MONEY fiduciary

Obama to Wall Street: Stop Acting Like Car Salesmen

Obama at the podium giving a talk
Alex Wong—Getty Images

President Obama will push for a "fiduciary standard," which would require financial advisers to act in clients' best interests.

It’s an issue that’s pitted Main Street against Wall Street for years. Now President Obama is wading into the murky question of what ethical duties financial advisers owe their clients when they recommend products like mutual funds and annuities.

On Monday, President Obama plans to use an AARP event to tout something known as the “fiduciary standard,” which would require financial advisers to act in the best interests of their clients, much as a lawyer must do.

That may seem like a no-brainer. But in fact, investment pros who call themselves “financial advisers” currently are not required to give clients the best advice or products that they can offer. They never have been. In the eyes of the law, financial advisers—once more commonly known as stockbrokers—are like car salesmen or the guys selling TVs at the local big box store: They can and do tout products that offer the heftiest profits and commissions.

To be sure, investment advisers have never been allowed to recommend just any investment. Current law requires they sell investments that are “suitable” for their clients based on factors like age or risk tolerance. In practice, however, that often means actively managed mutual funds with hefty sales loads or annuities with complex and expensive guarantees. Compared to low-cost index funds and exchange-traded funds, these investments can end up costing savers tens of thousands of dollars over the years it takes to build a retirement nest egg.

Raising the legal standard to a fiduciary one might stop that practice. That’s a big reason that consumer advocates, including the AARP and the Consumer Federation of America, have been calling for years to require all advisers to act as fiduciaries.

Both the Securities and Exchange Commission and the Department of Labor, which has jurisdiction over 401(k) plans, have taken stabs at requiring advisers to become fiduciaries. The issue was a key point of contention in the debate of the 2010 Dodd-Frank financial reform bill. While the bill ultimately included language that appeared to authorize the SEC to implement the financial standard, five years later the proposal is still stalled. One key point of contention: Financial advisers that work on commission tend to take on less wealthy clients. That has allowed Wall Street firms—and especially big insurance companies whose agents sell annuities—to argue that tougher rules would deprive middle class investors of advice.

Of course, it may seem strange that members of Congress would listen to what big business thinks is best for middle class investors while ignoring AARP and the Consumer Federation of America. But that only speaks to the strange ways of Washington—and, of course, to the ingenuity and determination of the financial services lobby.

The White House push appears to focus on advice doled out to investors in retirement plans. While that’s a huge group of investors, it’s not clear what effect, if any, the proposal would have on advice regarding taxable investment accounts. Any new rules could also be crafted to permit brokers to continue to earn commissions, something that many investors advocates are likely to see as a potentially fatal loophole.


Noooo! GDP Slowed in Fourth Quarter. And That’s Not Even the Worst Part

Jan Stromme—Getty Images

While the U.S. recovery continued in the fourth quarter, wages didn't grow as fast as many economists were hoping.

Economists got a fresh read on the U.S. recovery today: The federal government reported fourth-quarter gross domestic product growth slowed to 2.6% from the third-quarter’s 5%.

The good news is few economists expected the economy to outstrip the third-quarter’s robust number. The bad news is slower GDP growth wasn’t the only disappointment. In fact, many experts were looking past that headline number at something else: the Employment Cost Index.

The Labor Department index, a measure of overall employment costs, including wages but also benefits like health care, rose 2.2% year over year for the fourth quarter. It had grown 2.3% in the fourth quarter, and economists had been hoping that it would meet or exceed that mark.

That it failed to do so suggests wage growth—largely seen as the last missing piece of the recovery—still hasn’t picked up as much as we would all like. The upshot is that, while Americans seem to be able to find work, solid middle class jobs are still disturbingly scarce. Sluggish wage growth also means the Federal Reserve, which is feeling pressure to raise interest rates, may have extra breathing room, since rising wages are a key driver of inflation.

Here’s the wage growth trend line, fyi:


Fed Holds Rates Steady as Economic Plot Thickens

The Federal Reserve has said it won't raise rates before summer. But the economy picture is no less complex as the date approaches.

The Federal Reserve wrapped up a two-day meeting in Washington Wednesday, leaving short-term interest rates unchanged at near historic lows.

The move was widely expected: The central bank indicated as recently as December that investors weren’t likely to see a rate hike before summer. But the Fed’s actions were being closely watched nonetheless. With the summer deadline now two months closer, recent moves by the European Central Bank to bolster the continent’s economy have complicated the Fed’s upcoming choice.

The upshot is that for now U.S. consumers should be able to rest assured. Ultra-low interest rates mean borrowing costs for mortgages and other loans are unlikely to climb dramatically. But investors won’t have it so easy: Stock and bond traders will continue to fret about U.S. and European officials’ decisions, meaning more volatility like the sharp drop in Treasury yields (and rise in bond values) that took place earlier this month.

The Fed’s last meeting took place in mid-December amid feelings of increasing economic optimism. The U.S. economy had logged 3.9% GDP growth in the third quarter and the November jobs report was one of the best in months. That’s largely continued. Throw in an assist from cheap gas, and it’s no surprise the President Obama felt safe bragging about the ecomony in last week’s State of the Union.

