How To Invest Like A Professional

On August 25, 2008, Josh wrote this: “My question centers around investing in whole life insurance as a retirement investment…”

My advice to Josh is to keep it simple and profitable. For instance: 

Regarding investments: For investment advice, do not trust people. Instead, trust results–only. A diversified, core, mix of no load, low cost, index funds is the way to go. Why? Long term, not one expert has ever picked a mix of managed funds and/or asset-allocation, target-date, lifecycle, lifestyle, or balanced funds that beat a diversified, core, mix of index funds in performance. Therefore, it makes no sense to  pay an expert for his or her advice on investing in managed funds. Never, ever, allow anyone to experiment with your hard-earned money. To learn about asset-allocation and re-balancing, please read one of my previous posts on that topic.

Regarding life insurance: You said this: “…Most of the financial advisors tell me to buy term life and invest the difference….” Apparently, they know your financial situation. Therefore, it makes sense to take their advice: Buy term life insurance and invest the difference in the lowest cost index funds you can get.

Best wishes,

Your teacher, Frank Cirullo

Here are five smart moves you should take today:

1. Keep it simple and profitable: Use no load, low cost, index funds for your plan’s core mix of investments.
2. Set up self-directed accounts for employees (participants) who think they can pick managed funds and/or asset-allocation, target-date, lifecycle, lifestyle, and balanced funds that will beat a core mix of index funds in performance. Warning to employees: If you have never picked managed funds that beat index funds in performance–long term–what makes you think you can do it going forward?
3. Consider the possibility that you are paying more than you should for services such as recordkeeping and administration, consulting, and investment advice. For instance, what does added value really mean? The bottom line is how much money YOU earn on your investments after you pay for everything. That is why it makes sense to compare your ROI (Return on Investment) to an appropriate benchmark.
4. If you pay for an asset-allocation and re-balancing program, stop it. Instead, use the classic asset-allocation and re-balancing model and set it up on auto-pilot. It is free and it works as well as the most sophisticated asset-allocation and re-balancing programs.
5. Stop wasting your money. Yes, you can save at least ten percent of all you earn. Savers have a mind-set that makes it hard to let go of their money; they study ways to cut their living expenses. Spenders have a mind-set that makes it hard to hold onto their money. Before you make a purchase, you should ask this question: Whose plan do I want to contribute my hard-earned money to? Can you feel the pain of throwing your money away? Can you feel the joy of looking at your statement and seeing more money in your 401(k) or 403(b) plan than you thought was possible for you to save?

Fall in love with cutting costs and improving investment performance, not with service providers who you may think are the best, brightest, and most popular.

Best wishes,

Your teacher, Frank Cirullo

Are you curious about why so many employers miss the mark and set up a high cost 401k or 403b plan?

Would you like to know the easiest and fastest way to set up a truly low cost 401k or 403b plan?

If you already have a plan, would you like to know the fastest way to slash its cost?

An important step that many employers ignore is this.  Before you contact vendors for information about what they sell, it makes sense to get focused on the target you want to hit.  It would be a mistake to become distracted by vendors who want to convince you to switch targets.

If you shift your sight to the target you want to hit, you cannot fail to hit the mark, and you will have a truly low cost plan.  Easy!

I know that not one employer would choose a high cost plan over a low cost plan on purpose.  However, if you have a high cost plan that you believe is low cost, the only way for you to see your mistake is to compare your 401k or 403b plan to a truly low cost plan. 

Best wishes,

Your teacher, Frank Cirullo

If you don’t have an effective system of checks and balances, you probably won’t cut the cost of your 401(k) or 403(b) plan anytime soon. Just think about it. How can you cut costs that you don’t even see, yet? 

If you will take one hour to educate employees on the following six issues, they will help you monitor the plan to ensure that it is low cost. Why would they do that? It is in their best interests to have a truly low cost plan. See?

A good plan has low cost services (no hidden or camouflaged costs) and a core mix of investments that match the market’s performance. You can do yourself and the employees a favor by educating employees on the following:

1. Why you want employees to bring you their ideas on improving the plan.
2. Why your plan uses no load, low cost, index funds for its core mix of investments.
3. Why your plan provides self-directed accounts for employees.
4. How the plan is set up and why it was set up that way.
5. How the plan is managed and why it is managed that way.
6. How the plan is monitored to ensure that it remains low cost month-after-month, quarter-after-quarter, and year-after-year.

Read my articles and blog posts so that you, too, can learn how to set up a truly low cost plan, free. 

Best wishes,

Your teacher, Frank Cirullo

I know that you may be satisfied with your 401(k) or 403(b) plan, but here is why you need to consider the possibility that it may cost more than you think. A good retirement plan has truly low cost services (no hidden or camouflaged costs), and it has a diversified, core, mix of no load, low cost index funds that match the market’s performance less the cost the funds.

Examples:

1. If you hired the wrong consultant for your plan (he or she has a track record of recommending high cost plans), you won’t even know you made a mistake until someone proves to you that your plan costs more than it should.  
2. If you hired the wrong investment adviser (he or she has a track record of recommending investments that do not at least match index funds in performance), you won’t even know that you made a mistake until someone proves to you that your plan’s investments are costing  participants (employees) money–unnecessarily. 
3. If you hired a record keeper and administrator who charges more than the benchmark of $25.00, per eligible employee, per year with no hidden and camouflaged costs, you won’t even know that you made a mistake until someone proves to you that your plan’s recordkeeping and administration is costing  participants (employees) more money than it should. 

