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There is almost no limit to the ability of investors to ignore the lessons of the past. This cost them dearly last year. Here are six of the most important of these lessons for investors:

1) Beware of market forecasts, even by experts. As 2008 began, strategists from Wall Street’s 12 major firms forecast the end-of-the-year closing level and earnings of the Standard and Poor’s 500 Stock Index. On average, the forecast was for a year-end price of 1,640 and earnings of $97. There was remarkably little disparity of opinion among these sages.

Reality: the S&P closed the year at 903, with reported earnings estimated at $50.

Strategists aren’t always wrong. But they have been consistent, betting year after year that the market will rise, usually by about 10%. Thus, they got it about right in 2004, 2006 and 2007, but also totally missed the market declines in 2000, 2001 and 2002, and vastly underestimated the resurgence in 2003.

Ignore the forecasts of inevitably bullish strategists. Bearish strategists on Wall Street’s payroll don’t survive for long.

Read the rest of John Bogle’s column here.

A new tax law will allow retirees to skip required withdrawals from individual retirement accounts and related accounts this year. The change — signed into law by President Bush last month — is intended to give beaten-down nest eggs time to rebound from the brutal bear market.

But the new law may also create confusion, particularly for those just starting to take required withdrawals.

“The [existing] rules are confusing enough,” says Ed Slott, an IRA consultant in Rockville Centre, N.Y. “Now, more people than ever are going to get tripped up.”

Read the rest of the article at the Wall Street Journal.

If you’re like me, you might receive one or two credit card offers in the mail every day.  These annoying letters attempt to entice consumers to sign up for them with promises of a 0% APR for six months, sporting goods, or bonus frequent flyer airline miles.  While some people might enjoy receiving these mailings, the majority of people that get them do not.  In addition to creating more trash that needs to be thrown out, these credit card offers also increase the risk of identity theft.  Although it may appear to be overkill, shredding these pre-approved credit card offers is highly recommended, as it makes it harder for potential thieves to acquire your personal information.

If you are sick of these mailings there is help.  Under the Fair Credit Reporting Act (FCRA), a person is able to opt out of receiving these mailings.  In order to do this, one has to go to a website and enter some personal information.  The website is www.optoutprescreen.com and it works in conjunction with four consumer credit reporting companies (TransUnion, Equifax, Innovis, and Experian).  It will take up to a few months to completely stop receiving credit card offers, but the amount of junk mail one receives from credit card companies will be reduced significantly.

I recently acquired a little over a thousand dollars. I’ve been constantly hearing about Roth IRA’s and how they’re a really good option. What’s the difference between putting your money there versus putting it in a savings account? Should I even put my money in a Roth IRA? Thanks for your help. – Ryan, 22, Potomac, MD

Ryan,
Roth IRAs offer an attractive investment opportunity. The major benefit of Roth IRAs is that they offer an investor tax-free growth and withdrawals for all the contributions to, and gains in, the account. The major drawback is that every dollar contributed to a Roth IRA is after-tax and contributions are not tax deductible. The general rule is that if an investor is in a low tax bracket, a Roth IRA makes sense because there is the potential that in the future the investor will be in a higher tax bracket. On the opposite end, if a person is in a high tax bracket, they are probably better off investing in a traditional IRA because their contributions will reduce their taxable income.

There are a few differences between a Roth IRA and a savings account. With a Roth IRA, an investor can only contribute up to $5,000 in 2008 whereas savings accounts have no limit. In your situation, you have $1,000 so this presumably is not an issue. The major difference between the two is that the Roth IRA will offer you tax-free growth of your money, while you will get taxed on all interest earned from a savings account. The length of time you plan on not needing to access the $1,000 is the most important factor in your decision. Early non-qualified distributions (See IRS Publication 590 for all of the specifics) are taxed at 10%. Therefore, if you are absolutely sure that you will not need the $1,000 in the near future, I would recommend putting it into a Roth IRA. Otherwise, you are better off putting it into the savings account.