In short, many Americans are beginning to feel like things are normal again. That’s usually the signal for the Federal Reserve to return interest rates to a more regular footing. Raising rates can slow economic growth — that’s why the Fed doesn’t want to move to soon. But keeping them low can stoke inflation. At 1.6%, well below the Fed’s 2% target, that’s not an immediate problem. The worry is that once inflation starts to rise, it can quickly get out of control.

The Fed’s decision is so tough this time around because it took such extraordinary measures to prop up the economy in the wake of the Great Recession. While so far the Fed’s strategy seems to have worked, no one likes being uncharted territory. Fed officials may feel some pressure to return monetary policy to something that feels normal.

One big problem, however, is that even as the U.S. economy has improved, much of the rest of the world continues to lag. Last week struggles in Europe prompted the ECB, Europe’s equivalent of the Fed, to undertake some extraordinary actions of its own, committing to buy tens of billions of dollars in debt each month in a new bid to stimulate the continent’s economy.

With the global economy so intertwined, the Federal Reserve has to worry weakness and instability overseas could put a drag on otherwise healthy U.S. economic expansion. In particular, the ECB’s move, the equivalent of printing billions of Euros, is likely to weaken the common currency against the dollar. That will make it more expensive for U.S. companies to export their goods — ultimately hurting profits and also providing another check on U.S. inflation.

The upshot is that if the Fed was feeling ready to act sooner rather than later, the situation overseas may be giving it second thoughts. Of course, the Fed has given itself until summer to decide. So it’s got some breathing room, if not quite as much as it did in December.

But in the meantime don’t expect jittery traders to sit tight. The Dow dropped 100 points after the Fed’s announcement from 17,452 to 17,319, while Treasury yields fell as bonds rallied. You can expect more of that kind of drama.

MONEY stocks

Why It Hardly Matters If New York Stock Exchange Traders Get to Work in a Snowstorm

The George Washington statue stands covered in snow near the New York Stock Exchange (NYSE) in New York, U.S. Wind-driven snow whipped through New Yorks streets and piled up in Boston as a fast-moving storm brought near-blizzard conditions to parts of the Northeast, closing roads, grounding flights and shutting schools.
Jin Lee—Bloomberg via Getty Images The George Washington statue stands covered in snow near the New York Stock Exchange

Although it was hard to get to the stock exchange this morning, physical trading floors don't matter like they used to.

While much of New York and the Northeast remains closed Tuesday, the stock market opened at 9:30 a.m. its regular time.

The snow storm appears to have caused some trading hitches: The Dow is down more than 350 points, amid reportedly thin trading and the New York Stock Exchange’s parent has invoked a special rule that gives market makers extra leeway in difficult conditions.

But considering you can barely get a cup of coffee in midtown, things are not as bad as they easily might have been. During a similar blizzard in 1996, the market actually had to shut down. While stock traders may be having as hard a time getting to work as anyone else, most of them no longer need to trudge to lower Manhattan to buy and sell. Like so many other things, trading has moved online.

It’s true the floor of the stock exchange was once the hub of the stock trading world, and cable television and other media often give the impression that is still the case. In fact, the New York Stock Exchange handles only about 20% of trading in NYSE-listed stocks, and only a fraction of that is carried on by brokers the floor, according to Crain’s. Meanwhile, there are fewer than 1,000 NYSE floor traders, down from a peak of about 5,000 in the early 2000s, according the Wall Street Journal.

Why do the media still hover at the NYSE? Well, let’s face it, floor traders make more dramatic pictures than rows of people staring at computer screens. And as FORTUNE recently reported, the quiet on the floor actually makes for a better backdrop for live television commentary than the chaotic scenes of yore.

Even the media be starting to change, however. Last year, online news site MarketWatch, announced it would no longer use pictures of floor traders, saying it was giving readers the wrong impression.

So while today may not be the best day to catch a flight out of La Guardia, you can hop on your computer and trade. Of course, given the Dow’s recent tumble you’re probably better off going outside to build a snowman.


Gold is Back—for Now

Shannon Stapleton—Reuters/Corbis

Gold is up nearly 10%. But you're better off admiring this glamorous commodity than trying to buy it.

Gold is starting to shine again.

Since the start of the year, the yellow metal is up nearly 10% from $1,184 per ounce to just over $1,300 at Thursday’s close.

What gives? The move is likely one of the ripples markets have been feeling in response to the European Central Bank’s decision to start buying tens of billions of bonds each month in an effort to stimulate the European economy. While the decision was announced Thursday, investors had been anticipating it for weeks.

Unlike another commodity that’s been in the news—oil—gold has little intrinsic industrial value. But since everyone regards it as precious and has for thousands of years, investors often see it as the ultimate safe place to park cash when other markets look iffy.

It should be no surprise the ECB’s recent move fits that bill. The move was generally well received. The U.S. stock market, for instance, rallied more than 200 points on the news. But this kind of bond buying program is still something new. While the Federal Reserve, the U.S. equivalent of the ECB, successfully implemented its own bond buying program several years ago, there’s no guarantee the latest attempt will work, and there are likely to be unpredictable side effects.

