How To Invest Like A Professional

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

Tip: The following exercise will clarify your thinking on how you should invest your hard-earned money.

One way to learn the truth about your retirement plan is to get a pencil and sheet of paper and answer the following questions with the facts about what will happen long term, not your opinions about what you think or hope will happen.

1. Have you ever picked a mix of managed funds that outperformed a diversified, core, mix of low cost index funds–long term?  Write the number 1 now, and answer Yes or No.
2. Have you ever picked an asset-allocation, lifecycle, lifestyle, or balanced fund that outperformed a diversified, core, mix of low cost index funds–long term?  Write the number 2 now, and answer Yes or No.
3. Finish this sentence:  I invest in managed funds because I hope they will _________________________.
4. Finish this sentence:  I invest in an asset-allocation, lifecycle, lifestyle, or balanced funds because I hope it will _________________________. 
5. I don’t invest in a diversified, core, mix of low cost  low cost index funds because______________,
6. I always invest for the long term? (Note: the long term is more than 10 years.)  Answer Yes or No.
7. Did you know that hoping you will somehow get lucky and pick some investments that will outperform a diversified, core, mix of low cost index funds is not a strategy?  Answer Yes or No.
8. Do you believe that buying a diversified mix of index funds is a strategy that will works well, long term, for anyone regardless of his or her experience with investments or investment strategies?  If so, why do you believe it is true?  Write your answer: ______________________.  If not, why don’t you believe it is true?  Write your answer: ______________________.
9. Index funds always match the market’s performance less their cost.  True or False.
10. A diversified, core, mix of low cost index funds is the market.  True or False.
11. A diversified, core, mix of low cost index funds is the benchmark that investors try to beat.  True or False.
12. By clarifying your thinking you will always know the right thing to do, and you will have more money than if your investments underperform their counterpart index funds.  True or False.
13. You will have less stress if you match the market’s performance with index funds, than if your investments underperform the market. True or False. 
14. You will have more time if you keep your investment strategy simple and invest in index funds.  True or False. 

Best wishes,

Your teacher, Frank Cirullo

Note:

You don’t need to be a student to ask me a question.  Visitors can ask questions, too.

Nor do you have to be a student to tell me about a problem you want to solve. 

Yes, even if you are visitor you can ask me for help anytime you want my help.

My e-mail is: fcirullo@fcmstudents.com

Regarding your IRA account, 401(k) plan, or 403(b) plan, do you want help with one of the following issues?

1. Save time on monitoring your investments.
2. Save time on selecting a mix of investments for your plan.
3. Set up an automatic asset-allocation and re-balanciing program, free.
4. Save time on choosing a plan.
5. Save time on setting up a plan.
6. Save time on managing your plan.
7. Save time on monitoring your plan.
8. Other: Tell me what you want help with.

I’ll be happy to show you one or more proven solutions to any problem you may ask me for help with. 

Note: Proven means the idea or solution will will work every time it is tried.  You’ll see the result instantly.

Yes, you can use my proven ideas that can save you time and money–free.  After you read the idea or solution, you can use it fast. 

Send your e-mail to: fcirullo@fcmstudents.com 

Best wishes,

Your teacher, Frank Cirullo

Part 3 of 3:  Optimize your plan today.  Easy!

If you are confused about what to do next to optimize your plan, and/or you want to know how to optimize it the easy way, you can get free education at one of these two Web sites:

http://401kplanschool.com/ or http://www.403bplanschool.com/

What do the words “optimize” and “optimal” really mean? 

These words mean this: “First, optimal and optimize mean that the plan has a core mix of investments that match the market’s performance.  Index funds are designed to match the market’s performance.  Managed funds are designed to try to beat the market.  The only problem is most fail to beat it–long term.  Second, optimal and optimize mean that the plan has low cost recordkeeping and administration–it has no hidden and/or camouflaged costs. Note: These days you can hire a recordkeeper and administrator for $25.00, per eligible employee, per year.”

