How To Invest Like A Professional

If you have some money to invest, it means you understand the first step to creating wealth. However, if you are like most people, you got the last two steps wrong, which means you do not have as much money–as of today–as you could have.

Step 1: Save at least ten percent of all you earn. Unnecessarily spending your hard-earned money always results in pain. Saving your money always results in pleasure.

Step 2: Plan your estate as if you will die tomorrow. Ask an attorney if you need a will, and ask him or her if you need a trust. Always ask an attorney to help you with your estate planning.

Step 3: Plan your investments as if you will live forever. You will have more money if you pick a diversified, core, mix of investments that can match the market’s performance than if you pick a mix of managed funds, and/or asset-allocation, target-date, lifecycle, lifestyle, and balanced funds that  underperform the market. Most investors who fail to beat the market don’t even know that they have created a major problem for themselves by trying to beat no load, low cost, index funds in performance.

Summary: To have more money, more time, and less stress you will need to go three for three: (1) Save at least ten percent of all you earn. (2) Plan your estate as if you will die tomorrow. (3) Plan your investments as if you will live forever.

You are guaranteed to go three for three if you read my blog posts and do the required work. It’s free information.

Best wishes,

Your teacher, Frank Cirullo

For a moment, pretend that you and an old friend and associate are discussing retirement and retirement plans. 

You say: “I think the real question is not where we will find time to improve our plan, rather, it’s how much is it going to cost us and the participants (employees) if we don’t cut our plan’s cost, today, right now.” 

Your associate says: ”I know. I read that it’s more likely than not that our retirement plan is probably more expensive than it should be.  And whose money is being wasted?  Mostly, it’s the participants’ (employees’) money, but our money is being wasted, too. I, too, agree that we should improve our plan, so let’s cut its unnecessary costs, today.”

Okay, you can stop laughing.  Let’s get back to the real world. 

I would like to communicate something important to you. Do I have your permission?

If not, please stop reading now.

Well, the truth is this. The conversation you just read probably never takes place at any for profit business or not-for-profit organization. Why? It is because most employers don’t think it is urgent to cut their retirement plan’s cost.  Instead, most employers give themselves reasons to delay improving their plan. 

By the way, if you are an employee, your employer has time to do whatever he or she wants to do, so even though it is true that he or she is busy, don’t worry about him or her not having time to improve your 401(k) or 403(b) plan.  In fact, it is his or her fiduciary duty to cut your plan’s cost now, not next week, next month, or next year when he she may have more time. 

A fiduciary (employer) must always act in the particpants’ best interests.  And procrastinating on cutting unnecessary costs, for even one week, is guaranteed to cost participants more money than you and your employer can imagine–long term!

What employers don’t have time for is the consequences of not doing anything to cut unnecessary costs.  An employer is expected to know better than to have a plan that is loaded with fat (high costs) and ignorance is probably not a defense that he or she can win with in a court of law.

You can do yourself and your employer a favor by asking your employer to visit http://fcmstudents.com/wordpress/ (that’s the Web site you are on now) so that he or she can learn how to improve your 401(k) or 403(b) plan, free. 

I always welcome your comments, because I hope they will help others do the right thing with their 401(k) or 403(b) plan.

Best wishes,

Your teacher, Frank Cirullo

My goal is to teach my students how to choose a diversified, core, mix of no load, low cost index funds for their IRA account, 401(k) plan, or 403(b) plan. 

However, I want you to only invest a few minutes of your time, each day.  Why?  This process is new for you; therefore, it makes sense to slow down, take your time, and not be in a hurry.

By investing a few minutes of your time and choosing just one of the eight funds, per day, you will have a core mix of index funds–soon.  Easy!

During the first four days, you learned how to choose a mix of equity mutual funds for growth so that you can protect yourself from inflation.  Now you are learning how to choose fixed income mutual funds for income and balance.

IMPORTANT NOTE: You need to know something important about fixed income mutual funds that many people don’t realize when they invest in them: I want you to imagine that you are at a city park and you are watching kids play on a teeter-totter.  However, on this day, I want you to get a picture of a cartoon in your mind.  Imagine that interest rates are represented by a “%” sign.  And imagine that bond prices are represented by a “$” sign.  Got it?  Okay, interest rates are on one side of the teeter-totter, and  bond prices are on the opposite side.  If interest rates fall, bond prices rise.  But if interest rates rise, bond prices fall.  See? 