We’ve already seen one. Witness last week’s sudden 30% jump of the Swiss franc when the Swiss central page decided to stop fixing the franc’s value in euros. Investors flooded into the currency in part because it’s seen as likely to hold its value, whereas the ECB’s bond buying is actually meant to produce some inflation in the countries that use the euro. (Currently, the chief worry in the eurozone is deflation, or falling prices.)

The upshot is that while investors are cautiously optimistic, some want to hedge their bets, and gold is one way to do that.

Does it make sense for you? Probably not. It has gotten easier in recent years for small investors to hold gold with the advent of gold-oriented exchanged-traded funds like SPDR Gold Shares (GLD). Some financial planners have taken to putting a small portion of their clients’ assets, say 2% to 5%, in such instruments to guard against the kind of volatility we are seeing right now.

But if gold’s uncertainty-driven rallies can be dramatic, so can the reversals. In late 2011, when markets were still reeling from the financial crisis, gold traded at more than $1,900 an ounce. The Federal Reserve’s own bond buying program, whose second round had kicked off a year earlier, was a big factor in the run-up. Eventually, however, the economy regained its footing—and the inflation many gold fans feared failed to show up. By 2013 gold was back down about where it is today.

And remember, unlike stocks, which represent a share of a company’s profits, or bonds which pay interest, gold doesn’t produce any future wealth, which makes it hard to say what a fair value for it would be. Its jumps in price generally reflect changes in politics and market psychology, which are hard to predict. In the long run, gold isn’t likely to do more than keep up with inflation. Add in trading and investment management costs and most long-term investors are better off just riding out the market’s ups and downs.

MONEY europe

Europe’s Version of the Fed Announces a Big New Stimulus Plan

The symbol of the Euro, the currency of the Eurozone, stands illuminated on January 21, 2015 in Frankfurt, Germany.
Hannelore Foerster—Getty Images The symbol of the euro, the currency of the eurozone, outside the European Central Bank in Frankfurt, Germany.

The European Central Bank just took on its own version of "quantitative easing." Get ready to feel the ripples.

On Thursday European Central Bank president Mario Draghi announced plans to implement a bond buying strategy known as quantitative easing. The ECB, which is the European equivalent of the U.S. Federal Reserve, is hoping to boost the struggling European economy. The Fed implemented a similar effort several years ago.

Under QE, the European bank will buy up tens of billions of euros worth of bonds each month. That should help keep interest rates low and help stave off a worrying trend of falling prices, or deflation.

With the U.S. economy finally humming along, you may be tempted to shrug off the news. But changes in interest rates and prices across the Atlantic quickly ripple across the globe. Here’s how the move could affect you.

It may hold down interest rates and bond yields.

Ever since the Fed cut key interest rates in the wake of the U.S. financial crisis, bond yields have been unusually low. Although many forecasters expect the Fed to begin raising rates in 2015, the ECB’s latest move could keep a lid on how far yields on Treasuries rise.

European bonds already yield considerably less than Treasuries—German government bonds maturing in 10 years pay 0.4%, compared to about 1.9% for Treasuries. If QE continues to depress European yields, more and more buyers are likely to seek out Treasuries, pushing Treasury prices upwards. Bond yields fall when prices rise.

Continued low rates would be good news for borrowers but a mixed bag for investors. Although bonds would lose value when rates begin to rise, many income oriented investors and saver have been frustrated by low payouts, forcing them to hunt for riskier alternatives.

It could further strengthen the dollar.

By buying up bonds, the ECB is essentially creating more euros. On Thursday, the value of the euro fell to $1.16, according to Blommberg. That’s its lowest level in more than a decade. In the long run that should help European companies by making it cheaper for U.S. consumers to buy their goods. But if you own foreign stocks, you’re likely to feel some pain, at least in the short run.

The European stocks you own are denominated in euros, but the value of your account is denominated in dollars. As the dollar rises, a European stock simply isn’t worth as many dollars as it was before, assuming its price in euros didn’t change. The good news is, you don’t need to worry unless you plan to sell right away. In the long run, such currency fluctuations should even out.

The U.S. stock market is happy—for now.

The Dow climbed about 117 points, or 0.7%, to 17,671 in morning trading. While it’s always tricky to interpret stock market ups and downs, it seems likely investors are applauding the ECB’s aggressive action to prevent a deep recession, just as they did over the past several years when the Federal Reserve made similar moves. With the U.S. economy finally humming, the Fed’s strategy seems to have worked. Ultimately the best thing for stock values is to get Europe, a major driver of global growth, back on the same path.


Obama Calls for Raising Taxes on Investment Profits

stack of coins with the top one levitating above
Phil Ashley—Getty Images When investments are inherited, how big a cut should government get?

You pay less tax on capital gains than you do on regular income from a job. Why is that?

In Tuesday night’s State of the Union address, President Obama will be calling for a number of new tax credits for the middle class, along with a plan to make community college tuition free. And to help pay for all that, he’s proposing raising the taxes on some investors’ capital gains.

