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dankirk
08-19-2002, 12:42 PM
I know this is a little off topic here, but I'm not too proud to ask for free advice... Through my employer, I am able to save for retirement in a 401k, or a 457, or both. Should I only save in one of these plans, or put money in both? What is the advantage of one over the other? I am pretty naive when it comes to these things. Thanks, Dan

Hallett19
08-19-2002, 12:46 PM
I don't know too much about that but you have a beautiful boat and a beautiful family!! Where do yo usually boat at ?
But email this guy, he has a radio talk show in LA and all he does is investments and whatnot, he is brilliant. doug@fabian.com , his name is doug fabian.
[ August 19, 2002, 01:48 PM: Message edited by: Hallett19 ]

dankirk
08-19-2002, 01:00 PM
Thanks Hallett! Since I live about 5 mins from the Castaic launch ramp, we usually go there. I try to avoid it on weekends, though. Too many people, and too many rules. I miss the Nor-Cal lakes.
I will email the guy and see what he suggests.
Thanks again, Dan

Hallett19
08-19-2002, 01:06 PM
Oh cool, I live about 30 min from castaic, I go there quite often, when my boat is running :)

dankirk
08-19-2002, 01:25 PM
Cool, If you ever plan on going during the week, let me know. Good luck with your boat!
Later, Dan

Lakemead1
08-19-2002, 01:33 PM
I won't say I'm an expert at risk of sounding brash, but I do know my stuff. I'm a fee only financial planner and work for a large accounting firm.
401k or 457? Hmm, are you a state employee, private corp that subs out work to state maybe? Not sure, I haven't come across the option before, usually it's one or the other.
In any event, max out the 401k, at the very least to the point you get matched by your employer and more if you can. Do a yahoo search for asset allocation or modern portfolio theory. Find a website (I don't know of one off hand or I'd just link it here, but we use specific software from Frontier Analytics) with an asset allocation questionaire and take it. Get your allocation and match up your available invesment options with the allocation (I.E. large cap growth allocation to a large cap growth fund, etc.)
When available, use index funds. Over long periods, about 80% of the active managers fail to beat the indexes because of fees and trading costs, not to mention most couldn't beat the indexes without fees or trading costs built into their funds. This is the great lie Wall Street doesn't want the public to know because the big brokerages make tons of money on mutual funds. Some managers will have a good year or few good years, but over longer terms you're better with passive management (indexing).
Your 401k is the best method of saving for retirement, it defers taxes and that money compounds for you over the long term. Then you retire, and are typically in a lower tax bracket when you withdraw the money so you end up paying less to uncle sam.
Should you retire early (before 59.5 when you can withdraw from a qualified plan withough penalties) look into IRS rule 72T to access your retirement funds without penalty. Basically you can withdraw funds if you do so in substantially equal payments, typically yearly without penalty provided you do so at least until age 59.5 or at least a minimum of 5 years.
The most important factor is your asset allocation though, I think MSN Money has a good one, check into that. I thought I saw one on www.cnnfn.com (http://www.cnnfn.com) too.
The bear market is a good thing for you, and all of us investing on a regular basis because we're dollar cost averaging and buying more shares cheaper. As long as you have a long term time horizon (5 years or more) till retirement or when you'll need the funds invest as much as you can, and don't be afraid to allocate assets to equities. When you get within 5 years to retirement or planned withdrawals from your account, tailor back your allocation by raising the amount of fixed income funds and money markets in your account to reduce risk - the worst thing you could is have to put off retirement or reduce your lifestyle is you get caught in a bear market ill prepared!
Best wishes, and if you have any further questions feel free to email me.
Greg
www.lasvegas***boats.com (http://www.lasvegas***boats.com)