What does the word “service” really mean?  It means this:  “The plan is set up to be optimal, and it is managed and monitored so that it can remain optimized month-after-month; quarter-after-quarter; year-after-year.” 

Note: If your plan is not optimal as of today, it means you are getting poor service.  Poor service will cost you more money and more wasted time than you can imagine! 

It’s in your best interests to optimize your plan, now!

Best wishes,

Your teacher, Frank Cirullo

Part 2 of 3: Set up an effective system of checks and balances.

Can directors and committee members be sued by employees for a breach of fiduciary duty? 

Yes! 

But if you don’t believe it, you can read all about why some of the biggest companies in the United States have been sued.  You may even learn that your company is doing some of those same things.  You can do a search to get the facts–online. 

Note: Being sued by employees does not make you guilty.  Only a guilty verdict makes you guilty, but why not do everything you can, today, to reduce your risk of being sued?

Easy! 

How?  What steps can you take today?

Begin by studying the facts, not the expert’s opinions.  Many employers still have their head in the sand–they hold onto their high cost plans because it’s their opinion that it is low cost.  And they hold onto their awful investments (awful means they have underperformed index funds) because it is their opinion that they are “good” investments to hold for the long term.

My point is that for whatever reasons they happen to come up with, many employers make the mistake of not doing a few simple things to improve their plan.  First, most employers don’t even know their plan’s true cost; it may be because they get their all of advice from experts who have conflicts of interest!  Look at it this way.  Will the expert you hired fire his or her company for recommending an awful (high cost) plan to you?  No!  Does your plan have any hidden and/or camouflaged costs that you don’t see yet?  It probably does.  For instance, if you saw that your plan had hidden and camouflaged costs would you not eliminate them immediately?  Yes, of course, but you don’t see them according to Congress. 

Have you already concluded that your plan is a high cost plan, and you want to replace it today? 

If you have a 401(k) plan or 403(b) plan, do you think it would be a good idea to speak with an attorney who is an expert in retirement plan law? 

Yes, of course! 

Why?

He or she can show you how to set up your plan so that you don’t make the mistakes that most employers are still making.  You may be thinking this: “With all of the education being provided to employers by vendors, how is it possible for plan sponsors to make so many amateur mistakes.”  Well, Congress says that most people don’t even know the true cost of their retirement plan. Is it not an amateur mistake to not know the true cost of your plan?  Yes, it is a mistake!

First of all don’t be arrogant–don’t assume that you have hired the “best” people to advise you,  Instead, consider the possibility that your plan can be improved.

Many employers don’t know what they don’t know about being a fiduciary; therefore, they believe they are not breaking any laws, but it would be a mistake if you do not ask an attorney for advice.  For instance, can you name the employees at your company who are unwittingly acting as a fiduciary for the plan?   Have you even thought about what makes a person a fiduciary?  If you are an employee who works on a plan in any way, shape, or form, you need to find out if whatever you happen to be doing for the plan makes you a fiduciary.  A fiduciary can be held personally liable for a breach of fiduciary duty.

Basically, an owner, president, or board of directors has four options regarding their 401(k) plan or 403(b) plan:

1. Set up, manage, and monitor your organization’s plan yourself.
2. Appoint a person to set up, manage, and monitor the plan.
3. Appoint a committee ro set up, manage, and monitor the plan.
4. Hire a  professional to set up, manage, and monitor your plan.

Regardless of how you set up your plan, you are still a fiduciary and a fiduciary “…must always act in the best interests of the employees and their beneficiaries….” –DoL

Therefore, it makes sense to have an effective system of checks and balances, right?

The more complicated you make your plan the harder it will be to manage and monitor it properly.  For example: Managed investments are harder to monitor than index funds–managed funds have more moving parts to monitor.  Asset-allocation, target-date, lifecycle, lifestyle, and balanced funds have even more moving parts to monitor.  Therefore, can you think of any reason why you should not use a diversified mix of low cost index funds for your core mix of investments?  Easy!  And for recordkeeping and administration would you do what most employers do, which is to hire a company that offers “free” services and/or a revenue sharing program that in reality costs you more than the benchmark of $25.00, per eligible employee, per year?  No, that is, you would not do that if you really understand your fiduciary duty to always act in the best interests of the employees.

