cap growth. SM: Short­term munici­ pal debt. SP: S&P 500. SQ: Specialty diversified equity. SS: Single­ state municipal debt. SU: Short­term Treasury/government debt. SV: Small­cap value. TK: Science and technology. UN: Unclassified. UT: Utility. WB: World bond. XC: Multi­cap core. XG: Multi­cap growth. XV: Multi­cap value 5­year % return: Annualized performance over the past five years. Top 5 mutual funds by objective, year­to­date % return Emerging markets Fidelity Invest Legg Mason C Westwood Funds Voya Funds Cl A Dimensional Fds EMEAfrC BFMEmM p EmgMkts I RussiaA p EmMktV DivHarv A StrDivVal StrValDvIS Utilities p RRDivAC I Integrity Viking Hussman Funds Federated Instl Invesco Funds A Aston Funds HltcreSvc r LivOakHlt MdEqSys HlthCare HlthCr Fidelity Selects Oak Assoc Fds Fidelity Selects Schwab Funds Vanguard Admiral Global Virtus Funds A Cohen & Steers Deutsche Trust FPA Funds Invest Managers YTD % return Mid­cap core +5.0 +3.6 +3.6 +3.2 +3.1 Longleaf Partners Aston Funds Advance Capital I Gabelli Funds Transamerica Ptrs YTD % return Equity income Health biotech Why gas bears got it wrong XC LV BL IB GL GL LC LG BL LC GL GL LC GT MP IL XC EM LV IB IL LV MT MP MP MP BL LG LG XG MC BL IB SP XC BL WB LG IL LV IB BL IL LC MP IB GT LG BL EI SP LG MG IB MP MP MP LV SP BL EI SP MT HB IL IM IB SM MC LC SB SC AB XC BL BL LV WB EI BL MP MP MP MP MP MP MP IL SP XC Vanguard Idx Fds TotlIntl Vanguard Instl Fds InstIdx Vanguard Instl Fds InsTStPlus 5­yr % return GlblInfraA GblInfra I WorldDiv Paramnt ArSaulGOp I +5.4 +4.9 +4.3 +4.3 +3.8 YTD % return Pacific region EuroPac Funds Invest Managers Fidelity Invest Fidelity Invest SunAmerica Funds IntlValue +13.9 IntlDivInco +4.9 Canada +4.3 SAI MinVol +1.4 IntlDiv A +0.9 GMO Trust Hennessy Funds Dimensional Fds Matthews Asian Invesco Funds A YTD % return Gold oriented +1.8 +1.8 +1.4 Gwth +1.1 Yacktman p +1.1 Rydex Investor Midas Funds OCM Funds Deutsche Trust Frank/Temp Frnk A Large­cap core QualGrth I BrRkQLgC I SmallC p SmCpValI QualSmCap SCapValA p RRSelVal I NatResA p GlbCmdty r New Era GlbRs Energy +3.8 +3.8 +2.6 +2.6 +2.2 YTD % return +5.6 +5.1 +4.8 +4.4 +4.0 YTD % return Taiwan Japan Inv AsiaPcSCp AsianGIInv AsianPac p Science technology Fidelity Selects DWS Invest A GAMCO Funds Fidelity Selects Fidelity Selects +2.5 +2.3 +1.8 +1.6 +1.5 YTD % return Natural resources YTD % return YTD % return Jensen Funds Trust Prof Mgrs HensslerEq St FarmAssoc AMG Managers Invesco Funds A RidgeWorth Funds Virtus Funds I Wells Fargo Adv A Aston Funds Frank/TempFrnk A Fidelity Invest Price Funds US GlobalInvestors Vanguard Admiral International SmCap FairptMC I Equity p FocusFive I InstMdVal p Small­cap core ­4.4 ­4.6 ­4.7 ­7.6 ­8.9 +5.0 +3.5 +3.2 +2.4 +2.2 YTD % return +4.3 +1.6 +0.7 +0.6 +0.3 YTD % return Telcm +6.2 CommA p +2.4 GlTelAAA +0.2 Wireless ­0.1 ComEquip ­0.8 PrecMet Midas Fd t GoldInv t Gold&Prc GoldPrM A YTD % return Sector Rydex Investor Price Funds Direxion Fds ReavSelct Fidelity Selects BasicMat p +6.5 RealAsset +6.2 NatRBull2X +5.1 +4.2 Trans +3.4 YTD % return Balanced Midas Funds Hussman Funds Wells Fargo Adv A Wells Fargo Adv A Berwyn Funds Perpetual t StrTotRet r DivrIncA DivCapBldr Income Intermediate bond Vanguard Admiral Scout Funds Scout Funds Canaval Hill Fds Touchstone Family ITBdAdml CorePlBd I CoreBond I Bond I TRBd Inst Long­term bond LTBnd LTGrAdml ExDrGS2 TtlBAdml HighGrdI Vanguard Idx Fds Vanguard Admiral GuideStone Funds Vanguard Admiral Bishop Street Fds Long­term