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

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

Student: “Is it really that easy to improve my retirement plan?”

Frank Cirullo: “Yes.”

Student: “Can you show me how?”

Frank Cirullo: “Yes.”

Student: “What should I do?”

Frank Cirullo: “First, do you really want to know the facts about your plan? For instance, your mix of managed investments have underperformed a diversified mix of no load, low cost, index funds, and your retirement plan costs more than it should.  If you trust facts instead of opinions, you will see how to improve your plan. By the way, how much money will it cost you, long term, not to improve your retirement plan, today?”

Best wishes,

Your teacher, Frank Cirullo

The easy way to understand your 401k or 403b plan is by seeing–not thinking.

Your vantage point will determine whether you set up a truly low cost plan or keep your high cost plan that only appears to be low cost.

For instance, if you only look at high cost plans that create the illusion of being low cost, your plan will almost look normal. But once someone shows you a truly low cost plan and you understand what makes it low cost, you won’t touch a high cost plan again, ever.  With that insight, you will be able to spot the  high cost plans, instantly. 

To learn the truth about your 401k or 403b plan the easy way, you should study the six questions below. After you read the final question, you should be able to visualize what a truly low cost plan looks like:

1. For a core mix of investments, does your plan use managed funds and/or asset-allocation, lifecycle, lifestyle, and balanced funds or index funds? (If your core mix of investments is managed funds, you are experimenting with your hard-earned money, because you don’t have at least a ten year track record of picking a diversified mix of managed funds that beat a diversified mix of index funds in performance. If your mix of managed investments underperform index funds, will you have more money or less? Less, right?)
2. In addition to your plan’s core mix of investments, do employees have the option to set up a self-directed account? (Employees who don’t have a track record of picking managed funds that beat index funds can try it if they have a self-directed account).
3. For recordkeeping and administration, do you pay not more than $25.00, per eligible employee, per year (remember, no hidden or camouflaged costs are allowed)? (The less you pay for recordkeeping and admintration the more of your own money you keep).
4. Did you hire a consultant who has never set up a truly low cost plan? (Always ask for a consultant’s track record so that you know his or her history of setting up low cost plans. First, you need to learn what a truly low cost plan looks like so that you know which consultants actually know how to set up a low cost plan).
5. Did you hire an investment adviser who does not have a long term track record (ten years or more) of picking managed funds that beat a diversified, core, mix of no load, low cost index funds in performance? (Always ask for a long term track record of ten years or more.  You may learn that not one investment adviser has a long term track record of picking managed funds and/or asset-allocation, lifecycle, lifestyle, and balanced funds that beat a diversified, core, mix of no load, low cost index funds in performance). 
6. Does the co-ficuciary for your plan sell investments and/or other services such as recordkeeping and administration, consulting, or investment advice to your plan? (Why would you allow a co-fiduciary to sell investments and/or services to your plan?  Just think about it. It makes no sense to seek advice on how to set up, manage, and monitor a plan from someone who has inherent conflicts of interest. Would he or she fire his or her company for not setting up a low cost plan for you? No!However, it does make sense to ask vendors to explain the laws, rules, and regulations to you).

Many employers and employees have not seen what a truly low cost plan really looks like, yet. That’s  because they have been looking for a 401k or 403b plan in all the wrong places. Their vantage point impacts their judgement, and they don’t know how easy it is to switch to a truly low cost plan. 

To set up a truly low cost plan, you must see what to do–not think about what to do.

See?

Best wishes,

Your teacher, Frank R. Cirullo

A few months ago I published an article, “Cut 401(k) Expenses So That You Keep More of YOUR Money.”  In my article, in cost cutting Ideas #3 and #5, I exposed the fatal flaw that every asset-allocation calculator has. 

Cost Cutting Idea #3 - Beware the high cost of “free.”

Watch out for the myriad of bells and whistles that vendors provide “free.” If you look just below the surface you will quickly see that “free” comes with a considerable cost!

For example, financial calculators will waste your time and not provide any real value at all. The reason is simple. First, they cannot predict which asset-classes will outperform going forward. Second, they cannot predict how much you will earn on your investments. They simply can’t predict the future!

But take heart, because you can do a great job of planning your own investments without using financial calculators and without using the financial planning software that may only confuse you more.

Always keep it simple.

Cost Cutting Idea #5 - Stop trying to beat the market.

Let me ask you this. Can you hit a moving target blindfolded?

Here is what I’m talking about. Many people are trying to beat the market (hit a moving target) blindfolded. They are blindfolded because no one can predict which asset classes will outperform the others going forward. They are just guessing where the target is. That’s why they miss the mark.

Instead, why not invest in a diversified mix of low cost index funds so that you can match the market’s performance? That way you’ll have more money for retirement and beat the picks of most experts.

Did you know it’s a myth that you can predict the future by studying past performance?

No one has ever done it!

In my article, I revealed the truth about asset-allocation calculators so that poeple would stop wasting their time and money on foolish software and programs that try to predict the future. 

Tomorrow, I will show you how to use the classic asset-allocation model.  It can’t predict the future either, but it is fast, free, and it works as well as the most sophisticated asset-allocation programs.

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

You may be thinking, “Who is this guy that is giving us this wonderful and profitable information, free?”

Well, if you are curious and want to know who I am, you can use your favorite search engine to find out. 

Google Frank Cirullo at http://www.google.com/.  Or Yahoo Frank Cirullo at http://www.yahoo.com/, Or MSN Frank Cirullo at http://www.msn.com/.  Just type Frank Cirullo in the search box.  Easy!

Best wishes,

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

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, and a short-term bond fund.

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

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 seven funds. Then, in only one more day 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

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