Lakemead1
08-19-2002, 01:47 PM
Hey I found it, it's really basic, but it's here (http://cgi.money.cnn.com/tools/assetallocwizard/assetallocwizard.html)

rrrr
08-19-2002, 01:47 PM
I was a top notch stock picker until March of 2000. Since then I haven't done so good.
:D :D :D

dankirk
08-19-2002, 01:58 PM
Greg,
Thanks for the informative response! I work for the State of California, and can invest in either plan or both. The State does not match any portion due to the fact that they provide my Cal-Pers retirement. The deferred comp is going to supplement my Cal-Pers (which will be 90% of my salary when I retire). I am 32, and plan on retiring at 55. I wish that I could afford to max out both the 401 and the 457, but I can't. Should I put my money in just one plan or divide it into both? Does it matter? I do have a couple of index funds available (Vanguard Total Bond Market Index Fund, and CalPers S&P 500 Equity Index Fund). The State uses a questionnaire provided by Ibbotson Associates to determine asset allocation. I will also look at other sources.
Again, thanks. :D
Dan

Lakemead1
08-19-2002, 02:17 PM
Use the ibbotson questionaire, Ibbotson has their stuff straight for sure.
Do you have the same investment options in either plan?

dankirk
08-19-2002, 02:30 PM
Greg, yes, the options are exactly the same for either plan. I guess the only difference is how and when the money is dispersed. To me the 457 sounds like a better plan, but it is nice to be able to max out both if and when I can afford it. I think I can contribute up to $11,000 in each plan according to the new rules.
Dan

Lightning
08-19-2002, 03:33 PM
Dan,
I'm a Financial Advisor and run my own firm in Southern California (San Diego). A majority of my clients are civil service employees and have the same retirement plan setup; usually 401(k), 457, and PERS. FYI - maxing out the plans available through your employer might not be the best option for you, especially if they do not provide any matching on the funds, it just depends on your situation. If you want to chat let me know, I can give you my phone number or send me an email - whichever you prefer.
Take care,
Ari

hoolign
08-19-2002, 04:29 PM
I get quite a bit of info from here,there is no pop ups ,just get on the list and they send some informative items
http://www.fool.com/index.htm

Floatin'
08-20-2002, 10:01 AM
The average investor is far better off investing in index funds over the long haul. However if you are serious about the return "of" your money "Buy and Hold" is not recommended. Over a 10 year perior the market usually sees a cycle of swings 3 times. So keep a close eye on your investments and do not be afraid to sell your holdings and put your money into "Money Market" also I would suggest your join this club.
www.investors-club.com (http://www.investors-club.com)
I have made alot of money while all my friends has been losing their asses.

Lakemead1
08-20-2002, 12:25 PM
However if you are serious about the return "of" your money "Buy and Hold" is not recommended. Over a 10 year perior the market usually sees a cycle of swings 3 times. So keep a close eye on your investments and do not be afraid to sell your holdings and put your money into "Money Market" also I would suggest your join this club.
Not to be a smart ass here, so don't take it that way, but you really think you can time the market?
NO ONE can time the markets, it's just not possible considering the best and brightest on wall street fail to beat the indexes, if they could time the market wouldn't they all be way above the indexes?
From 8/6/82 to 10/17/95 if you stayed invested in the S&P your return was 14.2%, if you missed only the 10 best days, your return dropped to 9.9%, if you missed the best 20 days, your return dropped to 7.4%, 30 days out your return drops to 5.2%, 40 days - 3.3% and 50 days OUT OF 3,330 TRADING DAYS your return is a whopping 1.5%.
It's a little known fact that over the last 15 years the average growth mutual fund investor earned a whopping 4%, less than buying Govt. bonds - why? Because they jump in and out of funds chasing the hot manager on the cover of Money magazine instead of having a solid plan, and sticking with it.
Ok, I'm off my soap box now, this is all just my opinion, and the only reason I offer my neck up on the chopping block is I genuinely believe Dankirk wants to retire someday, and I hope I've provided some insight for him.
Dan, I say just invest in Las Vegas Hot Boat shirts at www.lasvegas***boats.com, (http://www.lasvegas***boats.com,) they're sure to be a collectors item :D

