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Everything posted by FrenchTeacher

  1. I'm really surprised that the "random walk" theory still has any believers at all. I always laugh when I read people quoting Warren Buffett (out of context, of course) saying that index funds are the best solution for most people. I've done a lot of reading of Buffett's work over the past year, and his body of work (both written and actual examples of his investment) completely contradict the notion that all current information is factored into the market. Indeed, anyone wishing to trouble themselves to read Buffett's annual letter to his investors in Berkshire Hathaway will find an accessible, comprehensible theory of investing that doesn't once say how useful index funds (or any other kind of mutual funds, for that matter) are. In the limited world of 403(b) investing, I can see where index funds can and should play an important role. But for any investments outside of 403(b) or 401(k) accounts, I can't for the life of me understand why an educated investor would turn to mutual funds.
  2. Yup. And pennies on the dollar for any parties who were actually wronged.
  3. I'm not trying to demonize Bogle. He has indeed changed investing, and for the better. I just think he's off on the subject of ETF's. For certain kinds of investors, ETF's represent all the benefits of index funds, and at a lower cost. I'm surprised anyone (including Bogle) doesn't see that.
  4. Thought you might be interested in some feedback that recently appeared in the Wall Street Journal's "letters to the editor" section this weekend. No link, unfortunately, because you need to be a subscriber to access them online (and I'm not). But here are a few excerpts. From Mark Armbruster, CFA, Chief Investment Officer of Alesco Advisors, LLC: "Mr. Bogle accuses the ETF industry of producing gimmicky funds with narrow sector focus, high intermediation costs, and excessive turnover. But the very transgressions Mr. Bogle accuses the ETF industry of are also present in the index mutual fund world. One need look no further than the Cancer Innovations & Healthcare index fund offered by one sponsor to find an example of narrow sector focus. Also, index funds that short popular market benchmarks exemplify a gimmicky strategy that was born in the index mutual fund world. When comparing all-in costs, ETF's have the advantage from my perspective. Their lower expense ratios (especially Vanguard's ETF's) tend to outweigh trading commissions and other costs, which can be quite low at discount brokerages." From Lee Kranefuss, CEO of iShares at Barclays Global Investors: "ETF's have attracted significant assets because the appeal to many different types of investors. The vast majority of ETF owners are buy-and-hold investors. On the other hand, about 90% of the ETF trading volume is done by institutional investors such as mutual funds and hedge funds for short-term exposure or to hedge risks. Importantly, this trading happens outside the fund at the stock exchanges; thus long-term ETF investors don't subsidize the costs of active traders in ETF's." I've bolded what I thought were the most salient points from what was written. Now obviously, these two guys (especially the CEO of iShares!) have skin in the game, so they can hardly be seen as objective. But then again, John Bogle is hardly objective in discussing the matter, either. Looking at the S&P 500 as an example, Vanguard's 500 index fund has an expense ratio of 0.18%. The SPDR 500, an ETF that tracks the same index, carries an expense ratio of only 0.11%. (And Vanguard's multiple ETF's routinely carry expense ratios of only 0.07%!) It seems to me that a long-term investor making a lump-sum investment would be far better served purchasing the ETF through a discount brokerage than the Vanguard mutual fund. Of course, if someone is dollar-cost averaging over multiple transactions, then the slim advantage enjoyed by the ETF's would most likely be wiped out by multiple transaction costs, even if using the cheapest discount brokerage available.
  5. If the goal of running the money yourself (by taking a lump sum) is to beat the guaranteed annuitized return of 8%, how is anyone going to make an annual return of better than 8% using an 80/20 bonds/stocks allocation? It seems to me to make a lot more sense to annuitize if you're going to split 80/20 in favor of bonds, as you mention here.
  6. Depends entirely on how you achieve this diversification. If you separate your funds this way: 20% large-cap domestic 20% small-cap domestic 20% real estate 20% foreign large-cap 10% emerging markets 10% real estate ...then you should be able to achieve diversification within one (good) fund family without much overlap at all.
  7. Why would you need to choose two different companies? Why not pick one company you like, and divide the investments within that company between conservative and aggressive? I think you have to be clear about what you're trying to accomplish. Good asset allocation doesn't have to involve different companies.
