How To Invest Like A Professional

So far you have learned how to compare expense ratios, choose a large-cap fund, mid-cap fund, small-cap fund, and a foreign fund.

Today, your assignment is choose two more funds.  Please use the same process that I taught you and choose a money market mutual fund and a short-term Treasury index fund. Easy!

Isn’t life great when people treat you right?  Really, don’t you love going back for more information that you can profit from?

Remember, if you do the work, you will have your own diversified portfolio in eight days–total.  And it only requires a few minutes of your time, each day. 

Just think about it.  If you have been using my proven process to pick out a mix of index funds, after today, you will have already picked out six funds.  Then, in only two more days you will have your own portfolio that is guaranteed to match the market’s performance less the cost of your funds. 

By matching the market’s performance, your mutual fund picks will beat the pants off the mutual fund picks of most experts–long term.  See?

Best wishes,

You teacher, Frank Cirullo

Before he retired, my cousin, Sam, owned a gas station for many years. 

One day I was putting gas in my car.  He told me about a customer who wanted some work done on her car.  She asked Sam, “Will you take it out in trade?”  He said, “Only if you can show me a way to put it in my cash register.” 

On that day, I learned that cash is king. 

Are you trading your hard-earned money for services that don’t put more money in your pocket?

For instance, if you pay an investment adviser commissions or a fee for his or her advice, shouldn’t the investments that he or she recommends at least match the market’s performance?  If they don’t, you will have a large opportunity cost–long term.  First of all, I bet that your investment adviser does not have at least a ten-year track record of picking mutual funds that beat a core mix of no load, low cost, index funds in performance.  Ask for his or her track record, which should be at least ten years, and you will see the truth.

My point is this.  Index funds are designed to match the market’s performance less their cost.  Instead of wasting your time in meetings with foolish people, it’s faster, smarter, and easier to invest in a diversified, core, mix of no load, index funds.  See?

Beat wishes,

Your teacher, Frank Cirullo

Often, the employer is the only person at a company who believes that the company’s 401(k) or 403(b) plan is a good one.  That’s because he or she set it up and never took the time to learn what an optimal plan looks like. 

The word “optimal” means that a plan has low cost services (no hidden and camouflaged costs) and its core mix of investments match the market’s performance day-after-day; quarter-after-quarter; year-after-year. 

Easy!

The good news is this: Every employer can set up a plan that is optimal, and it will require not more than one hour of his or her time to set it up.  That’s what I teach employers to do, free.  However, most employers cannot fathom that their plan can be improved that easily, so they do the same old, same old and never even try something that is this simple and easy to do.

An optimized plan saves you money because its truly low cost. And it even frees up more of your time because it requires less time to manage and monitor. 

If the cost you pay for services is too high and if investig in no load, low cost, index funds is not an option, then you can ask your employer to improve your plan by cutting its cost and adding a core mix of index funds.  If your employer refuses to improve your plan (he or she may be stuck on stupid), then you may want to take the following action:

1. Contribute just enough money to get the company’s matching contribution.
2. Use a self-directed account (if your plan has that option) so that you can invest in no load, low cost, index funds.
3. Set up a low cost IRA account and contribute up to the maximum allowed by law.

Best wishes,

Your teacher, Frank Cirullo

The bottom line is this: How much money do you have in your 401(k) plan, 403(b) plan, or IRA account after you pay for everything, which includes any hidden and camouflaged costs that you are paying but don’t see, yet? 

This is important: Always compare your results to an appropriate benchmark. That way you will know, for certain, if you are doing more harm than good to yourself and your loved ones.  

For instance, let’s say that your net return was 4.00% per year because you paid 3.10% in expenses. 

In other words, we are using an illustration whereby your mix of investments earned 7.10%, per year, but after expenses your net was 4.00%. 

Got it?

Okay.  Now, let’s say you are using an appropriate benchmark, and after expenses it had a net return of 7.00%, per year, because it did the right thing and paid only 0.10% in total expenses.

Now let’s compare the two returns after compounding each ROI.

Both portfolios invested in the same mix of investments, so both earned 7.10%, per year.

1. At 4.00%, per year (after expenses), your money will double every 18 years.
2. At 7.00%, per year (after expenses, your money will double every 10.29 years.