Why is this information important?  Well, if you need your money to live on and you can’t risk losing any of your principal, please do not invest in equity funds and fixed income funds.  Instead, invest in T-Bills and short-term T-Notes.  Why?  T-Bills and T-Notes are the safest investments you can make.  The next safest investment is a FDIC insured Certificate of Deposit. Yes, I know that these financial instruments don’t pay very much in interest, but if you need your money and can’t lose any of your principal, then your goal is safety of principal–not growth.  I hope you understand this important rule, because it will prevent you from foolishly reaching for higher yields and losing some or all of your hard-earned money.

Tomorrow, you will choose the final fund that you need for a core mix of index funds for your IRA account, 401(k) plan, or 403(b) plan.

Best wishes,

Your 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

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

In a moment, I will tell you a true story.  It’s about a group of lovely grandmas who are infamous for making a classic investment mistake and lying to the public about their investment track record.

An expert’s image is created by packaging, and it counts for everything at seminars and workshops and on radio and television.  Yes, show business trumps the facts, and the track record that many experts present to the public is not always what it seems.

You have heard it a thousand times: Things are not always what they seem.  You will have a better chance of not shooting yourself in the foot if you stop wanting something badly enough (fear and greed) to rush into giving yourself reasons to make a bad decision.  At the moment you make a decision, you will not know that you may have made a bad decision–that is why it is called a mistake.

The Beardstown Ladies investment club was packaged and they were naturals on stage.  These Grandmas were so charming that no one questioned the lies they told us about how they crushed the experts on Wall Street with their stock picking skills.

Now, lying on TV and radio is not anything new.  Many experts leave out material facts about their track record for the purpose of making themselves look like something they are not.  But the bottom line is this.  If you leave out material facts about your track record, you are deceiving the public.

Prior to this, did you know that leaving out material facts is a form of lying?  It is lying, and that is why you need to ask the right questions before you invest your hard-earned money.  The first question you should always ask an expert is this.  Do you have at least a ten-year track record of beating the market?  If so, show it to me, but do not try to fool me by cherry picking investments that you did not own back then. And don’t try to fool me by cherry picking time frames, either.

My point is this.  The media and the public fell in love with the Beardstown Ladies, but it was the kind of hoax that not even these grandmas knew was a lie.  They were happy with the growth of their investments, because they did not realize that most of the growth in their portfolio came from their own money that they invested each month, not from capital gains.  And even their investment adviser, who became famous along with them, did not know how awful their real Return on Investment (ROI) was.  The bottom line is this.  The adviser did not know that he and the lovely grandmas were lying to the public about their track record.

Do not make the same mistake that these grandmas and their investment adviser made regarding their ROI, because if you make it with your own investments it may cost you a fortune–long term. How? You will be satisfied with your awful investments that underperform the market, and it will never occur to you to switch to investments that are designed to match the market.

Here is what I am talking about.

The Beardstown Ladies had to apologize for lying to the public after a reporter named Shane Tritschm looked at the facts. The facts showed that the growth in their portfolio came from their own money, which was the deposits that they made into their investment account, each month, and not from the huge capital gains they claimed they earned on their stocks.

The ladies and their investment adviser claimed that their highest annual return was 23.4 percent, which was amazing for that time-frame, but facts are stubborn things.  A Price Waterhouse audit uncovered a yearly return of 9.1 percent.  In other words, their stock picks underperformed the market for that same time-frame. 

These lovely grandmas could have invested in no load, low cost, index funds and not paid their trusted investment adviser a bunch of money in commissions.  Had they done that they would have matched the market less the cost of their funds, and they would have enjoyed the following benefits:

1.     They would have had more money, because they would have at least matched the market’s performance–long term. Instead, they underperformed the market.

2.     They would have had more time, because it requires less time to research index funds than it takes to research stocks and managed mutual funds.

3.     They would have had less stress, because it is comforting to know that your investments will match the market’s performance less your cost and that your ROI will be good enough to beat the pants off most experts.

If you want more money; more time; and less stress, you can do it the easy way: invest in a mix of investments that will match the market’s performance.  And, too, the easy way is to read my blog—every day.  How you invest your time, every day, really does matter most.  That way it does not require more than a few minutes of your time to invest, because you can pick up the telephone and tell the brokerage firm’s representative what you want him or her to do for you. Easy!  Never ask an investment adviser what you should do about your investments because he or she has inherent conflicts of interest.  Instead, give him or her instructions on what you want to invest in.  See? 

Summary: Your IRA account, 401(k) plan, or 403(b) plan may be growing because of your own money that you contribute each month, and not because of capital gains from your investments. A time-weighted return will show you the truth about your investment picks because it accounts for deposits, withdrawals, and gains or losses during a certain time frame. Or you can you can just match the market’s performance.  That way you will not have to worry about if you are doing the right thing for yourself and your loved ones.

The bottom line is this.  The worst thing you can do is to be happy and/or satisfied with your investments that underperform index funds; especially, if you do not see what is happening with your hard-earned money until you retire.

