EDUCATION COURSE OVERVIEW
When you work with us you will begin by sitting down with us 1 on 1 to learn about the following topics and how they relate to your investment goals. The Education Course generally includes 1 to 2 hour meetings on 3 to 4 occasions. Course topics include: Understanding your investment options, Fee structures, Historical information about the markets and returns, College savings plans, IRAs, SEP/IRAs, 401k plans, and Why down years matter. We will also show you how to set up, make transactions, invest, and analyze your investment account.
L.O.R.D.S. STRATEGY
Mutual funds are professionally managed investment funds that pool money from
many investors to purchase securities such as stocks and bonds.
In the United States, mutual funds play an important role in U.S. household finances. By 2019, mutual funds accounted for roughly half of the assets in individual retirement accounts, 401(k)s and other similar retirement plans.
• A Mutual Fund diversifies by holding many securities thus decreasing risk.
• Daily liquidity
• Professional investment managers supervise the fund's investments.
• Can participate in investments that may be available only to larger investors.
• Mutual funds are regulated by a governmental body. All mutual funds are required to report the same information to investors, which makes
them easier to compare.
The mutual funds we work with have no front-end or back-end sales commission and are selected based on the following criteria:
Longevity - Funds have to be in existence at least 25 years.
Opportunity - Fund’s recent returns are underperforming its lifetime return. Usually making it a better opportunity than a fund whose recent returns are outperforming its lifetime return.
Returns – Funds historically have annual returns ranging from 12% to over 15%.
Diversity – Funds recommended are specific sectors and unique funds among different industries. Average Fund owns 52 distinct stocks.
Stability – Since 1985, if invested strategically in these funds, there were 35 years of positive returns with only 5 negative return years. The 5 negative years averaged -19.18%. Taking the average of the Dow Jones, S&P 500 & Nasdaq Indexes during the same period, there were 31 years of positive returns with 9 negative return years averaging -17.82%.
Sources: fidelity.com, morningstar.com and finance.yahoo.com.
SAVING FOR YOUR FUTURE; RETIREMENT, COLLEGE & BEYOND
401(k) – Returns average 3-8%. Contribution limits of $23,500 per year or $31,000 if you are age 50 or older in 2025. Even if employer contribution is matching dollar for dollar, returns are often low and much better options are available.
Traditional IRA – You can contribute up to $7,000 per year or $8,000 if you are age 50 or older in 2025. Contribution is tax deductible. At retirement, all distributions are taxable at your ordinary income tax rate.
Roth IRA – Main advantage is if you expect to be taxed at a higher rate during retirement than during your working years.
Sep IRA – If you have your own business you may be able to contribute about 20% of your net earnings up to $70,000 per year in 2025.
529 College Savings - As of 12/31/24 on nysaves.org, NY’s returns since 2003 range 1.78% - 11.85%. Contributions are deductible only on State taxes. Gains are not taxable. Better options are available.
Below is a return table to give you an idea of the long-term effects of the different return rates. Your Investments increase exponentially at the higher return rates of 13% to 15%. It does not represent actual client returns.
BONDS & FEES, ETC. ETC.
Target Date Funds
Fidelity Freedom Funds 2010 to 2030 as of 12/31/24 lifetime returns are 5.93% to 6.97%. Funds
start investing mostly in stocks with some bonds and cash, converting more to bonds and cash
closer to the target date. Funds average down years 28% of the time or a negative year 1 out of 4.
Source: fidelity.com, finance.yahoo.com.
Managed Asset Accounts
Managed by a Brokerage Firm. Available at different risk levels. Our reviews of competitor
accounts show returns of 3% - 9% and annual management fees usually ranging 1% - 2.5%.
After 24 years at 2%, 35% of the investment’s income goes to the Firm, 65% to the Investor.
Stocks vs. Treasury Bonds since 1928
If you invested in 1928, $100 in Treasury Bonds by the end of 2024 was worth $ 7,159
If you invested in 1928, $100 in the S&P 500 by the end of 2024 was worth $ 982,818
Source: http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/histretSP.html
Why Higher Returns May Be Achievable
Our objective is maximize returns by investing into higher returning Nasdaq stock funds. We
attempt to limit our downside exposure by diversifying across specific sectors in different industries.
Therefore, our performance does not necessarily follow the market's, as you can see in the chart
below. Since 1985, our mutual funds have averaged nearly half of the down years, have only gone
down -4.71% more during the average down year and have returned 4.98% more than the average of
the Dow Jones, Nasdaq and S&P.
THE TRUE COST OF ANNUAL MANAGEMENT FEES
Based on our experience, most firms charge an annual management fee of 1% to 2.5% on your account balance. They deduct their fee even if the account has a negative returning year. They make money regardless of your return and share no risk. Below are charts showing the effects of a 1.5% and 2.5% annual fee. Your investment growth is listed in future dollars, however their fees are not since they are deducted yearly. Highlighted in yellow, you can see how much their fees total to after 8, 16, 23, and 30 years. After 30 years a 2.5% management fee amounts to $244,267 on only $100,000 invested with the firm. If you follow the highlighted green amounts, you will see that after 30 years, the 14% returning account would be 7 times the amount of the ones returning 7% after annual fees. The returns listed are for information purposes only and do not represent actual client returns.
WHY DOWN YEARS MATTER?
The more Down Years there are and the more negative they are, the more the increasing negative effect on long term returns. See below the effects of the different return scenarios. The returns listed are for information purposes only and do not represent actual client returns.