  8. FrenchTeacher


    Steve, thanks for your apology. I appreciate it. For what it's worth, I don't necessarily disagree with you about ING. Indeed, the reason I stopped posting here for quite a while was that I came to the realization that I was expending far too much energy in defense of an entire company, especially given that I have no idea what the hell they're up to in the other 49 states. I can honestly state that a.) my experience with them has been overwhelmingly positive, at least part of which is due to the advisor that I have, and b.) in New York State, there are no other full-service financial providers that offer what ING does for the price that it does. But those observations apply to ING in New York only, and perhaps to me specifically. I have clearly personalized the debate that has taken place here, and been far too quick to take the bait when it has been dangled, and I have no interest in doing so any further. I'll continue to read the site, and post where applicable, but I suppose commenting further on NYSUT and ING serves no real purpose. Everyone here knows where I stand by now.
  9. Steve, perhaps I am misunderstanding. This is the problem as Vince cited it: ******************************* Based on that information, you are eligible to receive maximum PLS of $176922. SO, you can either take the: - base $7960 OR - $176922 and reduced $6766. That would be a difference of $1194 per month. ******************************* The choice isn't between nearly $8000 a month or a lump sum of $176,922...that would indeed be foolish. The choice is between letting the ENTIRE amount remain in the pension system (hence collecting $7960 a month for life) OR taking a partial lump sum of $176,922 which would reduce the pension payment by $1194 a month, to $6766. So the question really is, can you get a better return on that smaller amount of money than the 8.1% that Joel demonstrated would be necessary to "outperform" the pension? It seems to me to be a potentially worthwhile move to let the lion's share of the pension remain in place, thus retaining a guaranteed earnings ###### of $6766 a month for life, while investing the lump sum in such a way that it gets better than 8.1% over the remaining years of your life. Whether you espouse active management or indexing, is there anyone who thinks a long-term 8.1% return using a variety of equities investments is unrealistic?
  10. Joel has done the right math here. It seems to me that the only people who would pass on the lump sum option of $176,922 in this case would be those who feel themselves incapable of producing a return of 8.1% over the long haul. Given that most people who post here are such staunch proponents of indexing, and that a handful of different index funds is easily capable of returning in excess of 8.1% over many years, what could be the argument for the flatline return of the pension? I can understand not being willing to annuitize the ENTIRE pension, but this small portion of it? It seems to be a no-brainer.
  11. FrenchTeacher


    Wow. Thanks for being the guardian of what constitutes trollish behavior, Steve. I guess in this case (since I literally said NOTHING that can be constitutes as trolling), you consider trolling to be "posting opinions that run contrary to my own investing philosophies." I mean, seriously...all I did just now was state facts. Can you deign to "get into the gutter" with me long enough to point out what offended you? Given what you've said in the past about NEA's flagship account (Valuebuilder), I can understand why you might want to see their doors shuttered forever. It seems like a pretty miserable product.
  12. FrenchTeacher


    The endorsement is no more, true enough. But Opportunity Plus still has no annual fee, no sales charges, and lower M&E and other fees than any other full-service provider available to me (and, I think, to anyone else in New York). And of course, my financial advisor hasn't changed either. So yes, I'm still with ING, to answer your question below. Who are these "many NYSUT members" of which you speak? I often hear of them when the NYSUT critics start sharpening their knives, but none of them actually ever speak up for themselves...and I work with several dozen of them, none of which share your apparent outrage! Curious. Anyway, NYSUT did in fact acknowledge their wrongdoing. Our new president said flat out that mistakes were made, and vowed that they wouldn't be repeated. I understand they're in the process of seeking out a new provider now, and I suppose I'll withhold judgment until that process is concluded.
  13. FrenchTeacher


    I see the diatribes haven't changed much in the months since I last posted. What an utterly ridiculous assertion. ING did no wrong, and NYSUT was "the devil." I guess that's why NYSUT paid $100,000 to settle this affair, and ING paid $30 million. No, that's not a typo: ING's payment to settle with the AG's office was three hundred times greater than was NYSUT's. But yeah, NYSUT is the boogeyman here, Joel. Whatever you say. No doubt people will wave their fists and scream "politics!", their other favorite boogeyman. Which is an equally ridiculous assertion. Spitzer was ahead in the polls by a factor of 50, and his election to the governorship of New York was never in doubt. He hardly needed (or needs) the ongoing support of the teachers' union to get elected.