Whoever appoints the person or committee to set up, manage, and monitor a plan has a fiduciary duty to monitor their activities. 

A fiduciary (plan sponsor) can make the work of managing and monitoring a plan easy or hard.  In part 3, I will show you how to make the work easy.  The easy way of setting up, managing, and monitoring a retirement plan will save you time and money, and you’ll have less stress, too.

An effective system of  checks and balances will create a retirement plan that is easy to manage and monitor.  The result will be as follows: (1) The plan will truly be low cost–not the illusion of low cost like most plan.  (2) The plan will have a core mix of investments that match the market’s performance, every day–not a core mix of investments that you hope will match the market’s performance, long term. 

Most employers are hoping that the investments they choose for their plan will beat the market’s performance.  Why would you gamble with your employees retirement money when you have never picked funds that beat the market–long term?  Have you asked your adviser if he or she has ever picked funds that beat the market–long term?  Get the truth about your adviser’s track record now.  It’s your duty to ask for a real track record–not a cherry picked time frame.

Summary: 

1. Speak with an attorney who is an expert in retirement plan law.  Set up an effective system of checks and balances.
2. Find out who is a fiduciary for your plan.  Find out who is acting as a fiduciary without knowing it.
3. Make your job easy by keeping the plan’s mix of investments simple.  Consider using a core mix of low cost, no load, index funds.  If you have employees who want to beat the market, let them be–give them a self-directed account, but, also, educate them on the odds of them beating the market; especially, if they have never done it before.
4. Make your job easy: Avoid the myriad of ”free” services that have hidden and/or camouflaged costs. Nothing is free.  For instance, is the free investment advice you get from radio, TV, newspapers, or magazines really free?  Not if a recommendation or “hot tip” causes you to try to beat the market and you end up with a large opportunity cost!  Look at it this way.  You can always match the market’s performance with index funds–you don’t have to try to beat it and risk failing like most experts fail.  If you fail, you will have a large opportunity cost–long term.  It’s real money, folks!
5. Does you plan’s cost match the benchmark for the cost of truly low cost plans?  Can you prove it?  How?

Best wishes,

Your teacher, Frank Cirullo

Part 1: Whose Responsibility Is it to set up, manage, and monitor your plan?

Who is the named fiduciary for your plan?  The owner?  president?  a committee?

Someone is responsible for deciding how to set up a plan, how to manage it for results, and how to monitor it to ensure that it is getting the desired result.

Always begin with the end in mind:  Employers, think about the result you want.

You want a plan that is truly low cost, right?  Easy!  And you want a plan that has a core mix of investments that will match the market’s performance, right?  Easy! 

It’s easy to get the desired result, because any employer can get the training required to set up, manage, and monitor a plan the easy way.  Note: It’s been proven that most employers set up, manage, and monitor their plan the wrong way, because they get their advice and training from people who have inherent conflicts of interest.

Look at it this way: 

1. If your plan is not truly low cost, it’s a mistake that will cost workers more money than you can imagine.   Consider the possibility that your plan has hidden and camouflaged costs that you don’t see, yet!
2. If your plan has a diversified, core, mix of investments that underperform low cost index funds, it’s a mistake that will cost workers more money than you can imagine.   Consider the possibility that your plan has a diversified, core, mix of managed funds and/or asset-allocation, target-date, lifecyle, lifestyle, and balanced funds that have underperformed a diversified, core, mix of low cost index funds and/or will underperform a mix of index funds going forward.