Most debate about taxes tends to focus on the income tax. But that’s not Uncle Sam’s only source of receipts. Another big item is capital gains—essentially, the profit you earn when you buy something and then sell it at a higher price. You may have to pay capital gains taxes if you trade stocks or bonds or when you sell real estate. The tax code provides lots of ways for middle-income taxpayers to avoid capital gains levies, such as Individual Retirement Accounts, 401(k)s, and an exclusion on profits when you sell a primary residence. So the new taxes Obama is talking about are aimed at the affluent.

The president is arguing for two changes to the capital gains tax:

1. Raise the top rate from 23.8% to 28%. The highest possible rate on investment profits today is far lower than the top rate on wage income, which is 42.4%. Obama’s plan would narrow the gap.

2. Make more capital gains subject to taxes. When you sell an asset, you don’t owe capital gains tax on the whole sale price, only on the amount above what you paid—that is, your profit. But there is an important exception. If you sell an asset you inherited, the gain isn’t based on what your benefactor originally paid. It’s based on the value the day you inherited it. This “step-up in basis,” to use the tax jargon, can be very valuable.

For instance, imagine inheriting a $2 million stock portfolio for which your uncle had originally paid $1 million. If you sold it a year later for $2.5 million, you would owe capital gains on the $500,000 in appreciation since it came into your hands, but not the $1 million in value it gained before your uncle passed it down to you.

Simply get rid of the step-up, and you’d be on the hook for taxes on $1.5 million in profits. But Obama’s proposal includes some provisions to protect middle-class heirs. The first $100,000 in profits is off the table. Other exemptions target homes and “small, family-owned and operated businesses.”

And even Obama, who is arguing that the wealthy are getting too a sweet deal, isn’t proposing taxing capital gains exactly the same as wage income. Which raises a question: Why not?

This has actually been the case for the most of the roughly 100 years that the country has levied an income tax. One exception: Top rates for both income and capital gains were briefly both set at 28% after Ronald Reagan’s 1986 tax overhaul. Reagan agreed to hike the capital gains rate from 20%, in exchange for the Democrats slashing the top income tax bracket from 50%.

Inflation is one reason for capital gains’ special tax status. Partly because of record-keeping difficulties, the tax code doesn’t let taxpayers factor in inflation when calculating profits. So lower tax rates are a kind of rough compromise for investors who otherwise might owe tax bills on nominal gains simply because today’s dollar doesn’t have the same value it did in, say, 1970 or 1980.

The other big argument has to do with economic growth. Many economists argue that lower capital-gains tax rates are justified because they encourage people to save, invest, or start businesses. Ultimately, they argue, giving capital gains a break will spur growth that ripples through the economy.

Does it work? The evidence is mixed. Both Clinton and Bush cut capital gains tax rates. Under Clinton the economy boomed, while under Bush it tanked. But given everything else that happened in between—from the Internet revolution to the financial crisis—it’s difficult to tell what effect, if any, these policy changes had.

Low capital gains taxes also raise questions of fairness. They are a big reason some the wealthiest Americans pay a surprisingly light tax bill, at least in terms of percentage of earnings. The U.S.’s 400 top earners, all making more than $99 million, paid average tax rates of just 18% in 2010, according to recently released data. That compares with 11.8% for all taxpayers, but that broader figure also includes the 40% of households that pay no income taxes.

In any case, don’t hold your breath for a radical change to capital gains taxes in the next two years. With Republicans in control of Congress, “it’s a non-starter,” says Roberton Williams, a fellow at the Tax Policy Center.

MONEY best of 2014

5 Bright Ideas That’ll Make You a Better Investor

Lightbulb with pie chart
MONEY (photo illustration)—Getty Images (1)

From lower-cost financial advice to a fresh way to find a bargain stock, the best new investing breakthroughs of the year.

Every year, there are innovators who come up with fresh solutions to nagging problems. Companies roll out new products or services, or improve on old ones. Researchers propose better theories to explain the world. Or stuff that’s been flying under the radar finally captivates a wide audience. For MONEY’s annual Best New Ideas list, our writers searched the world of money for the most compelling products, strategies, and insights of 2014. To make the list, these ideas—which cover the world of retirement, technology, health care, real estate, college, and more—have to be more than novel. They have to help you save money, make money, or improve the way you spend it, like these five investing innovations.

Best Way to Get Advice Cheaply

In 2014, Internet-based “robo-advisers” went from a novelty to a force that’s changing how you get and pay for money advice. In a nutshell: They’re driving costs to the floor. Some of investing’s biggest names are going robo. The competition breaks down into two types:

Portfolio Builders: Startups like Betterment and Wealthfront use algorithms to design you a mix of low-cost index funds. They charge no more than 0.25% to 0.35% of assets per year, less than traditional advisers. Giant Schwab has announced a similar, free service. (Schwab is paid in part by putting customers into Schwab’s funds.)

Computers plus people: LearnVest is more focused on saving and budgeting, but for $70 a month it will also connect you with a financial planner for investment and other advice. Vanguard’s new Personal Advisor Services will create a portfolio for you, and assign you a planner you can talk to, for 0.3% per year. The pilot program is open to existing customers with $100,000 to invest.