dankirk
08-20-2002, 12:59 PM
Wow, I really appreciate all the great advice! I went to the Motley Fool website, and they seem to think that a Stock Index Fund is the way to go. This is what they say,
"The statistical evidence proving that stock index funds outperform between 80% and 90% of actively managed equity funds is so overwhelming that it takes enormously expensive advertising campaigns to obscure the truth from investors. In fact, one of the reasons that actively managed equity funds underperform stock index funds is because they are spending so much money to advertise -- money that otherwise would be invested on behalf of the mutual fund shareholders."
Like I said before, I am ignorant about this stuff, I do have a fund available called the CalPers S&P 500 Equity Index Fund. Are they suggesting that I put all of my retirement into this one fund? According to my assett allocation questionairre, I fit an "aggressive" profile. There is a fund called the "Gartmore Investor Destinations Series Aggressive Fund" which is diversified across 6 major assett classes. Isn't it better it invest in a more divesified fund?
Again, thanks for all the insight.
Dan
[ August 20, 2002, 02:00 PM: Message edited by: dankirk ]

SmartMoney
08-20-2002, 01:09 PM
Lakemead1......I'm with you! I'm a Financial Advisor as well and people have to realize that they are taking more risk by trying to time the market then to properly allocate there assets, DCA, rebalance and invest for the long haul. It cracks me up because some individuals think they have figured out this magical timing system for the market. Maybe some did get out at the right time when this Tech bubbble burst back in 2000. And you know what, that's GREAT! But ask them when to get back in and into what area? They have no idea. These people used the market to gamble....not to invest for the long term. Lakemead1 gave some great advise - use it and you'll be safe in the end when you need it!

Floatin'
08-20-2002, 02:53 PM
I'm never offended by someone's opinion that is different. All I'm saying is that you can stay in this market as it goes up and you can stay in it as it goes down that is your personal dicission. I hope you are long when it goes up and I hope you are short as it goes down.(2 yrs.)
Does anybody have a crystal ball and can tell you what tomorrow will bring? NO... But keep a close eye on your own investments and never ever trust someone to care for your hard earned dollars like yourself.
We have been in a bear market for 2 years and if you rode this market all the way down and would like to retire now you probably have less than half the money you had (equity portfolio) 2 years ago. I feel sorry for all my friends that had nice fat stock accounts and did not sell when the market turned down. I could care less about percentages,that is broker talk. Money talks period thats all that matters.
Finally "There is no glory in losing money" Do not be affraid to take profits when you have them and put those profits in a safe place.

Lakemead1
08-20-2002, 03:18 PM
No offense Floatin' but do you fix your own car (maybe), do your own taxes (maybe), but can you diagnose your own medical problems (not that you have any, other than dillusions of market timing j/k, but hypothetically?)
For example, you go to the doctor not knowing what's wrong with that burning when you pee (ha ha, I'm going to make this funny :D ), do you tell the doctor what is wrong with that burning, why, and how to fix it? No! (unless you have that problem often :o ) The doctor is the expert and he fixes you. I do the same thing for clients, I help them achieve their goals, if they need help (and most do) .
The point I'm making is that there are many hacks out there selling product and following wall street's great philosopher's, making comissions, and selling whatever ibanking deal their wirehouse has that day. I'm not one of them (although I used to be but changed career paths to being a financial planner so I could have the freedom to do what's right for the client). Dankirk was just asking for advice and I gave it. I'm glad you can respect another opinion, as I respect yours.
But, to say NO ONE will look out for your money like you will is just plain untrue. Maybe you've had a bad experience, maybe you're just smart enough to do it yourself and you do just fine with it, I don't know. But, I'm compensated with a base salary, so I have a job and I give my best advice, I have no other agenda (the firm I work for charges fees to the client for my services - boy, I sound like a hooker eek! )
If any of you reading this thread needs advice, find an established fee only financial planner, preferable a CFP (Certified Financial Planner) for help, because you'll get unbiased advice.
Dankirk, I have to be honest and say I would need to know more about that fund before saying it's good or bad. Feel free to email me the info and I'll look at it, then we can converse via email so as to stop boring everyone. DEFINITELY DO NOT PUT ALL OF YOUR MONEY IN THE S&P - there's something to be said for asset class diversification, and that's only representative of US Large Cap Growth and Value, no small cap, no intl., no fixed income, etc. etc.
Floatin - may you buy low and sell high grasshoppa :D
Best investing wishes to all!