U.S. VanguardInstlFds Wasatch Fidelity Invest Fidelity Spartan Vanguard Admiral YTD % return Mortgage +44.2 +40.8 +40.8 +40.6 +40.5 Wright Funds RidgeWorth Funds SEI Portfolios Victory Funds Invesco Funds A ExDurTreas USTryFd SAI LTTrs SpLTTrAd r LTsyAdml +7.3 +5.3 +2.6 +2.2 +1.3 YTD % return +2.2 +2.2 +2.1 +1.9 +1.8 YTD % return +3.7 +2.7 +2.3 +1.8 +1.8 YTD % return +9.9 +7.2 +7.0 +6.7 +6.6 YTD % return CurIn LTFdMtgI GNMA A FundFInc I US MortgA +1.8 +1.6 +1.6 +1.6 +1.5 IT’S WISE TO KEEP CASH ON HAND Investing Scott Burns Syndicated columnist Q: My son turned 18 in Janu­ ary. Last year he worked and re­ ceived a W­2 for a little over $5,000. He wants to put $5,000 into a Roth IRA with the inten­ tion of not touching it until he retires. Do you agree? Can you recommend a favored fund that would be low maintenance over the many years or at least a good place to start? A: Investing through a Roth IRA is a good idea. He doesn’t need a tax deduc­ tion, and the money will grow tax­free for a very long time. The low­cost path is for him to start a Roth at Schwab and invest in their U.S. Broad Market exchange­traded fund (ticker SCHB). It has a tiny expense ratio — 0.03 per­ cent — and will do better than the vast majority of managed domestic stock­ market funds over the next 40 years, simply due to minimal expenses. I’m not so sure, however, that he should put every dime into a Roth. There is a lot to be said, particularly for young people, for hav­ ing cash on hand. So may­ be he should invest $4,000 and hold $1,000. That money, and more that he can add later, can be used to buy things cheap (and without financ­ ing) as opportunities pres­ ent themselves. Workers who have some money in the bank are in much bet­ ter shape than workers living paycheck to pay­ check. Your son needs to re­ member that he is the best investment he can make, so having some cash on hand can be worth more than any stock­market investment. Q: I am 82 and live alone in a gated community for seniors where I rent my duplex for $1,500 a month. I am in good health. I took out a long­term­ care policy in 1999. The original policy premium was $1,318 a year. I have just received notice of a new increase to $2,185. I have a comfortable income from Social Security and required minimum distri­ butions (RMDs) from my IRA, amounting to about $6,500 a month in dispos­ able income (after taxes). Should I keep the LTC policy or cancel it? A: There is no clear answer for this. The most recent Genworth survey of nursing­home costs, for instance, shows a national average annual cost of $80,000, and a $51,000 average annual cost for Texas. So it is likely that you could cover the cost of care from your RMDs and Social Security benefits. On the other hand, if you continue the policy at $2,185 a year, you’ll recov­ er nearly two years of premium payments for every month of covered nursing care — if you go into nursing care. That means a short stay will “pay for itself” if you con­ tinue the policy. What concerns me is getting the policy activated if and when you need it. When I asked readers, the most common response was that putting claims in motion wasn’t easy. Charitable giving goals, if you have them, may be a good reason to keep the policy — keeping the insur­ ance would increase the odds that you would have some real value in your estate since your assets would not be drained to cover nursing­home ex­ penses. Questions: scott@scottburns.com Copyright, 2016, Universal Press Syndicate