Best Answer to Your Toughest New Problem

With the Fed ending quantitative easing, the big worry is when interest rates will rise again. Since bond values fall when rates rise, the bonds you own for safety suddenly feel high-risk. But Colorado Springs financial planner Allan Roth says a look at the numbers should dampen your worry, as long as you have a long-term focus. After the initial drop, the higher yields you’ll get in bonds can help make up for the fall. Many Fed observers expect rates to rise one percentage point next year. Below is what happens in a typical bond fund if rates spike twice as much, by two percentage points, and then flatten out.

Annualized return

Best Timely Trick for Finding Bargain Stocks

Count All the Cash

When you’re hunting for a bargain stock, a rich dividend is a classic place to start. A big payout is a sign that a company has to do something extra to attract buyers. And a firm with cash to distribute may be more stable than other unloved stocks. But dividend yields average just 2% these days.

The concept: “If you just look at dividends you ignore a significant piece of the pie,” says portfolio manager Patrick O’Shaughnessy of O’Shaughnessy Asset Management. Also add in stock buybacks, which can be a better use of cash than costly acquisitions often are. To do that, calculate “shareholder yield.” A company paying 2% that bought back 3% of its shares in a year would have a 5% shareholder yield.

The new way to invest: Cambria Shareholder Yield ETF (SYLD) buys stocks that score high on this measure.

Best Reason to Be Skeptical About Market-Beating Claims

Many new mutual funds and ETFs are based on the idea that by combing through past market returns, you can identify factors (such as company size) that explain why some stocks do better than others. But a new study by financial economists Campbell Harvey, Yan Liu, and Heqing Zhu argues that many of these discoveries are probably illusory. With the advent of cheap, powerful computers, academics are making more and more “discoveries”—over 200 just in the past 15 years. The sheer number of findings, the study argues, suggests researchers are simply picking up a lot of random noise.


Best Big Idea in Three Characters


That’s economist Thomas Piketty’s formula for economic inequality. In Capital in the 21st Century, Piketty says the return (r) on owning capital tends to be faster than economic growth (g). If he’s right, the rich will pull away from the rest. And it’s a reason to own stocks and other long-term assets.


MONEY stocks

The Best and Worst Stocks of 2014

It was a good year to be in the stock market -- but the spoils were not evenly shared. Here's a look at the hottest and coldest stocks of 2014.

It was a good year to be in the stock market. With the economy finally seeming to hit its stride, the S&P 500 — comprising the 500 biggest U.S. companies — has so far returned about 12%, compared to an annual average of just above 5% over the past decade.

Of course, the spoils weren’t evenly shared. Factors like falling oil prices and America’s continuing infatuation with gadgets and social media meant some stocks were big winners, while others actually left shareholders poorer — on paper — than they were in 2013.

Here’s a selective look at some of the year’s hottest and coldest S&P 500 stocks, with a focus on companies that many consumers interact with every day.

  • Hot: Southwest Airlines

    The wing of a Southwest commercial airliner during a flight over the Pacific Ocean near Los Angeles, California, November 19, 2014.
    Mike Blake—Reuters

    From cramped seats to hidden fees, consumers loathe airlines. But a strengthening economy and the recent sharp drop in oil prices — fuel typically accounts for a third of airline operating costs — mean airline investors have been flying high.

    The best performing stock in the S&P 500 this year: Southwest Airlines SOUTHWEST AIRLINES CO. LUV -1.91% , whose price has climbed 120%. (Delta DELTA AIR LINES INC. DAL -3.09% was another example, shooting up 74% in 2014.)

    To cap it off, in December, a woman gave birth to a healthy baby boy on a Southwest flight from San Francisco to Phoenix in December. “I can’t think of anything else that’s going to top that,” Captain John Gordy told ABC.

  • Cold: Transocean

    Transocean Drilling Rig, undergoing maintenance in the harbour of Valletta, Malta.
    Trevor Chriss—Alamy

    Chances are you’re loving low gas prices. But chances are you also aren’t stuck with a fleet of drilling rigs you’re looking to lease. The lower oil goes, the harder it is for marginally profitable wells to stay in the black. That in turn means more and more drilling equipment sitting idle. It’s added up to a terrible year for rig owner Transocean TRANSOCEAN LTD. RIG 2.15% . Shares are down 58%, more than any other stock in the S&P 500.

  • Hot: Allergan

    A syringe rests alongside a vial of Allergan Botox, produced by Allergan Inc.
    Jason Alden—Bloomberg via Getty Images

    The Botox maker’s stock just about doubled in 2014. The company’s October earnings release beat analyst expectations, but it’s the year-long bidding war over Allergan ALLERGAN, INC. AGN 0.15% that’s really juiced the stock price. After spurning an attempted hostile takeover by Valeant Pharmaceuticals and hedge fund manager Bill Ackman, the company finally agreed in November to be purchased by drug-maker Activis for $66 billion.

  • Cold: Avon

    An Avon Products Inc. lipstick.
    Scott Eells—Bloomberg via Getty Images

    Years of attempted makeovers haven’t prevented the steady decline of Avon AVON PRODUCTS, INC. AVP 1.55% , the iconic cosmetics brand best known for its legions of “Avon Lady” representatives who make sales calls in customers’ homes. The key to this direct-sales model are the reps themselves — keeping them motivated, well-supplied, and growing in number, that is — but the size of Avon’s U.S. sales force has in fact declined by about half since 2007. Domestic sales fell 21% in the first half of 2014 alone. A new website and overseas growth are reasons for optimism. And in December, the company did finally settle (for $135 million) Justice Department and SEC charges over allegedly improper payments to Chinese officials that had been dogging it for years. But with the stock ending the year down around 43%, the market appears skeptical.