Which 401(k) plan, 403(b) plan, or IRA account would you rather have?  The plan that had lower costs and doubled your money every 10.29 years, or the plan that had higher costs and doubled your money every 18 years–don’t forget that both plans had same mix of mutual funds that earned 7.10%, per year.

Now, do you see why it is important cut your plan’s expenses today and not procrastinate?  If you cut your plan’s expenses today, you are guaranteed to have more money tomorrow. That is a fact!

Cutting a plan’s expenses gives the plan’s participants more money every time it is tried.

Best wishes,

Your teacher, Frank Cirullo

In my previous blog posts you learned how to compare expense ratios, how to choose a large-cap fund, mid-cap fund, and a small-cap fund.

Use the same process to choose a foreign index fund. Easy!

Isn’t life great when people treat you right?  Don’t you love going back for more information that you can profit from?

Remember, if you do the work, you will have your own diversified portfolio in eight days.  And it only requires a few minutes of your time, each day. 

Just think about it: If you have been using my proven process to pick out a mix of index funds, you have picked out four funds.  In four days you will have your own portfolio that is guaranteed to match the market’s performance less the cost of your funds.  By matching the market’s performance, your mutual fund picks will beat the pants off the mutual fund picks of most experts–long term.  See?

Best wishes,

You teacher, Frank Cirullo

Guess how many employees have a 401(k) type plan? 

If you guessed that plans have an estimated 65 million participants, you would be right.  Just think about it.  That’s 65 million people who are being charged more than a plan should cost, these days.

Yes, the cost of most plans is high, but the good news is this.  The U.S. Department of Labor has proposed some new rules to improve disclosure of fees and expenses.  It’s not final, yet…so don’t get too excited. 

You should check it out at the U.S. Department of Labor’s Web site: http://www.dol.gov/ebsa/newsroom/08-991-NAT.html

Best wishes,

Your teacher, Frank Cirullo

In 2007, I wrote to Congress to ask them not to pass a law that they were working on that would have required a participant in a 401(k) or 403(b) plan to hire an expert to advise him or her.

Just think about it.  It makes no sense to hire a fox (vendor) to guard the henhouse (401k or 403b plan), right? 

And it would be a mistake to allow your plan’s co-fiduciary to sell investments and other services such as recordkeeping and administration to your plan.  Why?  He or she has inherent conflicts of interest!

Would you advise a farmer (employer) to hire a fox (vendor) to keep your chickens (employees) safe?  No! 

Vendors have inherent conflicts of interest and they will always act in their own best interests, not the participants’.  For instance, do you believe that your plan’s vendor will fire his or her company for not making your plan truly low cost?  You don’t really believe that your plan’s vendors will refer you to a competitor who provides a better service for a lower cost, do you? If you do, it would be a mistake.

My point is this.  You may need to hire one or more vendors to assist you with your 401k or 403b plan, but you’ll need to give your plan’s vendors instructions on what you want them to do for your plan so that it will be truly low cost. Truly low cost means that your plan has recordkeeping and administration that costs not more than the current benchmark, which is $25.00, per eligible employee, per year with no hidden or camouflaged costs. And it also means that your plan has a diversified, core, mix of low cost investments that match the market’s performance less the cost of the funds.  Index funds are designed to match the market’s performance less their cost.

By the way, for employee who still think they can beat index funds in performance, you can set up low cost self-directed accounts for them.  You can’t stop people from shooting themselves in the foot by experimenting (trying to beat index funds in performance), but you will still owe them the right kind of education–not the kind of education that encourages them to be foolish with their retirement money. 

Note: Most vendors can give you accurate information on the laws, rules, and regulations that you, the plan sponsor (employer) are responsible for knowing, but it would be a mistake to trust vendors to set up a truly low cost plan for your company.

Best wishes,

Your teacher, Frank Cirullo

If you believe that investing in a diversified, core, mix of no load, low cost index funds is the way to go, I can explain why it would be a mistake not to tell your loved ones, friends, and associates about my free lessons on investing in index funds and how to set up a truly low cost, IRA account, 401(k) plan, or 403(b) plan.

