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Old 01-24-2012, 08:14 PM   #1
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You get what you pay for!

How can people spend their working lives saving for retirement but not put any time into learning the basics of investing?

TSP Vs CD's - FederalSoup.com - Page 3

"I was quite sick of trying to figure out what TSP fund would do the best for me. I was not satisfied with the G Fund and really did not know enough about the others to feel comfortable as I took some heavy hits in 2000 and 2008. So a month and a half before I retired I pulled all but a few hundred out of TSP and put it in a IRA with a major investment firm.

Now there are those that do not like paying fees if the will TSP manage your account for nothing. I say you are getting what you pay for. I paid a little over 3% fee to the investment firm. I have recovered that fee. Past performance of the funds I am invested in should do 6 - 9% if the economy straightens out.

I never would consider a CD as one is locked in for a certain amount of years at a relatively poor rate. Given the choice of only CD's or TSP I would remain in TSP as one at least has the freedom to move the money around or make withdrawals. The professional investment counseling I received told me CD's are the worst possible thing to do now simply because the rate of inflation is about 3% per year and most CD's do not come close to that. With this consideration, locking your money into a CD you are literally going backwards.

I feel much more comfortable with a professional manager."
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Old 01-24-2012, 10:29 PM   #2
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IMHO the TSP is a great core holding. When I retired I moved about 1/3 of my TSP into an IRA. I wanted to capture some asset classes the TSP does not have like REITs and foreign bonds. Overall my IRA has not done as well as my TSP (which is 40% in G, 40% in C 15% in S and 5% in I) but those IRA asset classes have underperformed and I want to have them in my portfolio. I also have a taxable trading account which has done better but my wife's IRA in Wellesley has done even better:roll eyes:
It is good to at least use the G Fund as a core bond holding, maybe the only bond fund needed. When looking at the total financial portfolio remember to consider the risks and costs. My portfolio performance since retiring in 2008 is 08 -18.8%, 09 +18%, 10 +11.%, 11 +3.8%. Nothing so good as to offer investment advice but done by a 'regular guy'.
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Old 01-24-2012, 10:42 PM   #3
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Speaking for myself, I've spent my working life... working! 60+ hours a week doesn't leave much time for learning a new career and learning how to invest is a career. Just learning the basics isn't doing yourself a favor especially if you don't have a mind for the abstractness of the whole thing. Monitoring everything from the Chinese birth rate to who's running the corporations of America and hoping you didn't overlook anything would keep me up at night with worry that I am overlooking something. Hiring someone to help me meet my financial goals so I can do what I do best to earn income is many times better than trying to go it alone.
I think everyone would hire "someone to help me meet my financial goals" if that's what they actually had a reasonable expectation of doing.

Many end up paying high prices for an underperforming product-- just like that investor Helen quoted. Even worse, the investor has no idea that they've gone from an insured product to a high-risk asset class. They wouldn't have lost principle with the CD, but let's see how their advisor does during that investor's third bear market. I bet the investor will be searching for yet another adviser. Wouldn't it have been helpful for them to learn a little about the subject so they'd at least be able to tell when the adviser was spouting BS?

Thank goodness we don't have that problem with doctors or car mechanics, or we'd have to learn about those too. I'd much rather just give them my credit card and ask them to make it all better.
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Old 01-25-2012, 12:04 AM   #4
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But if it were so easy that all it took was a little learning about the subject, why is it so hard to find a decent adviser?
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Old 01-25-2012, 12:18 AM   #5
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But if it were so easy that all it took was a little learning about the subject, why is it so hard to find a decent adviser?
Because there is much more to being a "decent advisor" (as you put it) than familiarity with basic investing and retirement planning. Little things like integrity, conflicts of interest, the need to charge enough $$$ to support him/herself + family, the need to be a psychologist and understand your goals, life desires and risk tolerance, etc. If the advisor is employed at a firm, he must try to satisfy your desires while trying to balance the sometimes conflicting desires of his management. For example, management might be giving bonuses for advisors who get clients into fund X and firing advisors who don't, etc.

Working with someone else's resources is, IMHO, a tougher job than working with your own. I tried to help my SIL with some basic AA decisions in her 401k at her request. She thinks I did great and thanks me. I laid awake at night worried something would go wrong despite everything I did being very typical/generic. Never again.......
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Old 01-25-2012, 01:20 AM   #6
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But if it were so easy that all it took was a little learning about the subject, why is it so hard to find a decent adviser?
I think learning about asset allocation and investments is a lot easier than learning how to find a decent adviser.

I think that advisers have to learn at least a little about everything for everyone, instead of specializing in the one or two things that we'd personally care about. So an adviser has a much bigger challenge learning about financial management than you or I would have learning about our own personal financial management.

But aside from the learning part, I'm pretty sure that you or I would always have our best interests at heart. It may not be too hard to find a knowledgeable financial advisor, but finding a decent & ethical one is another problem entirely.

But, hey, you don't have to take my word for it. Just give all your money to this guy. He's a military veteran, he's a Marine, he knows what he's doing, and he charges low fees. He's even written a few books on the subject. No, he's not Leonidas, but he's almost as good:
http://www.rickferri.com/blog/strate...s-fee-matters/
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Old 01-25-2012, 01:40 AM   #7
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I didn't realize that advisers were more like used car dealers than professionals. Thanks!
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Old 01-25-2012, 04:59 AM   #8
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I guess I'm lucky in that I enjoy learning about investing. I agree that you have too too too much at stake to leave it to an advisor (Although you may want an advisor to answer questions or help with questions).