  • Hot: Electronic Arts

    Gamers wear headsets as they play Electronic Arts Inc.'s "Battlefield 4" video game on Microsoft Corp. Xbox One games consoles.
    Matthew Lloyd—Bloomberg via Getty Images

    Video game maker Electronic Arts ELECTRONIC ARTS INC. EA -0.94% has had it’s struggles — consumer blog Consumerist named it Worst Company in America two years running in 2011 and 2012. But the maker of titles like “The Sims” and “Battlefield” named a new chief executive in 2013. With help from the arrival of new Sony PlayStation and Microsoft Xbox consoles, the company posted a profit in its latest quarter after losing more than $270 million a year ago. Shares have doubled year to date.

  • Cold: Coach

    Coach designer handbag store, New York, USA.

    The leather-goods maker seems to have over-indulged on discounting, especially at factory outlets, undercutting its upscale aura. To turn things around, Coach COACH INC. COH 0.32% brought in a new star designer and is attempting to redefine itself as a broad “luxury lifestyle” brand (like competitor Michael Kors) not just a handbag maker. Meanwhile, it’s also closing a fifth of its North American stores to focus on urban flagships, and that cost sales. For 2014, the stock is down about 32%.

  • Hot: Keurig Green Mountain

    Green Mountain Coffee Roasters Inc. Products Ahead Of Earns
    Scott Eells—Bloomberg via Getty Images

    There are few stocks hotter than Keurig Green Mountain KEURIG GREEN MOUNTAIN, INC. GMCR 2.15% , the K-cup coffee pod maker, up more than 80% in 2014. What’s the secret to that success? Like Monster Energy, another 2014 top performer, the company earned an important vote of confidence from Coca-Cola, which in February paid $1.25 billion for a 10% stake in Keurig and then upped it to 16% a few months later. As the Motley Fool points out, Keurig has also done a good job keeping its older partners (like Starbucks) happy and courting new ones like Kraft’s Maxwell House Coffee. The company’s shares were buffeted in November by a departing CFO and somewhat modest earnings forecast, but that hasn’t put too much of a damper on the company’s extraordinary growth.

  • Cold: GameStop

    An Electronic Arts Inc. Battlefield 4 video game advertisement is displayed as a customer browses at a GameStop Corp. store in West Hollywood, California, U.S.
    Patrick T. Fallon—Bloomberg via Getty Images

    Electronic Arts may have been one of the year’s top stocks, but not all video-game-related companies had a good 2014. The industry’s transition from in-store sales of game disks to digital distribution allows publishers to circumvent brick-and-mortar retailers like GameStop. (Electronic Arts itself, in fact, recently inked a deal with Microsoft to provide some of hits through an online subscription service.) The problem is compounded because GameStop long made a significant chunk of its profits on used game sales, which depend on the existence of physical game disks — customers generally can’t re-sell digital copies. Meanwhile, Amazon and other online retailers are brutal competitors on hard-copy sales. All told, GameStop GAMESTOP CORP GME -0.14% was down about 33% in 2014.

  • Hot: Royal Caribbean

    The world's first smartship, Quantum of the Seas, sails into New York Harbor.
    Jonathan Atkin—Royal Caribbean International

    President Obama’s surprise announcement that he would end restrictions on travel to Cuba sent shares of Royal Caribbean ROYAL CARIBBEAN CRUISES RCL -0.49% spiking, along with the stock of practically every company with a Cuba connection. But the cruise line’s stock was already well on its way to a banner year. Declining oil prices has dramatically cut one of its primary expenses. Meanwhile, demand for berths has been growing in the U.S. as consumer spending picks up; and Royal Caribbean was the first major line to send a state-of-the-art ship — in this case, the $1 billion Quantum of the Seas — to China, where it will cater to the country’s burgeoning leisure market out of its new home port of Shanghai. The stock is soared 80% in 2014.

  • Cold: Mattel

    Barbies on shelves
    Richard Levine—Alamy

    Barbie may have met her match in Anna and Elsa. Disney’s princess duo — not to mention longer term trends like computer games — have taken their toll on Mattel MATTEL INC. MAT 0.65% . While results aren’t yet in for the all-important Christmas season, Barbie sales have fallen four straight quarters. “Girls have a lot of other choices,” toy analyst Sean McGowan recently told the New York Post. Mattel’s stock has fallen by nearly a third so far this year.

  • Hot: Monster Beverage

    Cans of Monster Beverage Corp. energy drink are displayed for sale at a convenience store in Redondo Beach, California, U.S.
    Bloomberg—Getty Images

    Shares of Monster Beverage MONSTER BEVERAGE CORP. MNST 13.13% jumped 30% in August on news that Coca-Cola planned to buy a 17% stake of the company. The Wall Street Journal suggested Coke might have bought the concern outright if Monster — whose drinks carry names like “Assault” and “Khaos” — didn’t contrast so starkly with Coke’s more classic image. Investors don’t seem to mind. Overall shares are up about 70% in 2014.