SmartMoney
08-21-2002, 07:50 AM
Floatin.... I understand and can feel the point you are trying to make. But there is more to a long term financial plan/portfolio than timing ALL of your dollars in and out of the market. Nobody should be afraid of taking profits! I think people need to remember that a majority of there assets should be well diversified across different asset classes.(Let's say 80%) Now if he or she would like to buy and sell stocks, maybe some sector funds, whatever the case may be, then your only risking a small portion of your overall portfolio on different stock or sector bets. And if it doesn't work out than you haven't lost your entire savings, just a small amount. And every time you get out of a position you've got to pick when and what to get back into? History has shown that in the long run the stock market has provided much better returns than any savings account or safe deposit box?!?!? Different strategies will work in different market environments..... but true asset allocation will always be there for your in the end. And the nice thing about it is that you can continue to invest on a monthly basis with this type of model regardless of what the market is doing. On average you'll be buying in at a lower price and when the market does return you will own more shares, therefore making a greater rate of return on your dollars.....instead of waiting to gain enough confidience to get back in and you will have probably missed a larger percentage of your gain!

Floatin'
08-21-2002, 08:32 AM
The bottom line is if you dollar cost average into the market every month over the long haul (20 yrs)? you will be buying some of the market at the top and some at the bottom and you will fall somewhere in the middle. Everyone has a different risk tolerance level and if you are diversified ie stocks,bonds,real estate,gold, and last but never least cash things should work out in the long run.
wink Now I have to go and do a root canal on myself :D
Life's Good
Floatin'

SmartMoney
08-21-2002, 08:53 AM
EXACTLY!!! And most people don't know or understand what there OWN risk tolerance is.... That's why they need a professional to help them analyze and understand where they should be putting there assets. I too must go back to work so that I can help people who need and want to be helped with there financial planning. It seems as though you are one of those who Thinks he is a jack of all trades. You even do your own Root Canals!?!?!

burning cole
08-21-2002, 10:33 AM
95.3% of your returns are going to come directly related to asset allocation. Lake mead has it right. Use the ibbosten questioneer and then pick the funds that best suit your risk tollerance. Floatin' index funds are a passive investment, probabally not the best suited for this type of situation.

burning cole
08-21-2002, 10:35 AM
dankirk if you need some help with investment options go to a professional. If you need help I am available.

burning cole
08-21-2002, 10:37 AM
Floatin, are you going to dollar cost average in Worldcom or Tyco. The reason that you use a professional is to steer you in the right direction but more importantly keep you to a plan and not let you make rash decisions on either buying or selling. Why do you think that most institutional investors do so well? Because they do not care they always do what is right.

burning cole
08-21-2002, 10:40 AM
Floatin' 90% of the people in the US do not have the balls or the knowledge to go short. What makes you think that you are smarter then the market. If you are then I want to invest with you. If you go short you better have that boat paid off cause your going to loose it in the long run. Never bet against the market. Support it.

bulldogdad
08-21-2002, 12:38 PM
hey lakemeade1,you sound like you know whats going on,my employer just went with piper jaffery,after a long and toilsom relationship with merllil lynch. We were doing pretty good until the downfall last year, anyway,we buy every week,which ,i'm no expert at this,but seems to offset the high and lows during the market right now. liked you're tip on the point you can start taking money out at 59,hell i might die before 65! buy the way since i've been at this company my employer has matched at least dollar for dollar,and has gone high as 2.35 per 1 dollar,have you heard of anyone matching this high?
:D

Charley
08-21-2002, 12:43 PM
OK , OK Lake Mead, Floatin, Burnin Cole.......how do you guys feel about improving our schools?? Cause Iv'e been investing in the California Lottery for over 10 years now and that's all I have to show for it! wink
seriously though guys...Long Term....how about Real Estate?

