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Posts posted by FrenchTeacher




    Assuming the Roth 403(b) comes to pass, doesn't that represent the best of both worlds? Better control of your money, higher elective deferral limits? Investment choice, of course, might still remain an issue...and I agree with you that a majority of the teachers that I work with don't go over the $4,000 mark. (And that $4,000 limit goes to $5,000 next year, correct?)


    The only immediate drawback that I can see is that Roth IRA contribution limits are dramatically lower than elective deferral limits for 403(b) plans...$14,000 for the 403(b) vs. $4,000 (I think) for the Roth IRA. It's also conceivable that a married couple with two incomes might price themselves out of Roth eligibility. If that's not your case, though, and if you have no plans to fund more than $4,000, then the Roth may well make sense.

  3. "Make a portfolio of funds from the company that you represent. Also, if you wish and FR, and/or FR's advisor is agreeable include funds, I think from ING. I will provide funds that match the ones you choose from Vanguard. I'll use index funds that closely match your fund choices, and let's see how these portfolios do over time. I guess that we can make the amount of the portfolio equal to $50,000, and you can make changes for every quarter. We can update the value of the portfolio every quarter, and see whichone does better. I hope that will be willing to backup your statements, and not weasel out of this challenge."


    I hope that you, or others who believe that the 403b insurance funds that you and others talk so highly about are willing to measure the success of these funds versus some simple no load index funds. I hear a lot of talk, but no action to back up the talk.



    I'll do this. Could be an interesting experiment. Of course, it'll transform us all into the kind of check-the-balance-every-day, micromanaging fools that we all know we SHOULDN'T be...but just for fun, why not?


    I'll do it with the caveat that, as I've pointed out many times before, I'm not suggesting (nor have I ever) that "my" funds are "superior" to anyone else's. But I have suggested that the principles of asset allocation and diversification that everyone preaches here can well be used in a 403(b) such as mine, not solely with index funds in a Vanguard account, so I'll be happy to put in my funds. We should choose a start date, see if anyone else is interested in playing, and put it all together in a separate thread.

  4. Ira,


    You said "Expenses does matter in the success of a fund, the more a fund cost the less successful it will be"


    Please show me any source that can provide real research to verify this statement. Anecdotal quotes from Bogle, Swedroe, Bernstein, and God do not count.



    That was the quote that jumped out at me, too...I'm assuming you meant "All other things being equal, the more a fund costs the less successful it would be." Yes?


    By the way, I have several persuasive quotes from God on the subject of fees. It seems He is fine with up-front sales charges that are clearly disclosed, but the 12b-1 fees really piss Him off.






    JP, I would reiterate part of what Ira said earlier: find out what part of your money is already free of the surrender charge, and transfer that. Next, find out which part of it is susceptible to the lowest amount of surrender charge, maybe 1% or 2%, and consider transferring that. The rest, you may want to keep in place until it becomes free (or at least a lot cheaper) to move it.


    Good luck. Hope this helps.

  6. Each person has to make their own judgement about the value of the investments recommended which, of course, includes cost.


    The more I read this site, the more I think that the problem does NOT lie with the investor who makes a considered, reasoned choice to pay more believing (s)he is getting more. The problems that appear to be far more common are twofold:


    1.) the investors who, like gerryborn (pre-TIAA), don't HAVE low-cost options...frankly, there's no excuse for that;


    2.) the investors who, through their own fault and the fault of those who are pretending to advise them, are not getting their money's worth, and don't even realize it.


    Admittedly, I have less sympathy for the second group; while their awareness level needs to be raised, it's ultimately their own money being spent, so surely they should accept responsibility for whether they are getting their money's worth for what they are paying.

  7. Usually the products being hawked are either Equity Indexed Annuities, which I don't favor and are rarely disclosed correctly and Variable Annuities that have some sort of guaranteed living benefit or guaranteed withdrawal benefit. They like to be able to say the words "six percent" even though there is nothing in the product that actually states they will earn 6%. They can hold these wonderful dinners because the commissions are very large and they only need a couple people to buy into the fantasy.


    "The returns of the market without the downside risk" - Sign me up!



    Scotty, can you go into a bit more detail here? If Equity Indexed Annuities ARE disclosed correctly, what are their strengths and drawbacks? Are there circumstances under which they would make a good investment?

  8. FR, In responnse to Joe's selection of index funds over the past 5 years, you were pretty gung ho about this being the right time frame when thinking of advisors who would recommend these funds to their clients talking about how they earned the extra 1 percent charges.


    Apparently, that time frame was adequate in the context of successful advisors. Now, when you were reminded about a very large representation of advisors making recommendations that are not successful, and do not measure up to the index, you are not sure of what the time frame should be. Please stop changing your story.


    If you feel that part of a sales advisors job is to recommend funds that beat the index, and they do not, they are not doing their job. Instead of the client simply terminating the relationship without receiving money back, don't you think that the client who lost a lot of money on the market because of these sales reps should be compensated. If these sales reps do not pay a penallty, theywill simple go on to others.