Summary of today’s lesson:

1. A person or perhaps a committe at your company has a fiduciary duty to set up, manage, and monitor your plan so that it gets the desired result.
2. The desired result is a truly low cost plan that has a diversified, core, mix of investments that will match the market’s performance. Index funds match the market’s performance less their cost.
3. The last thing employers and employees need is a high cost plan that has investments that underperform low cost index funds.  Note: Hidden and camouflaged costs create the illusion of low cost.  Congress learned that most employers and workers do not know their plan’s true cost

If you liked today’s lesson, you can get more free lessons at http://www.401kplanschool.com or http://www.403bplanschool.com .

Best wishes,

Your teacher, Frank Cirullo

My article, “Do You Want More Money For Retirement?” has just been published at http://ezinearticles.com/?expert=Frank_Cirullo  

Click on this link to read it: Do You Want More Money For Retirement?

Best wishes,

Your teacher, Frank Cirullo

Every time you interview a recordkeeper and administrator, plan consultant, and/or investment adviser, the two most important questions you can ask him or her are:

1. If I hire you, can I get index funds that cost 0.07% to 0.20%, per year? 
2. If I hire you, will you do the recordkeeping and administration for not more than $25.00, per eligible employee, per year?  Note: Remember, it’s your duty to uncover any hidden fees or camouflaged costs.  For example, revenue sharing may not save you any money at all–even if it looks like it can.  Instead of saving you money, revenue sharing often adds to the cost of a plan, because the investments may be awful–awful means that they underperform low cost index funds.

The idea is to save precious time by thowing a knockout punch early in the interview with the vendor. 

Yes, you want to knockout the vendors who can’t help you–not literally.  It’s best to knock them out of the competition for your business early in the first round, right?  Remember, asking a vendor to match the benchmark for the cost of whatever service he or she happens to offer you is reasonable and wise.

If you liked this information, you can get more free lessons at:

• http://www.401kplanschool.com/
• http://www.401kplanschool.com/
• http://www.fcmstudents.com/

Best wishes,

Your teacher, Frank Cirullo

Have you noticed how your mind comes up with reasons to do something–even when doing it is not in your best interests?

For example, you know you will gain weight if you eat cake, but you persuade yourself to buy a big piece of cake and eat it anyway.

What does this have to do with saving money for your retirement? 

Well, you really can persuade yourself to get through an entire day without buying anything new, but will you?

If you don’t buy anything new today, will you have more money tomorrow?  Yes, it’s guaranteed. And will you miss not having whatever you decided not to buy?  No, not at all!  Why?  We buy on emotion, not logic.

Step 1:List three reasons why you want to save money. (Listing three reasons to save money is using your logic.)

Step 2: Persuade yourself not to spend any money today.  That way you are guaranteed to have more money tomorrow, right?  (Again this is how you use your logic to make decisions, not your emotions.)

Do you see how easy it is to save more money?

Best wishes,

Your teacher, Frank Cirullo

Which one of these two investments is guaranteed to earn the most money for you over 1, 3, 5, 10, 20, 30, 40, and 50 years?

1. A S&P 500, blend, index fund that costs not more than 0.07% per year.
2. A S&P 500, blend, index fund that costs more than 0.07% per year.

The correct answer is #1: The less you pay for a S&P 500, blend, index fund, the more times your money will double between now and the day you retire.  

Will you apply this knowledge to your own investments today? 

Will you apply it to your retirement plan? 

I hope so.  The example (question and answer) should have proved to you that cutting your plan’s investment expenses and overall cost allows the magic of compound interest to guarantee you more money for your  retirement.  

Do you agree that vendors who leave out material facts about an investment such as a target date fund or asset-allocation fund cost you money?  Do you agree that if an expert fails to tell you the whole truth about your plan’s expenses it means that their service is poor and not as good as their brochure claims it is?  Note: Experts should know better than to leave out material facts, and that is why the courts hold the experts to the highest standard of conduct.

Rule: The rule is to never fall in love with your plan’s vendors (the recordkeeper, administrator, consultant, and investment advisor).  Instead of trusting an expert’s rhetoric and sales pitch, always use an appropriate benchmark to determine the real value of the service offered or investments recommended to you.  See?

Remember, knowledge when used is powerful.

Best wishes,

Your teacher, Frank Cirullo