  14. That makes it a widely used program. It does NOT necessarily make it, as you asserted, the highest participation rate in the country. And you remain unable to substantiate your earlier claim that the UFT has called it "the highest participation rate in the country." From your earlier post, in case you've forgotten: If the UFT has "frequently" made this assertion, why can I not find it anywhere on their website? Moreover, why can YOU not produce a single link to the UFT's "frequent" claims? Are you making up the UFT quote? Why can't you just say it's a good program that is popular among UFT members, and leave it at that?
  15. To your first point: isn't something similar true of an advisor who draws no commission, but charges an hourly rate? If someone is getting paid $125 an hour to study your circumstances and offer advice, is there much of an incentive to complete the task in four hours, when you might spend six, or eight? Or twenty? For that matter, short of some sort of monitoring system, how do we know that such advisors actually spend the hours that they are charging for exclusively studying the charged client's circumstances? Scotty, perhaps you can answer this: is there any kind of independent verification of hours done by some third-party monitor for advisors who charge in this fashion? Or is it a different variation of "Trust me, I'm working in your best interests," much like lawyers who find some mystical way to bill various clients for 100+ hours per week? To your second point: I agree that there may be an inherent lack of training when dealing with an agent that has only ever worked for one company, was educated by that company, and is therefore drinking that company's Kool-Aid. I think that's why people should seek out one of the independent designations from the people they are considering hiring as their advisor. CFP (certified financial planner) is probably the most common one. Someone inside the industry could speak to some of the others that are out there. Such a designation has independent criteria that have nothing to do with how well you know XYZ Company's product line, and everything to do with how well you understand the precepts of financial planning.
  16. The NYC teachers' union is too smart to even make that assertion, Joel...or am I missing something? What they DO say is that their members, on a percentage basis, contribute at over twice the rate as do educators in other school districts. They do not claim that they are the best, or the highest rate, in the nation. You remain the only party making that claim.
  17. Scotty, You really disclose not only the names of your competitors, but their lower cost structure, to your clients? Before they commit to you? That's genuinely impressive. Would you say that's the norm among people that do what you do, or would you say you're more the exception than the rule? Either way, I agree that as nearly as I can tell, the 403(b) industry is quite different. I would applaud any measure that ultimately led to greater transparency of costs.
  18. So 64 percent of NYC teachers participate. That's good, I guess. But your original claim was: "NYC teachers have the highest rate in the nation when it comes to participating in their no-load, completely voluntary, no match 403(b)/457(b)/401(k) Plans. What say you?" I say (again), how do you know that this is the highest rate in the nation? Did the Annual Report of the TRS Board of Trustees acclaim this as the highest rate of participation in the nation? If not, who did? Besides you, I mean? Impressive! Two days later, the participation rate has s up to 67 percent! Are there any other numbers you'd like to pull out of thin air and claim to be the highest in the nation? Might as well shoot for 100, if you're just going to make them up as you go. I'll check back in a couple of days. I bet NYC teachers will be up to a 70-75% rate of participation by then!
  19. Are you saying that NYC teachers have the highest participation rate in the nation? What's the source of your information? What independent entity has researched this topic? Was it published somewhere? I doubt that you'd hear it phrased quite that way. Here's what it might sound like: "We have these 403(b) options that everyone says is so great: Vanguard, Fidelity, TIAA-CREF. But I have no idea how much I should be investing out of every paycheck. And each plan has something like 25 or 30 investment options! Which ones are right for me? Every time I call the 800 number for one of these plans and ask them how I should invest, I'm told that the plans are "self-directed" and that it's up to me to decide, and they just refer me to one website after another. Why can't I talk to a human being that knows what they're talking about?" Herb's allegedly "self-serving" comments are, indeed, right on the money, and bear repeating here:
  20. Thank you, Ira, for this gentle reminder of why I stopped posting here in the first place. Heaven forbid a dissenting opinion should appear: the attacks get personal, and the tinfoil hats come out as the conspiracy theories unfold and the "suspections" are raised. When the facts don't support your argument, I guess, it's a lot easier to discredit the messenger. Have I been defending these "immoral and hopefully illegal activities"? On the contrary. I have said (and I repeat here) that I have no problem with Spitzer investigating ING and NYSUT. If, as I suspect, he concludes that nothing criminal is occurring here, then I will feel vindicated for my choice of financial company and for my support for the union. If, on the other hand, he comes back and files charges, then I will do what I can to change what needs changing within NYSUT, switch carriers for my 403(b) account, and pocket some part of a nice financial settlement besides. Is such an investigation ongoing now? Depends who you ask, I guess. Spitzer himself says it's a broad investigation, not one specific to ING and NYSUT, but why should we believe him? He's only the guy running the investigation. So did I hide my "knowledge" of an investigation that probably isn't taking place? Er, no. Hope that one answers itself. The fact that you describe these activities as "hopefully illegal" reveal, plain as day, that YOU are the one with the agenda, sir, not I. You and others here are actively hoping that Spitzer can find some legal reasoning to prosecute activities that were fully disclosed, or perhaps find some other under-the-table activity going on so he can prosecute that (THAT, at least, would be a genuine crime!). I, on the other hand, don't have a dog in this fight. I like ING, but I'm surely not married to them, and if they are revealed to be involved in something wrong, they will be my FORMER financial provider in the blink of an eye. Hell, I might even call Vanguard. At any rate, I'm not sure I see the point of my coming here any further. This is clearly supposed to be set up as "Vanguard Diehards Lite," a self-congratulatory circle-jerk where everyone can applaud their own financial savvy and berate the silly stupid people who are currently under a dastardly agent's spell. I enjoy a good discussion/debate as much as anybody, but it is becoming obvious to me (again!) that this is neither.
