Through the Fairfield Senior Center Lifelong Learning Program, Gerlach is teaching senior citizens once a week how to become fishermen of good investments to sustain them in their retirement.
Once a week for six weeks, Gerlach instructs seniors about investing. He isn't handing out quick tips on when to buy and sell, but gives the 40 seniors enrolled in the course a broader understanding of how Wall Street works and how economic forces tumbled the country into a recession. From there, he mentors them on how to assess smart investments.
"I teach people how to fish, not give them fish," Gerlach said. "Many seniors are freaked out about what has happened to their investments and don't understand how we got into this problem. I want them to know how to analyze stocks and mutual funds. They can learn that on their own and make intelligent investment decisions."
Gerlach realizes that many of his students have seen their 401Ks erode because of the Wall Street collapse and are unsure about maintaining their standard of living in retirement.
Al Vosburgh, coach of the Lifelong Learners Program, described Gerlach's course as a hit with the seniors. After all, everyone, regardless of age, is concerned about affording retirement.
"The response has been excellent, we had to cut it off at forty people," Vosburgh said. "It's very few people who don't pay attention to the stock market and why we face the humongous debt we have. It's a viable interest of how to invest during retirement."
Gerlach's investment course is one of 19 offered at the Fairfield Senior Center, covering a wide range of topics. The need for investment information for seniors is important, according to Gerlach. He will be offering that information to Westport seniors soons since the Town of Westport has also invited him to present a similar program, beginning in January.
Gerlach traces the collapse of the sub-prime mortgage rate and its toxic influence on the economy and the banking industry, in particular, and how it has dried up credit for consumers and businesses. He outlines how and why the federal government has tried to prop up the financial industry as well as the automobile makers to prevent a complete economic collapse.
With that background, Gerlach is moving into the workings of the stock market and how seniors can invest wisely to suit their financial needs. For seniors, he recommends choosing mutual funds as a solid investment choice, but the challenge is which one since there were more than 6,000 that underperformed the market last year?
"You need to know what's important to look at in choosing a mutual fund," Gerlach said. "There are still plenty out there that outperform the market."
* First, investors need to do some homework. Find funds that have had consistent management for at least the last five years. Fund managers with tenure tend to develop the expertise and feel that adds up to higher returns. This information is available for free on Morningstar.com, Gerlach said.
* Next, study the fund performance for a minimum of the last five years. A low risk fund is probably earning from 6-8 percent. You're looking for at least that kind of performance during that span.
* Finally, understand the risk factors advertised with a fund. Seniors should be looking for average to less risk. Combine that with the other two indicators and you have a good chance of picking a winner.
Gerlach points out that load or back-end fees are relatively irrelevant in analyzing a fund. If you're getting above market returns, it's worth paying the fees, according to Gerlach.
Selecting individual stocks is a bit trickier, but certainly another viable tack to take for seniors who like the thrill of picking their own winners. Gerlach recommends evaluating individual stock performance online at Yahoo.
He emphasizes having a plan before you start. Selecting an individual stock requires more thought than tossing darts at a board. The key is to find stocks that undervalued, according to Gerlach, He teaches seniors to determine the Price Earnings to Growth (PEG) ratio of an individual stock to determine if it's a risk worth taking.
Going to Yahoo.com Financial section, you can get all the relevant numbers you need. The PEG ratio formula is computed by finding the current stock price earnings; then dividing that by the estimated earnings per share for this fiscal year. Then divide that number by the estimated growth rate for next year (all numbers are available on Yahoo).
For example, if a stock share is $20 and the estimated earnings per share is $2, and then the earning ratio is 10 times. Then divide 10 by the estimated growth, let's say it's 12 percent. The PEG for this particular stock is .85 - anything under 1 is considered undervalued and makes for a good risk.
Gerlach adds that most good financial advisors know the PEG ratio, but aren't likely to share it with investors. As homework for his course, Gerlach has seniors pick mutual funds and individual stocks to invest in hypothetically, then track their progress.
If they follow his recommendations, he's betting that seniors will begin to understand how to invest intelligently to secure their retirement years. In his opinion, he's teaching seniors how to fish for good investments, not spoon feeding them the information.
"I got the idea to do this last year when the fiscal crisis hit," Gerlach said. "Seniors need this information. Many have seen their investments erode and don't know what to do about it. They can continue to invest and earn money in retirement."