Investment Advisers

Advisers come in different guises. They may call themselves a variety of comforting names; wealth advisers is one. They may be independent practitioners, or members of a special department set up by a conventional stock brokerage or investment banking firm or commercial bank.

They may be actually specializing in the sale of life insurance and annuity products. To round out their sales portfolio, they may even sell mutual funds on the side.

They make their earnings from sales commissions from what they sell you or from fees on your assets they manage.

But they are selling something and therefore, their advice may not be truly independent.

Aside from all that, they can be costly. ( See the Earl J. Weinreb NewsHole® comments.

Thrift Savings Plans or TSPs

The Thrift Savings Plan or TSP, administered by the Federal Retirement Thrift Investment Board, was created for U.S. civil service employees and uniformed members of armed services. Under the TSP program, individuals can make contributions to retirement savings.

The TSP is a part of the Federal Employees Retirement System, or FERS. Others include the FERS annuity and Social Security.

It’s designed to closely resemble what’s available in the private sector, with tax deferred contributions to 401ks. It is also open to employees covered under the older Civil Service Retirement System or CSRS.

There are five funds; all can be selected in varying amounts, including a diversified mix in the S&P 500; a mixture of corporate and treasury bonds.

Investing Overseas?

The financial media will often discuss investing at least some of your funds overseas. But nothing is definitive about what is global diversification of investment.

Many large American companies are doing business overseas. So investing in the S&P 500 will give you a measure of global diversification.

If you do buy overseas investments to broaden this strategic step, there are emerging or developing, as well as developed countries in which to participate. Using indexed funds or exchange traded funds (ETFs), you can invest around the globe with varying regional emphasis.

Use indexed funds which are not hedged against currency value changes. This also helps diversify against inflation in the U.S. and acts as a currency hedge.

Stock Broker Obligations

If the Securities and Exchange Commission has its way, stock and bond brokers will have to observe fiduciary rules when discussing investments with clients. In the past, all they were obligated to do was see that investments were suitable for their clients.

Under fiduciary rules, brokers could be sued by tort lawyers for any imagined infraction and/or lack of explanation. This makes the broker’s job too scary for any practitioner to contemplate keeping.

It’s a scary possibility even for efficient stock brokers, that can drive them all out of business.

Keep tuned.

Corporate Bonds, Duration and Inflation

There is a possible solution to the quandary of bond ownership and inflation. I refer you to my Earl J. Weinreb NewsHole® comments.

Most investors who look ahead many years, some as much as fifty, tend to overlook the principle of duration..

Overcoming inflation with the wise use of bonds concerns constant reinvestment in low-cost mutual funds or ETFs (Exchange Traded Funds).

The proper implementation of duration should suit the investor’s personal time horizon. That is, how long the bond fund will be held before the funds will be needed.

Corporate bonds can help overcome inflation and the dearth of income and potentially limited growth from stocks.

But be sure you invest in a low-cost bond mutual fund or ETF where interest earned is automatically reinvested in shares of the same fund each month.

Your Portfolio Earnings in The Future?

I find a major disconnect among investors on Main Street and Wall Street about what they expect to earn from their securities portfolio over the next ten, twenty, even fifty years, after tax and inflation.

Admittedly, that is a tough prediction because investors must take income taxes and inflation into account, along with projected securities’ yield and market returns. None of that is simple.

In one survey I noted net/net/net predicted return by a number of experts over the next fifty years. Interestingly, returns ranged between 2% and 3% annually.

That is unusual and shocking to many. Investors’ experience from the past would have had expectations of close to 6%.

In other words, many securities markets observers believe that potential, along with taxation and inflation bites, will reflect dismal future market returns.

I have written about alternatives and will take them up in future blogs. ( See the Earl J. Weinreb NewsHole® comments.

Why Use Financial Advisers?

Some financial and business insights that will make it easier to invest without having to hire an advisor whose fees will take 15%, 20% and more of your investment earnings every year, slice by slice. Without you feeling it until it’s too late.

Figure it out for yourself. That’s what it costs when you pay a 1 ½% management fee each year on your assets, and you’re getting earnings of 6% a year on average.

The lessons result from my observing the successes, failures and foibles on Wall Street. You probably have seen my Earl J. Weinreb comments on this subject many times in the past.