I used to have an advisor, charged 1% a year and I used that time to learn about AA and retirement planning. I don't think having an advisor is a bad thing, but you have to remember if you run out of $$ your advisor isn't going to slip you some cash to pay the bills. It is on you not the advisor so how can you not learn and be the CEO of your retirement?
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Old 01-25-2012, 07:28 AM   #9
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exactly what classes or education do people need to be an advisor? just curious. Does it take a special course of study? or can anyone just put up a sign that says advisor? I have not seen a school that advertises investment planning classes.
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Old 01-25-2012, 07:49 AM   #10
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A fair number of Feds are preyed upon by unscrupulous advisors trying to get them to move their TSP funds to "professional management" when they retire. "It only cost 3% and I made that up" -- sad. I moved my external IRA into the TSP. DWs accounts give us diversity options not available in the TSP.
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Old 01-25-2012, 07:56 AM   #11
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I am still working for the feds, but have moved all of my misc IRAs and 401Ks INTO the TSP.

They are sending out info on the new ROTH TSP option in mid Feb.

Really, if you don't want to take the time to read about the TSP on their website, just pick a lifecycle fund.
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Old 01-25-2012, 08:04 AM   #12
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exactly what classes or education do people need to be an advisor? just curious. Does it take a special course of study? or can anyone just put up a sign that says advisor? I have not seen a school that advertises investment planning classes.
My understanding is that unless regulated by the state, there is no requirement for specific education. There are many certifications that an advisor can get and they have standards and continuing education requirements. Also my understanding is that some products like insurance would require education and a test, due to state regulations.
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Old 01-25-2012, 08:04 AM   #13
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I didn't realize that advisers were more like used car dealers than professionals. Thanks!
I'm not sure who should be more insulted - financial advisors or used car dealers.

Seriously, many financial advisors are both ethical and good at what they do. The problem is trying to identify them among those who have conflicts of interest as Youbet described above, are ethical but not good, good but unethical, or both. Most of us think it is far less risky to do a little investing homework and learn enough to DIY. Companies like Fidelity and Vanguard make it pretty easy.
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Old 01-25-2012, 08:12 AM   #14
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My understanding is that unless regulated by the state, there is no requirement for specific education. There are many certifications that an advisor can get and they have standards and continuing education requirements. Also my understanding is that some products like insurance would require education and a test, due to state regulations.
CFA and CFP are pretty rigorous, certification is managed by the profession and they have set and maintained high standards.
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Old 01-25-2012, 09:19 AM   #15
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But if it were so easy that all it took was a little learning about the subject, why is it so hard to find a decent adviser?
Especially since we have a few hundred on this forum and we don't charge a single cent ...

Of course, you do have to "pay" for a few rude comments (including me ) every once in awhile...
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Old 01-25-2012, 04:07 PM   #16
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I didn't realize that advisers were more like used car dealers than professionals. Thanks!
Not all of them, but far too many of them...

And at least most used car dealers are a recognized quantity with several sources of objective pricing information. But I haven't used a car dealer in over 30 years.

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I am still working for the feds, but have moved all of my misc IRAs and 401Ks INTO the TSP.
They are sending out info on the new ROTH TSP option in mid Feb.
The TSP came along too late for me, and spouse's IRAs are all after-tax contributions, but I'm eagerly watching the Roth TSP. That would drop her IRA expense ratio from 0.40% to... about 0.02%.
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Old 01-25-2012, 05:00 PM   #17
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CFA and CFP are pretty rigorous, certification is managed by the profession and they have set and maintained high standards.
Agreed. Still, my understanding is that even CFPs are only bounded by "suitability" rather than "fiduciary" standards. I don't know this for a fact, but when I was looking at the credentials of CFPs several years back, I saw many who used that designation working for companies who sold financial "product". In my thinking, that automatically precludes a fiduciary relationship.

I could be wrong. I was once, so YMMV.
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Old 01-25-2012, 05:34 PM   #18
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When I retired from NASA I was considering getting CFP certification. I went to work part time for a financial planner who was a friend. When ever I suggested a particular mutual fund for a client from Vanguard or TR Price his response was "I can't make any money putting my clients into those". Based on that, my advice would be, if you don't feel up to managing your own investments, only do business with a fee only financial planner. Any other arrangement puts your interests in conflict with the interests of the planner.
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Old 01-25-2012, 06:27 PM   #19
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I think that when one finally finds an advisor, one often has a false impression that the advisor is constantly looking out for the client, monitoring the clients investments and needs on a very personal level.

I'm sure there are many good advisors (like good plumbers, doctors, lawyers, mechanics, psychologists, the list goes on), yet in the end, one still is just another client/customer to them that is bunched together will all the other clients/customers.
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Old 01-26-2012, 02:42 PM   #20
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Little things like integrity, conflicts of interest, the need to charge enough $$$ to support him/herself + family, the need to be a psychologist and understand your goals, life desires and risk tolerance, etc. If the advisor is employed at a firm, he must try to satisfy your desires while trying to balance the sometimes conflicting desires of his management. For example, management might be giving bonuses for advisors who get clients into fund X and firing advisors who don't, etc.
Which is why so many advisors like me are leaving large firms and going independent. There's no boss telling me what to sell, who to work with, etc. Advisors are leaving big firms like Ed Jones and Merrill in droves to go independent.........

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Working with someone else's resources is, IMHO, a tougher job than working with your own. I tried to help my SIL with some basic AA decisions in her 401k at her request. She thinks I did great and thanks me. I laid awake at night worried something would go wrong despite everything I did being very typical/generic. Never again.......
Welcome to my world........
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