Investing with FC is a long term investment........not short term.......if you cant look farther then your next pay check, dont go with FC.....cause it is not for you!! What seems like a rip off in the short run is actually a worth while investment IN THE LONG RUN!!! But the problem is that people pull out of their investments because they need money for that new car or wedding or whatever.
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First Command Financial Planning: Their Insurance and Mutual Funds Are Rip Offs
- Thread starter johndd321
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First Command called me a week after finishing OCS. I didn't like how the salesman pushed being a retired Colonel... I have no problems hanging up on a telemarketer, but as a new ensign it was dificult to get rid of the guy. I think that's a sketchy selling tactic.
Make sure you max out TSP and put $250 a month into your ROTH!
Make sure you max out TSP and put $250 a month into your ROTH!
johndd321 said:
I especially like Vanguard because of their ultra low expense ratios. I started putting money in a Vanguard IRA in '97 as a young E-5 and put away money each year for 5 years until '02, when baby 2 and PCS to an area with no job market for my husband with a tanked stock market made investing unappealing. When they started TSP for active duty, I started with the max input and have been upping my % every time they let us. I personally dislike First Command both because they have such a huge load (it takes a LOT to overcome the load) and their selling tactics strike me as just plain wrong. I'm definitely in it for the long haul, but if you check out any personal finance magazine you will find that there are always people who prefer managed investments with big loads (like FC), and those who prefer index and low load managed funds.
I went to one of First Command's dinners as well as the private one on one meeting. At the time I did not know much about investing other then what I have heard from the media and family. Even with this limited knowledge, I did not learn anything from that meeting. Did anyone else feel the same way?
The red lights started going off in my head real quick. To me this is what I thought they where doing.
1. They get you to realize how important investing is (which it is)
2. They then try to confuse you and make you think it is way too hard to understand on your own.
3. They then give you the sales pitch of how they can invest for you so you can have more free time. You say yes and then your dependency on their advice is established.
I became motivated to invest from doing research. If it comes between not investing and investing through First Command, by all means do First Command (though I would pay someone cheaper). If you have some time to research, then there and better options out there.
I was thinking more about the long term instead of the short term when I couldn’t get past the 50% loaded fund they were selling. It has a greater impact on the long term because of your lost initial investment as well as the continuing fees that you will be charged.
The red lights started going off in my head real quick. To me this is what I thought they where doing.
1. They get you to realize how important investing is (which it is)
2. They then try to confuse you and make you think it is way too hard to understand on your own.
3. They then give you the sales pitch of how they can invest for you so you can have more free time. You say yes and then your dependency on their advice is established.
I became motivated to invest from doing research. If it comes between not investing and investing through First Command, by all means do First Command (though I would pay someone cheaper). If you have some time to research, then there and better options out there.
I was thinking more about the long term instead of the short term when I couldn’t get past the 50% loaded fund they were selling. It has a greater impact on the long term because of your lost initial investment as well as the continuing fees that you will be charged.
That's what worries me so much about the front-loaded funds. Isn't it in your best interests to have more principal in the account in the beginning? I'm no investment expert, but it would seem that would be in your best interests, at least as long as the market does well.
So far, I have been very happy with FC... but that doesn't mean it will work for everyone. All of the reps I have talke dot have been very willing to explain everything to someone like me who has never taken a consumer ed class, much less any sort of advanced investment education. With an 8 year committment after wings (at least) I'd say I (any most other people on this board) are in it for the long haul. Think about it. If you want to play with stocks, don't go there. I keep a separate account to do that.
On a separate note (sort of)- about taking care of your people- If you aren't (can't) afford to pay FC half of your investment for the first year (ie Junior Enlisted) then FC is definately not the plan for you. Could be why they don't let Junior Enlisted invest with them!!! (I'm not sure but I think you need to be an E-5.) So they're not quite as evil as the ealier posts imply.
On a separate note (sort of)- about taking care of your people- If you aren't (can't) afford to pay FC half of your investment for the first year (ie Junior Enlisted) then FC is definately not the plan for you. Could be why they don't let Junior Enlisted invest with them!!! (I'm not sure but I think you need to be an E-5.) So they're not quite as evil as the ealier posts imply.
The price to invest long term with First Command
The difference in cost between a load and no load fund is a good question. I should have posted a numerical example a while back. Let’s take a look. One of FC’s funds, AIM Summit, which has been sold recently to new FC clients. It has an expense ratio of 0.99%. Summit will have a 50% front end load for the first year.
Now let’s compare Summit to the Vanguard 500 index fund with an expense ratio of 0.18 and no load. We use the Vanguard 500 index comparison since it is a large cap fund as well. I will use 0.2% expense ratio instead of .18% for Vanguard so we can use the software from the link below. We will also need a few other assumptions.