    I know that the above will not happen, but, I wish you would please stop talking about successful advisors earning the extra charges.




    Ira, either get back on your meds or start reading my stuff in its context. The reason I used five years in my first example is that I was alluding to Joe's post, which said that in the last five years, his funds had performed in such and such a way. He brought up the five-year time frame; I didn't. I merely asked him if five years of outperformance would be enough in his eyes to warrant the paying of a commission. And in the second post, I postulated five years as the time frame in which I'd dump an unsuccessful advisor.


    These two statements are not even contradictory, much less do they constitute my "changing my story." And if you're reduced to grasping at straws in this embarrassing manner, perhaps it's best just not to post.


    I don't know why you're offended at the notion that "successful advisors earn the extra charges," especially when that observation comes virtually back-to-back with a statement that an UNsuccessful advisor should be dumped after five years.


    Hey, if you want to propose a series of fines for advisors who recommend underperforming funds, be my guest. Chase your tail all day with that one. From what I read here and elsewhere about the insurance and financial services lobby, you have a better chance of walking on water than getting such legislation passed. But it's your time and effort...knock yourself out.



  9. The salesman can advise fund choices among his clients . He may or not be highly qualified to do this.


    But ther bottom line is that the total of all load funds perform more poorly than the total of no load funds, the investor who is invested for the same period of time cannot do as well. So where is the additional dollar value added by the salesman to the loaded fund?




    Assuming the salesman IS qualified to advise on fund choices, it would seem that the additional dollar value added by the salesman to the loaded fund lies in the fact that he isn't selling "the total of all load funds," he's selling a selection of them.


    At this point, the investor has an option: attempt to put together a selection of funds that will beat whatever index (s)he's shooting for by a decent margin, or accept that (s)he and her/his advisor are probably not capable of that, and go with the index approach. I can see the merits in either approach, and it really winds up depending on a.) the appetite of the investor for this kind of stuff, and b.) the ability level of the advisor.

  10. Hi,

    FT: I went to Paris this past Spring Break. Now I could have stayed home and saved several thousand dollars and invested that, but by reading those books my portfolio has done so well that I could afford it. However, what I needed was you along to help me with speaking French. Best Wishes.



    Tres bien! La qualite de vie est vachement importante, je suis tout a fait d'accord! Bien plus important que de se mettre en place pour faire des comptes tous les jours! Felicitations!


    [Hope you enjoyed Paris...what a gorgeous city. I'm quite envious. I lived there for a year several years ago, and would love to go back there one day soon.]

  11. In every short term period there will be load advisors who give better advise, and do better than the market. It is also true that there will be many of the advisors who give information that does not measure up to the market and "WILL NOT "have earned his commission".


    By your logic, since all sales advisors are renumerated by the same commission structure, those salesman who have advised portfolios that do not measure up have not earned their commission, and should return this money to the client.





    From what I've seen and read, I doubt you'll find many advisors willing to offer a rebate. But just as a guy who does his job consistently well year after year deserves to be commended for it, a guy who does not measure up to the market and does not earn his commission deserves to be shown the door.


    I'm not sure what the right time frame to judge a guy is...it's probably longer than the most recent one-year return, but you shouldn't have to wait twenty years before making the call. If I were saddled with someone who was costing me money for no good reason after five years, say, I'd be looking for options.

  12. Hi,

    FT, you asked "would not an advisor who had recommended the funds that Joe listed have earned his commission?"


    Yes, the people who recommended those funds to me did earn their commission. I bought their books.


    They are John Bogle, Larry Swedroe, Willian Bernstein, Frank Armstrong, Rick Ferri, Bill Schultheis, Charles Ellis, and even Charles Schwab. I can thank them for keeping me about water when the market dived, and allowing me to take advantage of the big run up two years ago. These guys are the best! Best Wishes.




    Wow. Eight books, $20 a pop, say...do you have any IDEA what that $160 would have grown to, if invested rather than spent on books???




    However, there have been some funds that have done well over the past five years: Mid-Cap Index-- +9.02%; Small-Cap Value Index-- +14.29%; and the REIT Index-- +19.62%. I have these funds in my tax-deferred accounts. Maybe James' agent didn't have him in a diversified portfolio.


    Also I would say that my portfolio would have suffered from those high fees that go with VAs. I feel fortunate that I learned to do it myself and didn't have to suffer the advice of an agent. Best Wishes.




    Joe, how would you feel if it had been an agent that led you to the funds you listed here? In a market which has drifted downward over five years, would you not think the agent had done his/her job successfully if (s)he had shown you funds that returned 8.02%, 13.29% and 18.62% to you, after a 1% fee that (s)he had earned?

    FT: The market has hardly drifted downward over the last five years! From January 2000 to March 2003 the SP 500 was down about 50 percent. Since March 2003 the SP 500 is up about 50 percent.




    Which still leaves it quite a bit DOWN from where it was at the beginning of 2000, no?


    The question I asked was not to debate whether the market's movement over the past five years constituted a "drift" or a "bell curve" or anything else. It was to ask a simple question: in a five-year period where the overall market direction has been negative from beginning to end, would not an advisor who had recommended the funds that Joe listed have earned his commission?