Here is why it makes sense and why it’s profitable for you to ask everyone you know to visit my blog at

http://fcmstudents.com/wordpress/

First, please don’t make the classic mistake of trying to teach people this stuff yourself, because they may think that you are an arrogant know-it-all.  And they may even think that you are just another foolish person who likes to give people unsolicited ”hot tips.”  Neither of us wants that for you, do we?  Truly, we want to help people with their IRA account investments and 401k and 403b plans, not alienate them, right? 

Okay, are you ready to learn how you will profit by asking people to visit my blog?

Well, it turns out that the price you pay for index funds, recordkeeping and administration, and other services is always based on supply and demand.

People (vendors /service providers) compete for your business and they use advancing technology to save time and slash the cost of doing business with you.

How does that help you?  Do you remember what I taught you about paying as little as possible for your index funds?  The less you pay, the more money your earn on your investments, right?

It’s competition for your business and advancing technology that lowers the cost of index funds.  See?

Low hanging fruit (foolish investors) are keeping plan costs higher than they should be.  Foolish people hire high cost service providers who sell expensive mutual funds and expensive retirement plans. Often, a trusted person will unwittingly refer you to a high cost service provider.

Nobody will cut his or her fee if they have plenty of business, right?  You wouldn’t volunteer for a pay cut, either, right?  And, as long as the mutual fund companies have plenty of business, not one mutual fund company will cut their cost on the mutual funds that they sell to the public.

Are your loved ones, friends, and associates low hanging fruit (foolish investors) and don’t know it, yet? Their problem is lack of knowledge about investments, investing, and 401(k) and 403(b) plans, because they may be focused on the hype, myths, and half-truths that is everywhere in the media. That kind of stuff only looks like it’s good advice, to amateurs.

Just think about it. Competition for your business and advancing technology are your friends, that is, if you don’t follow the large crowd of investors who are still trying to beat the market by investing in managed funds. If you are following this large herd of people who are trying to beat the market, you, too, will underperform index funds, and you, too, will be part of the problem with the high costs people pay for IRA accounts, 401k and 403b plans, mutual funds. consulting, investment advice, and recordkeeping and administration.

As more people learn about index funds and how they beat the pants off most expert picks, you will see the cost of index funds come down even more.  Remember, the price you pay is always determined by supply and demand.  Be a wise consumer…get the facts and stop listening to people’s opinions.

By the way, don’t fall into the trap of saying this: “If everybody invests in index funds, then index funds won’t be any good anymore.”  First of all, everybody won’t invest in index funds because most people will always be jerked around by their own fear and greed because most people like excitement. 

You should not be afraid to invest in index funds, because, long term, your diversified, core, mix of no load, low cost, index funds will beat the picks of most experts. 

So don’t let financial planners and other experts talk you into selling your elegant mix of index funds and buying managed funds, and/or asset-allocation, target-date, lifecycle, lifestyle, and balanced funds that don’t even have a long term track record of beating no load, low cost, index funds. Experts have inherent conflicts of interest, which means that they will always act in their own best interests–not yours.  See? 

And don’t touch any of those expensive, enhanced, index funds that experts like to sell to the public; especially, if they don’t have at least a ten-year track record of beating the plain, no load, low cost, index funds that we are talking about, right here.

Best wishes,

Your teacher, Frank Cirullo

In my previous blog posts you learned how to compare expense ratios, how to choose a large-cap fund, and how to choose a mid-cap fund.

Use the same process to choose a small-cap blend index fund. Easy!

Isn’t life great when people treat you right?  Don’t you love going back for more information that you can profit from?

Remember, if you do the work and choose one mutual fund, per day, you will have your own diversified portfolio in eight days.  It only requires a few minutes of your time.  And eight days will pass whether you do the work or not.

Best wishes,

You teacher, Frank Cirullo

A diversified, core, mix of mutual funds has eight mutual funds in eight different asset-classes.  And each day I will show you a different fund that is in the mix.  Soon, you can have your own portfolio of index funds by investing a few minutes of your time, each day,  Easy!

In my previous blog post, I showed you how to select a large-cap blend index fund.  Use the same process to select a mid-cap blend index fund. You may want to begin your search at Vanguard and Fidelity. 

Remember, the idea is to pay as little as possible for an index fund; therefore, please read my previous blog post if you don’t remember the process.

Best wishes,

Your teacher, Frank Cirullo