Chestah Cheetah
08-21-2002, 01:15 PM
Charley:
seriously though guys...Long Term....how about Real Estate?Nuff said!

Lightning
08-21-2002, 01:32 PM
I think that you not only be diversified but you also need to have a well built plan in place that takes into account your clearly defined goals. Clearly defined means not only retiring by a certain age, but also determing how much money in todays dollars is needed at that point. Once that is determined, it's time to figure out how much needs to be saved to get there. It sound pretty basic, but very few people do this succesfully. That's why people hire financial planners such as Lakemead1, SmartMoney, and myself.
Most people out there shoot from the hip with investing. For example, "I heard that's a good fund, so I invested in it." - They usually do this without even evaluating if the fund is the right one for them. I call it the "shot gun effect" - because that's what the portfolio ends up looking like by the time they end up coming in to see a financial advisor.
On the other hand, there are a few people out there that realize they cannot do all things effectively. These people are usually referred to as "successful". They work hard at making money, and find people that specialize in certain areas to do things for them so they can focus on making more money. They hire; CPA's to offer them proactive tax advice; Financial Advisors to help them succeed financially; Secretary's to answer the phones; etc...
The bottom line is this; there is no magic solution that works for every investor or client.
Some people may benefit from active management others many benefit from passive management.
Some people will benefit from a 401(k) others may not.
Some people need a proactive CPA that can offer advice about tax reduction strategies, other people need "joe's tax preparation service".
[ August 21, 2002, 02:35 PM: Message edited by: Lightning ]

HavasuDreamin'
08-21-2002, 01:46 PM
Lakemead 1 & Lightning have given you excellent advice. If your investment horizon is for a longer period of time, don't try timing the market, you end up turning paper losses into realized losses. Four years of finance classes at USC taught me that there are only a handful of investors who have been able to out perform the market (although many claim to have done so), one of which is Warren Buffet. You won't beat the market over 20-30 years, and if you can, your in the wrong business wink . Index funds are your best bet IMHO (assuming you have 20+ years of time to weather the ups and downs). The average return in the market is about 10% - 12% per year........AVERAGE! When in doubt seek professional help, but make sure the professional is looking out for your best interest.........meaning, if he/she doesn't ask you what you are trying to accomplish right from the get go..............go somewhere else.
Good Luck
PS........isn't funny how quickly the "e" investing died?
[ August 21, 2002, 03:10 PM: Message edited by: HavasuDreamin' ]

burning cole
08-21-2002, 02:04 PM
When in doubt seek professional help, but make sure the professional is looking out for your best interest.........meaning, if he/she doesn't ask you what you are trying to accomplish right from the get go..............go somewhere else.
Probablly the best advice yet.

Floatin'
08-21-2002, 03:32 PM
I don't have a problem with anyone consulting a professional before investing but I don't hear any of you professionals saying that the client should become educated and do some homework on their own. The first homework I would do before letting a professional manage my money or investments is to check their track record, how long have they been giving financial advise? Tell them you want to see what they have done over a long period of time, say since at least 1987. Then look over their shoulder and question anything and everything that you don't understand.
And always remember it is YOUR HARD EARNED MONEY not theirs.
Ask yourself this question before investing,
"Am I more concerned about the return ON my money or the return OF my money"

Floatin'
08-21-2002, 03:49 PM
burning cole:
Floatin' 90% of the people in the US do not have the balls or the knowledge to go short. What makes you think that you are smarter then the market. If you are then I want to invest with you. If you go short you better have that boat paid off cause your going to loose it in the long run. Never bet against the market. Support it.Does your financial advisor understand 1. How to use "PUTS" as insurance for your "Long Positions"
2. Does He/She understand "Writing Covered Calls"
3. Does He/She use "Stop Loss Orders"
I can go on and on about ways to protect your investments however most people don't want to hear it. Sadly for them none of my friends did.
Most financial advisors can tell you your asset allocation but you need to manage that allocation properly or else.
Everything I own is paid for in cash. That was going against the advise of professionals but I like to sleep at night