  • Cold: Amazon

    Amazon CEO Jeff Bezos holds up the new Amazon Fire Phone at a launch event, Wednesday, June 18, 2014, in Seattle.
    Ted S. Warren—AP

    For years Internet behemoth Amazon AMAZON.COM INC. AMZN -1.21% seemingly defied stock market gravity. While shareholders usually punish a stock when company managers prove unable — or unwilling — to produce profit, that rule never seemed to apply to Amazon. CEO Jeff Bezos always managed to persuade investors to funnel would-be earnings back into growth. Indeed, sales have exploded, growing more than tenfold in 10 years, from less than $7 billion in 2004 to more than $80 billion today. But after a $400 million loss in the first half of 2014 and a big miss with the much-hyped Amazon Fire phone, investor patience may finally be running out. So far this year shares are down 23%.

  • Hot: Under Armour

    A detailed view of the Under Armour basketball shoes worn by Golden State Warriors guard Stephen Curry #30 against the Utah Jazz at ORACLE Arena on November 21, 2014 in Oakland, California.
    Thearon W. Henderson—Getty Images

    Under Armour UNDER ARMOUR INC UA -0.01% took the sportswear world by storm in 2014. The stock is up over 60% since January 1, 2014, a performance worthy of a company that took home both Yahoo Finance’s Company of the Year award and the title of Ad Age’s Marketer of the Year. Revenue is on track to increase by 30%; its women’s brand has emerged as a success; and it’s set to add tennis star Andy Murray to its growing list of athlete endorsers.

  • Cold: General Motors

    2015 Cadillac Escalade
    General Motors

    Falling oil prices have re-ignited Americans’ appetite for cars, particularly the super-sized ones GM GENERAL MOTORS COMPANY GM -0.64% is known for, like the Cadillac Escalade, which saw sales jump 75% in November. Unfortunately, booming sales in North America haven’t quite made up for weakness in foreign markets like South America and Europe, where GM lost nearly $400 million last quarter. Factor in months of controversy following the company’s February recall of faulty ignition switches — now linked to more than dozen deaths — and the year has been a grim one for GM investors. Shares are off 21%.

  • Hot: Apple

    Apple CEO Tim Cook wears the Apple Watch and shows the iPhone 6 Plus during an Apple event at the Flint Center in Cupertino, California, September 9, 2014.
    Stephen Lam—Reuters

    Apple APPLE INC. AAPL -1.51% started the year as the most valuable company in the world, with a market value of just over $500 billion. Since then a well-received new iteration of the iPhone has helped put to rest doubts about whether CEO Tim Cook can fill the shoes of the late Steve Jobs. So far this year, Apple is up 42% and is now worth a whopping $712 billion. Not that it can rest on its laurels: Investors and Apple fans are anxiously awaiting the company’s attempt to re-invent yet another everyday item — the wristwatch. How that fares could help determine whether Apple becomes the first $1 trillion company.

  • Cold: Whole Foods Market

    Customers shop in the produce section of a Whole Foods Market Inc. store in Dublin, Ohio, U.S., on Friday, Nov. 7, 2014.
    Ty Wright—Bloomberg via Getty Images

    Kale isn’t just for hipsters any more. Sales of organic and natural foods are booming, and no company deserves more credit than Whole Foods WHOLE FOODS MARKET INC. WFM -0.42% . But with these once niche products going mainstream — even Walmart carries a line of organic food now — the Austin, Texas-based supermarket chain risks becoming a victim of its own success. Walmart’s sales pitch: It claims to undercut the competition on price by 25% or more. “For a long time Whole Foods had the field to ourselves,” founder and co-chief executive John Mackey told investors in May, according to The Wall Street Journal. “That was nice, but we don’t anymore.” Shares are down 18%.

  • Hot: Facebook

    silhouettes of people using mobiles in front of FAcebook logo
    Dado Ruvic—Reuters

    Honestly, how could Facebook FACEBOOK INC. FB -1.79% continue to grow so fast, when everyone you know is already on it? Amazingly that’s just what it managed to do in 2014: The company logged third-quarter revenue of more than $3.2 billion, a 50% jump over the year-ago figure. The secret? Facebook appears to have cracked the code in terms of helping advertisers reach consumers on their smartphones — mobile adds represent about two-thirds of advertising sales. That’s a big deal when fewer and fewer of us are relying just on our desktops. Overall shares are up 40% this year.


MONEY best of 2014

6 New Ideas That Could Help You Retire Better

Lightbulb in a nest
MONEY (photo illustration)—Getty Images (2)

A great new retirement account, the case for an overlooked workplace savings plan, a push to make your town more retiree-friendly, and more good news from 2014.

Every year, there are innovators who come up with fresh solutions to nagging problems. Companies roll out new products or services, or improve on old ones. Researchers propose better theories to explain the world. Or stuff that’s been flying under the radar finally captivates a wide audience. For MONEY’s annual Best New Ideas list, our writers searched the world of money for the most compelling products, strategies, and insights of 2014. To make the list, these ideas—which cover the world of investing, technology, health care, real estate, college, and more—have to be more than novel. They have to help you save money, make money, or improve the way you spend it, like these six retirement innovations.

