Retirement Investing:
The Five Most Important Things You
Need to Know
LSU Faculty Senate Workshop
April 19, 2016
Don Chance, PhD, CFA
James C. Flores Chair of MBA Studies &
Professor of Finance
And Here They Are:
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Don Chance - LSU Faculty
Senate Workshop
Diversify
Do not be overwhelmed or
impressed by the choices
Do not get caught up in
performance
Cost is everything
Do it yourself
April 19, 2016
2
Diversify


“Don’t put all of your eggs in one
basket”
But – how far should you go?

Don Chance - LSU Faculty
Senate Workshop
Can you get over-diversified? Too
many eggs in one basket?
April 19, 2016
3
Do not be Overwhelmed
or Impressed by the
Choices
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Investment choices
Mutual funds
 Individual stocks & bonds
 ETFs (exchange-traded funds)
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Size, value, global/emerging, retirement
date, asset allocation, blended
There is an enormous amount of
duplication, repackaging, and just plain
clever marketing
Don Chance - LSU Faculty
Senate Workshop
April 19, 2016
4
Do not Get Caught up in
Performance
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Don Chance - LSU Faculty
Senate Workshop
Money chases money
There is no performance
consistency, because …
No one consistently knows what
the market will do
Every time you chase
performance, you give them
money
Performance is fleeting
April 19, 2016
5
Cost is Everything!

What are the components of the
cost?

Fund management and
administration
 which
includes commissions, bidask spreads
 the funds pass on this cost to you,
and,
 most people pay too little attention
to cost
Don Chance - LSU Faculty
Senate Workshop
April 19, 2016
6
(Cost is Everything!)
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Don Chance - LSU Faculty
Senate Workshop
Assume you deposit $5,000 in
1980 and increase it by 5% a year
through 2015
That would add up to about
$508,000 saved
Look at how much money you
would have under the following
alternatives:
April 19, 2016
7
(Cost is Everything!)
No cost
ETF
Low Cost Index Fund
Typical Index Fund
Average Equity Fund
Don Chance - LSU Faculty
Senate Workshop
Balance Difference Capture %
$2,824,685
$2,789,781
-$34,904
98.76%
$2,789,781
-$34,904
98.76%
$2,596,729 -$227,957
91.93%
$2,377,931 -$446,754
84.18%
April 19, 2016
Fees Paid
$14,686
$14,686
$94,818
$183,188
8
(Cost is Everything!)
Don Chance - LSU Faculty
Senate Workshop
April 19, 2016
9
(Cost is Everything!)
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Don Chance - LSU Faculty
Senate Workshop
Over 35 years, after accounting for
the interest you could have earned
on your money, you invested a
total of $906,659.
After accounting for compounding,
the mutual fund companies took
the following:
April 19, 2016
10
(Cost is Everything!)
ETF/Low Cost Index Fund
Typical Index Fund
Average Equity Fund
Don Chance - LSU Faculty
Senate Workshop
You Invested
$906,659
$906,659
$906,659
April 19, 2016
They Kept
$34,904
$227,957
$446,754
Pct %
3.85%
25.14%
49.27%
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(Cost is Everything!)

LSU ORP (alternative to TRS)
Three fund companies (TIAA,
Voya, VALIC)
 82 fund choices
 Average cost: 0.38%
 Maximum cost: 1.14%
 Minimum cost: 0.04%
 These are pretty good choices

Don Chance - LSU Faculty
Senate Workshop
April 19, 2016
12
(Cost is Everything!)

LSU Supplemental (403b & 457)
Six fund companies (TIAA, Voya,
VALIC, MetLife, Fidelity, Empower)
 316 fund choices
 Average cost: 0.74%
 Maximum cost: 2.21%
 Minimum cost: 0.04%
 Some good choices but too much
expensive junk
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Don Chance - LSU Faculty
Senate Workshop
April 19, 2016
13
(Cost is Everything!)
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Homework
Identify which funds you are in
 Go to http://www.lsu.edu/hrm/
 Choose “Employee Benefits”
 Choose “Additional Employee
Benefits – Retirement”

 Choose
“ORP Vendors”
 For each vendor, click on the link
that mentions “Fund Performance”

Don Chance - LSU Faculty
Senate Workshop
Compare the cost of your funds to
0.7%
April 19, 2016
14
(Cost is Everything!)

Homework (continued)
Back to “Employee Benefits”
 Choose “Additional Employee
Benefits – Supplemental
Retirement”

 Choose
“ORP Vendors”
 For each vendor, click on the link
that mentions “Fund Performance”

Don Chance - LSU Faculty
Senate Workshop
Compare the cost of your funds to
0.7%
April 19, 2016
15
Do It Yourself
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Don Chance - LSU Faculty
Senate Workshop
Buy and hold
Invest steadily, as long as you
remain confident of the long-run
performance of companies
Resist the temptation to trade
frequently
Ride out the storms, if you can
stand it
April 19, 2016
16
To Recap
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Don Chance - LSU Faculty
Senate Workshop
Diversify
Do not be overwhelmed or
impressed by the choices
Do not get caught up in
performance
Cost is everything!
Do it yourself
April 19, 2016
17
Many thanks!
Don Chance - LSU Faculty
Senate Workshop
April 19, 2016
18