  21. Mr. Spitzer's investigation was not regarding ING specifically, but the industry in general, a fact he confirmed in the NY Times on Monday: That's as much as I knew. Unless you work in Mr. Spitzer's office, that's as much as ANYONE knew. Feel free to treat this as my "intentional deception" if it makes you feel better. I knew nothing then of an investigation specific to ING, and for that matter, I know nothing now of that. I do know that earlier this week (or late last week?), some of the Post spin doctors attempted to depict what appears to be a broad investigation of the 403(b) industry as an investigation into ING & NYSUT specifically. Whether that is true or not is up to Mr. Spitzer's office to answer, but his quote above suggests that it is not.
  22. Joel, I applaud your ability to take my words out of their context and puff yourself up with the usual amount of self-righteous indignation. I stand by what I said: FERA's charge that NYSUT fails to disclose their arrangement with ING is demonstrably false. The presence of an investigation does NOT equate to anybody's guilt, unless vast portions of the U.S. Constitution have been revoked (not entirely unlikely, given the current administration in office). Spitzer is to be applauded for investigating at the behest of his constituents, even placing himself at some political risk in so doing. But it just sounds ignorant for people to equate the presence of an investigation with the obvious guilt of the investigation's target.
  23. What action do you want him to take? The primary charge of the letter--that NYSUT takes money from ING without full disclosure--is demonstrably false! How is Spitzer supposed to take the letter seriously? Let me put it another way. Eliot Spitzer is the attorney general. His job is to investigate/prosecute criminal activity. Can ANYONE name a single law that has been broken here? You guys are all barking up the wrong tree. If you want to effectuate change, have a law passed barring such arrangements. Or at least cite the law that has been broken. Anyone? FT: You knew that Eliot Spitzer started his official investigation months before yet you went ahead and asked the following: "How is Spitzer supposed to take the letter seriously"? Joel Yeah, that whole "innocent until proven guilty" thing must have clouded my judgment. I guess you've decided to go with "where there's smoke, there's fire" as your legal guide. Different strokes for different folks, I guess. My skepticism about the letter from FERA was based on the demonstrable falsehood of its assertions. I will say again as I said before: show me the law that was broken, and I'll retract what I said about the letter's inherent silliness (as well as its author's obvious transparency).
  24. Joel, I learned about this either late last year or early this year. I didn't circle the date on my calendar, so I can't be more specific. But there was snow on the ground.
  25. The "foundation" in question in this out-of-context quote, of course, is the "Foundation for Education Reform & Accountability," described in the article as a "conservative think tank." Their raison d'etre is to oppose the teachers' union at every turn, all in the name of lower taxes (and lower teacher salaries, of course, but gee, who cares about THAT?). It's fairly transparent that they are opportunistically piling on to the 403(b) issue here in an attempt to show the union in a bad light. What a surprise. The remainder of the Post piece contains few surprises, too: mostly antiunion drivel, featuring reminders that a.) NYSUT members pay dues b.) NYSUT officials are actually (gasp!) COMPENSATED for their services c.) New York State property owners pay some of the highest taxes in the country (which, of course, is entirely the fault of the teachers' union) and gee, if all that is going on, then it must smack of graft and corruption, right? Cue the music from "On the Waterfront"...
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