Best Kick-Start for Newbies: The MyRA

Half of all workers—and three-quarters of part-timers—don’t have access to an employer-sponsored retirement plan like a 401(k). The new MyRA, highlighted in President Obama’s State of the Union address in January, will fill in the gap, helping millions start socking away money for retirement. Even if you are already well on your way to establishing your retirement nest egg, you could learn something from this beginner’s savings account.

The idea: The MyRA, rolling out in late 2014, is targeted at workers without employer plans. Like a Roth IRA, the contributions aren’t tax-deductible, but the money grows tax-free. Savers fund a MyRA via payroll deductions, with no minimum investment and no fees.

What’s to like about this baby ira: The MyRA’s investments, modeled after the federal government’s 401(k)-like Thrift Savings Plan, emphasize safety, simplicity, and low costs. Those are principles more corporate plans—and individual savers—should embrace.

Best Workplace Plan That’s Finally Come of Age: The Roth 401(k)

With a 401(k), you sock away pretax money for retirement and then pay taxes when you withdraw the funds. With a Roth 401(k), you do the opposite: take a tax hit upfront but never owe the IRS a penny again. Few workers take advantage of this option. Now that could be changing.

This year Aon Hewitt reported that for the first time, 50% of large firms offer a Roth 401(k), up from 11% that did so in 2007. Adoption levels—still only 11%—tend to pick up once plans have a Roth on the menu for several years and new hires start signing up, Aon Hewitt reports.

A recent T. Rowe Price study found that even though young workers who expect to pay higher taxes in the future reap the greatest benefit, savers of almost every age collect more income in retirement with a Roth 401(k). A 45-year-old whose taxes remain the same at age 65 would see a 13% income boost, for example. And, notes ­Stuart Ritter, senior financial planner at T. Rowe Price, “the ­money in a Roth is all yours.”

Best New Defense Against Running Out of Money

When the only retirement plan you have at work is a 401(k), you may yearn for the security you would have gotten from monthly pension checks. Pensions aren’t coming back, but the government is letting 401(k) plans be more pension-like. A rule tweak by the Department of Labor and the IRS should make it easier for employers to incorporate deferred annuities into a 401(k)’s target-date fund, the default retirement option for many. Instead of a portfolio of just stocks and bonds that grows more conservative, target-date savers would have a portion of their funds socked into a deferred annuity, which they could cash out or convert to a monthly check in retirement. Done right, the system could re-create a long-missed pension perk, says Steve Shepherd, a partner at the consulting firm Hewitt EnnisKnupp. “They are making it easier and more cost-effective to lock in lifetime income.”

Best Supreme Court Ruling

In June the Supreme Court issued a ruling that makes it easier for Fifth Third employees to sue the bank over losses they suffered from holding company stock in their 401(k)s. The share price fell nearly 70% during the financial crisis. By discouraging companies from offering stock in plans in the first place, the unanimous decision could help 401(k) savers everywhere.

For years—and especially since the 2001 Enron meltdown—experts have advised against holding much, if any, company stock in your retirement plan. Still, not everyone has gotten the memo. About 6% of employees have more than 90% of their 401(k)s in company stock, the Employee Benefit Research Institute reports. About one in 10 employers still require 401(k) matching contributions to be in company shares, according to Aon Hewitt, a benefits consulting company.

With heightened legal liability, that could finally change. The upshot, according benefits lawyer Marcia Wagner, is that fewer employers will offer their own stock in their 401(k)s. “It’s risky for them now,” she says. That’s “a tectonic shift.”

Best New Book on Retirement

You may think you’ve heard a lot the looming retirement crisis. Well, it’s worse than you think. That’s the message of a new book, Falling Short, written by retirement experts Charles Ellis, Alicia Munnell, and Andrew Eschtruth.

One of their main targets is the 401(k), whose success depends on an unlikely combo of investor savvy, disciplined saving and great market returns. As things stand now half of Americans may not be able to maintain their standard of living in retirement. Their prescription? Don’t wait for Washington to fix things. Save as much as you can, work longer, and delay Social Security to increase your benefits.

Best New Idea About Where to Retire

Whether you can stay in your home after you retire is as much about where you live as it is about your house. Yes, there are inexpensive changes you can make to age-proof your home, but is your town a good place to age? AARP is helping people answer that question. Through its Network of Age-Friendly Communities, AARP is working with dozens of cities and towns to help them adopt features that will make their communities great places for older adults. Those include public transportation, senior services, walkable streets, housing, community activities, job opportunities for older workers, and health services.

Nearly half of the 41 places that have joined the network signed on in 2014, including biggies such as San Francisco, Boston, Atlanta, and Denver. Membership requires a commitment by the community’s mayor or chief executive, and communities are evaluated in a rigorous program that is affiliated with the World Health Organization’s Age Friendly Cities and Communities program and is guided by state AARP offices. This spring, AARP will launch an online index rating livability data about every community in the U.S.

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