    It's a hypothetical question, with a pretty simple answer. Market down + my funds up = advisor good.

  14. FT


    You had mentioned that you are interested in discussing and perhaps investing in individual stocks. At the Moringstar site there is a discussion group called stock picks..............I've read that for those who think they can outsmart the market, assign less than 10 percent of your assets that you are willing to loss to this purpose (because you will be competing with professional managers for the most part)......good luck........Ira


    I may look into that...thanks.


    (For what it's worth, I'm puzzled by the notion that an individual stock purchase constitutes the establishment of a "competition" with managers, who have a manyfold advantage over little ol' me when it comes to investable assets. Anyway, I'm not smart enough (nor do I have enough time on my hands, most days) to attempt to build an entire portfolio in an effort to beat the mutual funds that are available to me for a small price.)


    Upon further consideration...I guess strictly speaking, it IS a statement that you can beat the market anytime you buy anything other than an index fund.

  15. I just happen to agree with Barrons 100%. Barrons is my new hero. I don't think a communist would say something like that about Barrons. I read about options and I learn again and again that costs matter and the "intermediary" costs investers money.



    Hi Steve,


    In light of your newfound admiration of Barron's, are you going to reconsider their findings in this article too?




    Hee hee...didn't think so, but just thought I'd ask. :-)


    TR, the bill in question proposes "setting standards for selling annuities" to the 65 and up crowd. A separate proposal thinks doing away with ALL VA sales for the 85 and up crowd is a good idea.


    Setting aside for a moment what specific "standards" are being proposed (and I agree with you, having all the facts is essential here), I think both of these CONCEPTS are solid.




    From the LA Times article:


    "Opponents in the insurance industry have portrayed the bill as anti-business, however, and Scott is in a tough fight to get it passed.


    They say previous reforms have given regulators greater oversight and funding to go after shady operators. Reputable insurance companies already police themselves, said Mike McCaffery, a California spokesman for the National Assn. of Insurance and Financial Advisors.


    Issues raised by the insurance industry prompted Scott last week to hold the bill in the Assembly Insurance Committee until the next legislative session in January. Meanwhile, Scott said he would attempt to address those concerns while keeping the core issues of protections for seniors in place. "I've got to walk a fine line between what I think is pro-consumer and yet get a bill that I think will get signed into law," he said. "To do that, I need more time. But I'm not giving up on the fight at all."




    My favorite lines here are that the bill is "anti-business," and that "reputable insurance companies already police themselves." Well, duh! Isn't this bill designed to go after the DISreputable insurance companies? What a crock. Oh, and then there's this gem: "We see some seniors well into their 80s who have a level of financial sophistication," he said. "They say, 'I'm in charge of my money, and this is what I want to do with it.' " Something tells me that financially sophisticated eightysomethings aren't lining up to buy a product with surrender charges that go past their life expectancy. Financially naive eightysomethings, on the other hand...




  18. I have a question, I guess for Joel, Can Jeff invest in both a 457 and 403b. Do you know what the financial limits are?



    I have a few friends in a nearby district which has both a 403(b) and a 457 plan. You can fully fund both plans up to the IRS limit every year. This year, that's $14,000, or $18,000 if you're 50 years old or more. So someone in that district can defer up to $28,000 (or $36,000) of their salary in 2005.


    All they need now, of course, is 28,000 spare dollars to fully fund both plans.


    Joe, I'm not sure if it's so much that they're unhappy, as it is that they're oblivious. Then when they DO start doing a little homework, they find out they've been paying a lot, and at that point start to analyze what they've gotten in return and/or hold the agent accountable.


    Either way, it really leaves me scratching my head: unless you are in a single-provider district, why on earth would anyone simply accept substandard service/advice? There's no reason anyone should be at anyone's mercy; if anything, the agents should be at OUR mercy, since we have options if they fail us.


    Well, at least for now we have options...we'll see what happens when the IRS is done rewriting the code.


    However, there have been some funds that have done well over the past five years: Mid-Cap Index-- +9.02%; Small-Cap Value Index-- +14.29%; and the REIT Index-- +19.62%. I have these funds in my tax-deferred accounts. Maybe James' agent didn't have him in a diversified portfolio.


    Also I would say that my portfolio would have suffered from those high fees that go with VAs. I feel fortunate that I learned to do it myself and didn't have to suffer the advice of an agent. Best Wishes.




    Joe, how would you feel if it had been an agent that led you to the funds you listed here? In a market which has drifted downward over five years, would you not think the agent had done his/her job successfully if (s)he had shown you funds that returned 8.02%, 13.29% and 18.62% to you, after a 1% fee that (s)he had earned?


    To follow up: the fact that they paid $100k in fees is meaningless without further context, of course. Tell me they started with $900k, they now have $1 million and they paid $100k in fees, and I'll agree that they were unsuccessful, regardless of time frame. Tell me they contributed $150k over 25 years, paid $100k in fees and are retiring with $1 million, and I'll think differently.

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