Best wishes,

Your teacher, Frank Cirullo

Did your employer deal you a bad hand?  Is that how you feel about your 401(k) or 403(b) plan’s menu of investments? 

Well, the good news is you can deal yourself a winning hand–today.

How?

It’s your money, so ask your employer to get you a diversified mix of investments that will match the market’s performance.  Easy!  No load, low cost, index funds are designed to match the market’s performance less their cost. And the following asset-classes will give you proper diversification.  For instance, you can invest in seven to eight mutual funds as follows: Large-cap blend, mid-cap blend, small-cap blend, foreign large-cap, money market mutual fund, short-term bond fund, intermediate bond fund, and a long-term bond fund.

How much longer will you hold that losing hand of managed funds that has underperformed index funds?  Are you ready to deal yourself a winning hand that will beat the picks of most experts–long term? 

Know when to fold them…fold your losing hand, today, and deal yourself a winning hand of seven to eight index funds as described above?  Easy!

Best wishes,

Your teacher, Frank Cirullo

Many experts still don’t get it–they are still trying to beat the market (index funds) by creating a myriad of packaged products and/or software that they can sell to you.  The only problem is this. Not one expert has ever picked a mix of funds that beat a diversified, core, mix of no load, low cost index funds in performance.

My point is this.  If you already own a mix of no load, low cost index funds, it would be a mistake to let someone talk you into selling  them and buying a mix of funds that the expert hopes will beat the market (index funds).  Never allow anyone to experiment with your hard-earned money.  See?

Best wishes,

Your teacher, Frank Cirullo

Three things that every investor wants:

1. More money: You have a clear choice.  Will you choose to match the market’s performance with index funds or try to beat it?  Anyone who can read and do simple math can invest in a diversified, core, mix of no load, low cost, index funds and match the market’s performance–less the cost of your funds.  If you try to pick funds that will beat the market, you are experimenting with your hard earned money, because you have never picked funds that beat index funds (the market)–long term.  Nor has your investment adviser ever picked funds that beat index funds, long term.  If you don’t have a long term track record of 10 years or more, what are the odds of you beating index funds–long term? Be honest.  Always tell the truth to yourself.  That way you will make fewer mistakes.
2. More Time: Picking a mix of index funds is fast. Picking a mix of managed funds requires more research than picking index funds.  Monitoring index funds is fast because you are only concerned about cutting your cost, and you should do that whenever you have an opportunity to invest in the same index funds for less.  Monitoring managed funds and/or asset-allocation, target-date, lifecycle, lifestyle, and balanced funds requires more time than monitoring index funds because each fund has many moving parts.
3. Less Stress: If you invest in index funds, you know what your results will be: you will match the market’s performance, less the cost of your funds, whether the market goes up, down, or sideways. And you will beat the pants off most experts–that kind of knowledge is comforting.  If you invest in managed funds, and/or asset-allocation, target-date, lifecycle, lifestyle, and balanced funds it will be an emotional roller-coaster ride like you have never been on before.  You can count on the market will go up, down, or sideways, and you will be excited if your investments happen to beat index funds (the market).  However, you will feel stress in the years that your picks  underperform index funds, and you may even wish you had followed this rule: Keep it simple stupid.

Best wishes,

Your teacher, Frank Cirullo

Have you ever given someone advice and/or feedback?  Did you see the expression on his or her face?  He or she looked uncomfortable, right?  Well, it happens that way whether you see it or not. I know you want to help people; especially, your employees and loved ones.  The good news is this. There is a way to give people information without them being uncomfortable.

In a moment, I will show you how to give people information so that they are grateful, not resentful.

Have you noticed how the information I give you, here, is simple to understand, and how easy it is to implement? In fact, anyone who can read and do simple math can implement my process and be a successful investor. And it’s free information.

I help people who are on the wrong road and don’t know it, yet.  And, you, too, can help people who are on the wrong road and don’t know it, yet. The wrong road has high costs and investments that underperform the market. But you can point them to the right road. The right road has low costs and investments that match the market’s performance.

How can you show people the right road without them being uncomfortable with the information?  Say this to them. I want to communicate something to you.  Do I have your permission?  If they say yes, you can show them my blog and/or send them an e-mail with this address: http://fcmstudents.com/wordpress/ That’s it, and it only requires a few seconds to help someone. The less we say to people about investments and investing the more they appreciate our information.  See?

It will make you feel good to know you helped someone by simply pointing out the road that they need to be on.  That way, like you, they will finally be on the right road that can give them what they want most, which is more money, more time, and less stress.

Best wishes,

Your teacher, Frank Cirullo