1. Both funds will be made into an IRA (so no taxes at the end)
2. We plan on only contributing $3,000 this year. The full amount will go to the Vanguard fund. You will only get to contribute $1500 to the AIM Summit because of the 50% fee.
3. Every year we will contribute $3000 to both IRAs (I know the contribution goes up the next few years, but lets keep it simple)
4. Lets assume that the SP500 composite index (not to be confused with Vanguard 500 index) will do as well as the stock market average since1926, which is between 10% and 11%. Let say the SP will average 10.5% to be safe. We will make 10.5% our average return for both funds.
5. Assume an inflation rate of 3%
6. We will invest for 40 years.
So what is the result?
AIM Summit will be worth $1,636,109.
The Vanguard 500 index will be worth a whopping $2,024,947.
The difference is $388,838!
The 50% load and higher expense ratio is a high price to pay for investing through FC for the long term and this is only one fund!!
The difference would be greater if we invested more every year and had a higher initial investment! Check out the link below and play with the numbers. You have to do the calculations twice. Once for the non load fund. Then cut that in half and do the calculation for the 50% load fund.
http://www.superstarinvestor.com/ga...orbes.com/tools/calculator/fund_expense.jhtml
But wait, I have one more thing to add. Large Cap Index funds have performed better then 96% of large cap actively managed fund. Summit is an actively managed fund. The chances of beating the market are slim and the chances of Summit beating Vanguard SP500 are close to nil when you factor in expenses. Remember the Vanguard 500 index is not trying to beat the market.
Summit has done worse than the SP composite index an average of 3.45% for the last 10 years. Vanguard 500 index has only done .07% worse on average the last 10 years. You will start with less investment principal with FC and will probably never catch up to someone with the Vanguard 500 index. Remember, it is hard to outperform the market. It will be an uphill battle for Summit as well as other FC funds to beat Vanguard 500. Let us do the calculation again considering how the two funds have done in comparison to the SP 500. This time we will have Summit average 7.12 % a year (10.5-3.45+.07). Our 40 year return for Summit will become $738,675.
Subtract the difference with what you would have made with Vanguard 500 and you would get $1,286,272. That is a very high price to pay for investing long term with first command.
FC’s Summit and Fidelity Destiny have performed worse than the market and their peers. I wonder why FC sold such bad investments?
So the moral of the story is this. You can’t control how the market will do, but you can control costs!
References: John C Bogle: Common Sense on Mutual Funds
The difference in cost between a load and no load fund is a good question. I should have posted a numerical example a while back. Let’s take a look. One of FC’s funds, AIM Summit, which has been sold recently to new FC clients. It has an expense ratio of 0.99%. Summit will have a 50% front end load for the first year.
Now let’s compare Summit to the Vanguard 500 index fund with an expense ratio of 0.18 and no load. We use the Vanguard 500 index comparison since it is a large cap fund as well. I will use 0.2% expense ratio instead of .18% for Vanguard so we can use the software from the link below. We will also need a few other assumptions.
1. Both funds will be made into an IRA (so no taxes at the end)
2. We plan on only contributing $3,000 this year. The full amount will go to the Vanguard fund. You will only get to contribute $1500 to the AIM Summit because of the 50% fee.
3. Every year we will contribute $3000 to both IRAs (I know the contribution goes up the next few years, but lets keep it simple)
4. Lets assume that the SP500 composite index (not to be confused with Vanguard 500 index) will do as well as the stock market average since1926, which is between 10% and 11%. Let say the SP will average 10.5% to be safe. We will make 10.5% our average return for both funds.
5. Assume an inflation rate of 3%
6. We will invest for 40 years.
So what is the result?
AIM Summit will be worth $1,636,109.
The Vanguard 500 index will be worth a whopping $2,024,947.
The difference is $388,838!
The 50% load and higher expense ratio is a high price to pay for investing through FC for the long term and this is only one fund!!
The difference would be greater if we invested more every year and had a higher initial investment! Check out the link below and play with the numbers. You have to do the calculations twice. Once for the non load fund. Then cut that in half and do the calculation for the 50% load fund.
http://www.superstarinvestor.com/ga...orbes.com/tools/calculator/fund_expense.jhtml
But wait, I have one more thing to add. Large Cap Index funds have performed better then 96% of large cap actively managed fund. Summit is an actively managed fund. The chances of beating the market are slim and the chances of Summit beating Vanguard SP500 are close to nil when you factor in expenses. Remember the Vanguard 500 index is not trying to beat the market.