Did you know that most employers won’t ask for help if they unwittingly believe that their 401k or 403b plan is already low cost?

Please, do not make the amateur mistake of not asking a knowledgeable person to prove to you how much your plan is really costing your company and its employees.  Any knowledgeable person can know at a glance if your plan costs more than it should, and he or she will be able to prove it to you.  Easy!

Or you can just read my articles and blog posts, and you will learn how to do the right thing–free.

Best wishes,

Your teacher, Frank Cirullo

If you have read just one of my articles or blog posts, you know that I show you proven ways to improve your 401(k) or 403(b) plan, fast.

The only problem is this. Most people never realize that their plan can easily be improved, so they do nothing, at all. 

Just think about it. No matter how good (low cost) you may think your plan is, it probably can be improved–fast. But, first, you must be trained so that you can see your plan’s problems. Easy! I train you, free. Next, you need to be aware of how advancing technology can cut your plan’s cost.  And you need to be aware of how the vendors compete with each other for your business–why they are so successful at selling their expensive services and/or investments to plan sponsors.  It is not asking too much of you to know this stuff, because it is your fiduciary duty to be informed. And it is also your fiduciary duty to always act in the best interests of the participants (employees), right?

To see your plan’s problems, it is best to assume that you may have made a few mistakes and you simply don’t have the right kind of training to catch them. That way your mind will be open to see what you may have done that was wrong.

Okay, so how does one know where to look for mistakes?  In other words, how do you know that your plan may be costing you more money than it should?  And how is it possible to fix problems that you don’t even see–yet? 

It’s like this. You can improve your plan the easy way. Or you can hope that, somehow, you will notice your own mistakes. I bet you will never catch any of your own mistakes, which means your plan will continue to cost more than it should!

The easy way to fix your plan is to read my articles and blog posts, because I only show you the proven ideas that work every time they are tried.  That’s how you can improve your plan fast! See?

Best wishes,

Frank Cirullo

Do you really treat others as you wish to be treated?  

For instance, does your 401(K) or 403(b plan serve YOU? Or does it cost more than it should?

Remember, procrastinating on cutting your plan’s cost won’t help anyone at your company,

You can do the right thing by taking five easy steps, today:

1. Switch out of a core mix of investments that does not at least match the market’s performance.
2. Hire a recordkeeper and administrator who will charge you not more than the benchmark for the cost of recordkeeping and administration.  Remember, no hidden or camouflaged costs are allowed.
3. Manage your plan so that it is truly low cost.
4. Educate the employees so that they, too, can become part of an effective system of checks and balances.  That way they will protect themselves and your company from a renegade fiduciary who does not get it on what a truly low cost plan looks like.
5. Monitor your plan so that it remains truly low cost month-after-month, quarter-after-quarter, and year-after-year.

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

The most successful business owners know when they have a problem.  And if they can pinpoint the problem, at that very moment, they will see the solution.

But it’s not like that with 401(k) or 403(b) plans that successful businesses and organizations set up.  Congress will tell you that many successful businesses and organizations have an awful plan (high cost with a core mix of investments that underperforms index funds) and those employers don’t even know it.  

The problem is this.  Many employers don’t know that their plan’s structure has created the illusion of low cost.  And the new laws, rules, and regulations that Congress wants to pass won’t force employers to finally set up truly low cost plans. 

Why? 

How can you fix problems that you don’t even see?  For instance, if three of the industry’s biggest vendors (they have the most clients) disclose a plan’s cost to you, and that cost is high relative to truly low cost plans, then a high cost plan will almost look normal to you–right?  

Congress can’t tell vendors how much to charge for their services and investments, and I like it that way because I like having a free market.  My point is this. Employers need the right kind of education–not the kind of eduction that they get from vendors who have conflicts of interest.  See?

There is only one way that you can see that your plan is not as low cost: Always compare your plan to a truly low cost plan.  Never compare your plan to the myriad of high cost plans that the vendors recommend. 

If you compare your 401k or 403b plan to a truly low cost plan it will only require a few minutes of your time, and you will see the major problems that your plan has, instantly. 

You can learn how to compare your plan to a truly low cost plan, right here, free.

First, you must be in the right frame of mind.  That way you will consider the possibility that your plan is not low cost. 

Remember, you have a fiduciary duty to always act the the best interests of the participants (employees) and their beneficiaries. And a high cost 401(k) or 403(b) plan does not serve the participants or you (the employer), at all.

Best wishes,

Your teacher, Frank Cirullo

So far you have learned how to compare expense ratios, choose a large-cap fund, mid-cap fund, small-cap fund, foreign fund, money market mutual fund, short-term bond fund, and an intermediate-term bond fund.

Today, your assignment is choose a long-term index fund.  Please use the same process that I taught you and choose a long-term 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

If you have been doing the required work, then after today you will have your own diversified, core, mix of no load, low cost index funds, which is guaranteed to match the market’s performance less the cost of your funds.  And it only required a few minutes of your time, each day.

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

Best wishes,

You teacher, Frank Cirullo