I love the Tour de France. That’s why about this time last year, I gave you Three Investing Lessons from that venerable athletic event. The comparison between bicycle racing and investment success seemed to strike a chord with many readers — so this year I’ll give you three, brand-new lessons!

As I said before, we’re all in the race for financial victory. My finish line may be different from yours, and hopefully we’ll both be winners. But the road isn’t easy for any of us.

With that in mind, let’s take a look at what we can learn from the Tour de France.

Lesson #1:
You Don’t Always Need to Be First

The Tour de France isn’t just one race. It’s a series of daily stages that take place over about a three-week period. The winner doesn’t need to finish first every day. In fact, he doesn’t need to finish first at all! What counts is the cumulative time for every stage of the course.

For way too many people, investment success means “making more than the next guy.” That’s the wrong way to look at it — and a great way to burn yourself out long before the finish line.

Top racers like Lance Armstrong, Andy Schleck and Cadel Evans know this well. That’s why they pace themselves carefully, saving energy for the tough stages they know are ahead. They run the numbers. And they know exactly what they need to do at each and every stage of the race.

So if you want to reach your financial goals, you first need to define them. The answers are all in the math. For example, let’s assume retirement is your number one goal. Here are a few of the inputs to consider:

• You want to retire ___ years from now.

• You’ll need income of $ ______ per year in retirement.

• You’ll need to have $ _______ saved to provide this income.

• You currently have savings of $_____.

• You are able to save $_____ per month from now until you retire.

Crunch the numbers and you can figure out what kind of annual gains you need to generate from your investments. If it’s 3 percent, your job will be a lot easier than if it’s 30 percent, and you won’t have to take as much risk.

Now picture a racer going into the last few stages of the Tour de France with a big lead. What should he do?

He should slow down and reduce the chances of a crash.

Investing isn’t any different: When you can reach your goals easily, then you take as little risk as possible.

Lesson #2:
Ignore the Cheaters

As in most professional sports, athletes in the Tour de France are tempted to gain an edge with illegal drug use. You’ve seen the stories and heard the rumors.

So what’s an honest racer supposed to do? Join the steroid crowd? No.

I firmly believe that in the long run, those who work hard and play by the rules will have their victory. They may miss some opportunities. They may not get to wear the yellow jersey. But just by finishing the race, they will have done something most of us can only dream about.

The same holds true in investing …

You can cut corners, cheat people, and push yourself to the front of the line in many different ways. It’s especially easy when you never have to see the person who bears the cost of your actions. But someone always pays.

I try not to think about whatever other people are doing. I can’t control their actions — I can only control my own. And I find that when I plan carefully and then follow the plan, I can stay on track toward my long-term goals.

Lesson #3:
Get Used to Bumpy Roads

Earlier this week the Tour de France racers went through a section of cobblestone roads. The ride was bumpy, to say the least, but they kept on going. Why? Because there is no other way to the finish line!

Investing works the same way …

I wish I knew a way to make 20 percent a year, every single year, and never have to endure a losing month, week, or day. Unfortunately I’m not aware of any such investment.

Bumpy roads simply go with the territory for successful investors. You know you’re going to hit them sooner or later. How you prepare for them will make all the difference in whether you get through to the other side — or let yourself get driven off course.

What can you do to get ready?

First, don’t let yourself be surprised. Study market history. Look at the historic volatility of your chosen investments. If it happened before, it can happen again. The next time may be even worse.

Second, diversify your portfolio into different assets that tend not to move up and down at the same time. And don’t worry when one of your stocks or funds lags behind the others. Be patient.

Third, get help when you need it. Tour de France riders have a whole team behind them taking care of the details. They know they can’t do it all themselves. So educate yourself and bring in professionals when necessary.

Are you getting the feel of the road now? I hope so. The Tour de France will be over soon, and someone will be the winner. Your lifetime investment plan, however, will last a whole lot longer. Stay on the course and you can be a winner, too!

Best wishes,

Ron

This investment news is brought to you by Money and Markets. Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit http://www.moneyandmarkets.com.

Obama’s Budget Cuts Visualization

{mp3}MTJune_26{/mp3}

Mr. Coxe has consistently been named as a top portfolio strategist by Brendan Wood International. He was ranked number one in the 2007, 2008 and 2009 surveys. Don Coxe has more than 35 years of institutional investment experience in Canada and the US. He was CEO of a major Canadian investment counseling firm, Research Director and Strategist for a leading Canadian institutional dealer, a strategist on Wall Street, and CEO and Chief Investment Officer for Harris Investment Management, Inc.

(Advance to 19:30 to hear the beginning of the Donald Coxe Interview)

Did you think the potential collapse of the public employee pension system is so far in the future you don’t need to be concerned? Or, if you’re not in the system that it doesn’t affect you? A new report from George Mason University says it’s closer than you think.

The university’s Mercatus Center studied public employee systems across the country and chose to use New Jersey’s as an example of how bad things can be.

“New Jersey’s defined pension systems are underfunded by more than $170 billion, an amount equivalent to 44 percent of gross state product and 328 percent of the state’s explicit government debt,” said authors Eileen Norcross and Andrew Biggs.

The report says the state has five defined benefit pension plans that cover 770,000 public workers, and more than a quarter million retirees depend on $6 billion per year in benefits.

Officials maintain pension plans are underfunded by $44.7 billion when the return on investment is 8.25 percent. The study used calculations consistent with private-sector accounting methods and, when they are applied, the state’s underfunded benefit obligations go from $44.7 billion to $173.9 billion.

“It is estimated if state pension assets average a return of 8 percent, New Jersey will run out of funds to meet its pension obligations in 2019. If asset returns are lower than 8 percent, they will run out of funds sooner,” the report says.

How much sooner? Under certain assumptions the well could go dry as early as 2013.

It comes as no surprise we got into this pickle because legislators overpromised benefits to state workers while shirking responsibility on the state’s contribution to the pension plans. Gov. Jon Corzine was fond of saying he had put more money in the pension plans than was contributed in the prior 15 years combined. Even so, it wasn’t enough.

Some states have moved their employees to a defined contribution plan, like a 401(k). Michigan put new hires in them starting in 1997. Alaska moved to such a plan in 2003. Florida, Nebraska and Ohio offer hybrid plans. New Jersey has two such plans, one for the state’s universities and colleges and another for elected and appointed officials and current participants in the Public Employees Retirement System (PERS) and Teachers’ Pension Annuity Fund (TPAF).

….read page two of US State pension system near collapse