Summit has done worse than the SP composite index an average of 3.45% for the last 10 years. Vanguard 500 index has only done .07% worse on average the last 10 years. You will start with less investment principal with FC and will probably never catch up to someone with the Vanguard 500 index. Remember, it is hard to outperform the market. It will be an uphill battle for Summit as well as other FC funds to beat Vanguard 500. Let us do the calculation again considering how the two funds have done in comparison to the SP 500. This time we will have Summit average 7.12 % a year (10.5-3.45+.07). Our 40 year return for Summit will become $738,675.
Subtract the difference with what you would have made with Vanguard 500 and you would get $1,286,272. That is a very high price to pay for investing long term with first command.
FC’s Summit and Fidelity Destiny have performed worse than the market and their peers. I wonder why FC sold such bad investments?
So the moral of the story is this. You can’t control how the market will do, but you can control costs!
References: John C Bogle: Common Sense on Mutual Funds
johndd321 said:
I'm a long haul investor, so I've left my Vanguard IRAs to quietly yo-yo along like the rest of the stock market :icon_mi_1 I think they're now back up to being worth about the 10k I initially invested in them. I have an uncanny ability to deposit money into the stock market right before it tanks, but at least I'm not having to make up for a high load on top of that :icon_wink When my husband finishes up college we'll start up my IRA again, get one going for him and put some money away for the kids for college. I enjoy reading investing stuff and have actually considered being a financial planner if the Navy decides that my bum knee will mean that they no longer require my services. My parents retired while I was still in high school, and it really made me realize how important it is to prepare yourself for retirement. I joined the Navy because after 2 years at a private college I felt like they were selling too much of their future for mine. They're well off enough now that 12 years into retirement my Dad at 68 has gotten his PPL again after 30 years and is looking to buy a plane.
mbeaser,
Sounds like you've got a good plan. Dollar cost average your investments so you don't have to worry about putting money in at the wrong time. In the long run it will probably do better than trying to time the market. Good luck with the Navy and with your investing.
Sounds like you've got a good plan. Dollar cost average your investments so you don't have to worry about putting money in at the wrong time. In the long run it will probably do better than trying to time the market. Good luck with the Navy and with your investing.
GSKiker
SNA On my Way to P'cola
AN easy start in a USAA fund.
A lot of people find themselves a little short in the money needed to start a lot of mutual funds. USAA has a fund called the Balanced Strategy Fund, symbol is USBSX. You do not need need 3k down to start it, I think it is like $50 to start and a minimum of 20 a month from that point on. I found this on www.clarkhoward.com This guy is on AM radio in Jacksonville. There are a ot of great financial tips on this website, I encourge everyone to check it out. Let me know if it helps you or not. Later
A lot of people find themselves a little short in the money needed to start a lot of mutual funds. USAA has a fund called the Balanced Strategy Fund, symbol is USBSX. You do not need need 3k down to start it, I think it is like $50 to start and a minimum of 20 a month from that point on. I found this on www.clarkhoward.com This guy is on AM radio in Jacksonville. There are a ot of great financial tips on this website, I encourge everyone to check it out. Let me know if it helps you or not. Later
I'll Keep my $0.02 short - I didn't read everything Johnd said, but there is value to his point. I was a financial advisor with American Express (Series 7, Series 66, CO health/life, etc..).
The lesssons I learned from making 100+ phone calls a night is that a financial advisor is really a salesman. They are the middleman between you and the company, and that keyword "load" is the money that goes to them. Every company has a similar setup, but all are a little different.
In your early 20's, you ain't making much but you have time on your side - this means you want more going into the fund and less into the "advisors" pocket. Your advisor tends to want the reverse. (not always the best advise)
As phrogdriver said, if your the type that puts your investments off, a slick advisor will at least get some of your money in the market which is better than none. Otherwise, I saw some of the people come in my office that were 55ish and hadn't done squat to prepare for retirment - it wasn't a pretty site.
Right now, all my money is in USAA. It is simple to set up the Roth, mutual funds, etc.. they have an operating expense, but that goes directly to the people making decisions about how to make money with your money, not to the salesman. There are no loads, which is even better.
The lesssons I learned from making 100+ phone calls a night is that a financial advisor is really a salesman. They are the middleman between you and the company, and that keyword "load" is the money that goes to them. Every company has a similar setup, but all are a little different.
In your early 20's, you ain't making much but you have time on your side - this means you want more going into the fund and less into the "advisors" pocket. Your advisor tends to want the reverse. (not always the best advise)
As phrogdriver said, if your the type that puts your investments off, a slick advisor will at least get some of your money in the market which is better than none. Otherwise, I saw some of the people come in my office that were 55ish and hadn't done squat to prepare for retirment - it wasn't a pretty site.
Right now, all my money is in USAA. It is simple to set up the Roth, mutual funds, etc.. they have an operating expense, but that goes directly to the people making decisions about how to make money with your money, not to the salesman. There are no loads, which is even better.
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