More Straight Talk on Investing

21Is the “Smart Money” Smart? Yes, but…

One of the terms that you'll read or hear as you pay attention to investing is the “smart money.” You'll see it in headlines and hear it on financial news programs. Frankly, it's a dumb term, applied randomly to groups of seemingly sophisticated investors who some may think have the secrets to success to which the rest of us aren't privy. Don't believe it. That said, there is a particular group among these investors who can teach us a thing or two. While this group invests billions of dollars, maintains professional staffs, and possesses long traditions of prudent, successful investing, their goals and objectives are very similar to yours. I am speaking of the endowment teams at America's premier universities.

I truly believe there is a considerable amount that individuals can learn about long-term investing and retirement planning by studying how these universities manage their endowment funds. Think of a mid-career professional, Vickie, pondering her retirement investment strategy and life after working. And then think of the manager of a large university endowment. Here are the parallels:

• Both are responsible for overseeing a critical pool of assets. For an endowment team, the pool is often the source of 30%–50% of the university's operating budget and its financial security for the future. For Vickie, it is likely her 401(k) plan account, which is the most money she's likely to ever amass and it has to sustain her in her retirement ...