Lakemead1
08-21-2002, 03:59 PM
The first homework I would do before letting a professional manage my money or investments is to check their track record, how long have they been giving financial advise? Tell them you want to see what they have done over a long period of time, say since at least 1987 and I had said
If any of you reading this thread needs advice, find an established fee only financial planner, preferable a CFP (Certified Financial Planner) for help, because you'll get unbiased advice.
Floatin', I kinda said the same thing, but you expanded on it - thanks!
then from bulldogdad
. liked you're tip on the point you can start taking money out at 59,hell i might die before 65! buy the way since i've been at this company my employer has matched at least dollar for dollar,and has gone high as 2.35 per 1 dollar,have you heard of anyone matching this high?
I had said
(before 59.5 when you can withdraw from a qualified plan withough penalties) look into IRS rule 72T to access your retirement funds without penalty. Basically you can withdraw funds if you do so in substantially equal payments, typically yearly without penalty provided you do so at least until age 59.5 or at least a minimum of 5 years.
Keep that in mind bulldogdad, I plan on taking some out before 59.5 too :D
I don't have a problem with anyone consulting a professional before investing but I don't hear any of you professionals saying that the client should become educated and do some homework on their own. Floatin', this is a very important part of working with a financial planner. I don't do any discretionary (where someone trades for you) accounts. I actually do something like this:
1)meet with client to determine needs goals and objectives, if it looks like there's a good fit between advisor and client, move on to stage 2 (I say that, because I've flat out turned down clients who want me to trade their accounts and follow the hot stock or sector)
2)develop and Investment Policy Statement between advisor and client, outlining needs, goals, objectives, risk tolerance and time horizon. Have client approve and client and advisor sign said policy
3)present investment options to client and educate client as to the options and how they work. This is in conjuction with the asset alloction. Educate client on the inner workings of their investment plan as will be implemented.
4)After the client understands, and signs off on the plan, Implement it!
5)Monitor and rebalance as necessary to stay with plan.
If you want a good advisor, quiz that person, make sure they do those things!
Regards
Greg
www.lasvegas***boats.com (http://www.lasvegas***boats.com) (invest in LVHB Tshirts! they'll be a collector's item someday :D )

Lakemead1
08-21-2002, 04:05 PM
BTW, I forgot to respond to bulldogdad's match thing. Nope, I haven't heard of any company matching that well, most employers are cheap and don't want to match at all, or not much. You have a generous employer, and take advantage of it!
and another BTW. I don't agree that a 401k "MAY" be a good investment alternative. Also, someone said it "Might Not" be the best thing for you.
That's just wrong. Even if there is no match, add up the immediate tax savings, the compounded growth and tax savings on that, the flexible withdrawal options for first home college expenses or early withdrawal under IRS rule 72T, even add in there loan provisions for emergency, and A 401K IS THE BEST INVESTMENT ALTERNATIVE!
There, I said it, I respect other's opinions but I'm allowed to disagree. I've actually turned down clients who wanted to invest with me because I told them to max out their 401k first.
Can we talk about boating now :rolleyes:
I'm ready for Saturday and getting out to Mead again, anyone else going out this weekend?

Floatin'
08-21-2002, 04:19 PM
I'm sure all of you advisors are very good at what you do!!! :) I could talk about money all day but now it's Drinkin' & Floatin' time

Lakemead1
08-21-2002, 05:06 PM
I'll drink and float to that... on Saturday (or maybe I'll start tonight :rolleyes: )

Starloans
08-21-2002, 09:04 PM
Here you go!
If you had bought $1000.00 worth of Nortel stock one year ago, it would now be worth $49.00.
With Enron, you would have $16.50 of the original $1,000.00.
With Worldcom, you would have less than $5.00 left.
If you had bought $1,000.00 worth of Budweiser (the beer, not the stock) one year ago, drank all the beer, then turned in the cans for the 10 cent deposit, you would have $214.00.
Based on the above, my current investment advice is to drink heavily and recycle
Of course you can always substitute silver bullets for the Bud.