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This next story is for those who are seeing in the stock market turmoil a threat to their own retirement. We're going to get some investment tips from David Swenson. He's famous for how he's managed Yale University's money. Last year, Swenson made Yale a 28 percent return, adding a whopping $5 billion to the university's endowment. And that wasn't a fluke. Over the past two decades, Swensen's record is better than any university foundation or pension fund. NPR's Chris Arnold has more.

CHRIS ARNOLD: If you want to make the most money you can for retirement, David Swensen is your friend. He recently took the time to research and write a book to give advice to everyday people. First, he says, in scary economic times like this, you shouldn't trust your instincts.

Dr. DAVID SWENSEN (Manager, Yale University Endowment): The human tendency in this kind of environment is to do something to make a change.

ARNOLD: Stocks seem risky. They've been falling. So Swensen says that most people he talks to get nervous and want to sell stocks.

Dr. SWENSEN: And that's exactly the wrong reaction - buying high and selling low. It's not a way to make money. It's not hard, right?

(Soundbite of laughter)

Dr. SWENSEN: Very simple. You want to do the opposite.

ARNOLD: Swensen says you should have the right long-term mix of stock index funds, bonds, real estate investment trusts adjusted according to your age. We've got his advice on that at npr.org.

But, say, when stocks tank, that mix gets out of balance. You used to have, say, 30 percent of your holdings in U.S. stocks. Now it's 29 or 28 percent. So you rebalance by shifting more holdings into stock index funds.

Dr. SWENSEN: Volatility has been so extreme that there have been a couple of instances where we've traded pretty significant volumes, tens of millions of dollars.

ARNOLD: That's in a single day. If stocks fall, Yale's endowment is buying them. On some days, the markets turned around and come roaring back up to where it started. And then Swensen's sold stocks.

Dr. SWENSEN: …and made in excess of a million dollars. So you end up at the same place that you started, except a million dollars ahead. That's not bad. But from rebalancing, not from speculating, simply sticking with your long term targets.

ARNOLD: That's the takeaway. The stock market can end up flat, but you've still made money because you rebalanced when it was down. Sure, sometimes the market keeps going down, but over time, five years, 10, 20 years, you figure the market will eventually keep rising. And Swensen says you will goose out substantial extra returns by rebalancing along the way.

Dr. SWENSEN: Free bonus.

ARNOLD: Now, back to that mix of what you should own. Here, Swensen says that people are constantly bombarded with the wrong messages.

(Soundbite of TV commercial for Ameriprise Financial)

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ARNOLD: We called up Jim Barnash with Ameriprise Financial. He's the national director of financial planning. He says especially in volatile markets like this, people need quality one-on-one advice to make sure they're properly diversified. We asked him what the fees are at Ameriprise for that advice.

Mr. JIM BARNASH (National Director of Financial Planning): They're in a range from 40 basis points on up to in excess of one and a quarter percent.

ARNOLD: Okay. And I'm just busting out my calculator here. Let's say somebody's, I don't know in their late 40s, early 50s, they've made some money, they got half a million dollars in their retirement 401K - one and a quarter percent. So that, right there, that's going to cost them $6,250 a year for the Ameriprise fees. And then on top of that, they'll be paying fees for the different mutual funds that their in?

Mr. BARNASH: It's very possible, if you're using mutual funds.

ARNOLD: Over 20 years, that person is losing hundreds of thousands of dollars because of fees. Of course, that's better than not investing at all, and a lot of people want an advisor to help them. But Swensen says that most of these investment services provide pretty mediocre advice, and it's just not worth giving them a percentage of your life savings.

Dr. SWENSEN: That's the wrong path. And the reason it's the wrong path is it's a very, very expensive path.

ARNOLD: Swensen says fees are also the big reason you should buy index funds instead of classic mutual funds. The index funds which track market segments like the S&P 500 are a lot cheaper. Swensen says the vast majority of professional, mutual fund managers fail to beat those indexes.

Dr. SWENSEN: I mean, when you look at the results on an after fee, after tax basis over reasonably long periods of time, there's almost no chance that you end up beating an index fund.

ARNOLD: The odds, he says, are 100 to one. Swensen's last bit of advice, don't try to pick individual stocks and go with non-profit funds like Vanguard. There, too, the lower fees will mean more money in your pocket over time.

Chris Arnold, NPR News.

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