From Jaymz on Variable Universal Life insurance (VUL):

"Oh yeah and idiots that think "no load funds" are the way to go, think about it real hard. The company charging the least amonut [sic] to manage your money is the best right. hahahahaha. If you were good at doing something would you charge the cheapest price? Hell no. Simply put the better portfolio managers are going to charge more, BECAUSE THEY GET HIGHER RETURNS, SO THE FEE IS WORTH IT BECAUSE YOUR NET GAIN IS HIGHER. No load funds typically track what the major indices do so they are easy to manage hence cheap. You get what you pay for."

From Lazyboy on World Financial Group (WFG), a company that sells VUL through a multi-level marketing program:

"You konw guys out there i’m a lazy boy as my name but i make around 100k a year can you do that? by just open your month and talk so you do ,cause you guy can do alot of reseach of a company why don’t you reseaching yourself to see you can find out thing you really are.
But anyway i know you can not do it because you guy are american not america
let me remind you guy what Obama said last year , what he did last year and what he promis last year now more than a year ready he still to trying to looking anther ex. to said why he can not done it .
Let me tell why, because me same as AMERICA PRESIDENT OF UNITED STATE only konw how to talk but DONT KNOW HOW TO WORK are you agree!"

I’m not making these up. They came from salespeople pushing VUL and from salespeople recruiting downlines for pushing VUL. There are several more like these in the WFG post.

I don’t know if I should laugh or cry. Obviously shenanigans like this are happening every day. People are sold a bill of goods because they don’t know better and because the salespeople are skillful. Now, should we protect people from such mishaps? If yes, how?

I touched upon this subject a little bit in a previous post Read the Contract and Protect the Consumer. I said there should be an independent body that puts a score on service contracts and that companies should be required to display such scores. I’ve seen letter grades in big bold letters in restaurant windows. Obviously it can be done.

There was a proposal in congress to create a consumer financial protection agency. I have not followed the politics closely but last I heard it was either dying or being watered down. Even at its full scale, I think the proposed agency only puts out more required disclosures and maybe enforces a minimal standard.

I don’t think disclosure-based consumer protection is working, as evidenced by the sales of inappropriate products to consumers who can’t tell a good product from a bad one. Your thoughts?

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Schwab has 5 index funds that require only $100 minimum initial investment. The lineup is not as extensive as Vanguard’s, but it’s adequate for a small investor. Although Schwab doesn’t have a bond index fund, customers can buy Treasury bonds at auction or buy new-issue CDs, all for free.

Schwab customers can also buy 8 Schwab ETFs without commission. Because these ETFs are new, my first choice would be the index funds unless the asset classes can’t be covered by the index funds. Here’s an example of a simple portfolio using Schwab index funds and ETFs:

It’s amazing to me one can invest ten grand for the cost of a few cups of coffee a year.

Fidelity has offered 8 Spartan index funds at low expenses for some time now. These index funds typically have a high minimum initial investment requirement, which makes them not feasible for small investors. In response to Schwab’s commission-free ETFs, Fidelity struck a deal with iShares to offer 25 iShares ETFs free of commission.

These iShares ETFs are among the most popular ETFs in the market. Although Vanguard ETFs have slightly lower expenses, for small investors, not having to pay a commission on small purchases is much more important than the expense ratios. Like Schwab, Fidelity also offers Treasury bonds at auction and new-issue CDs without commission. Here’s an example of a simple portfolio using commission-free iShares ETFs at Fidelity:

It’s more expensive than the similar portfolio at Schwab but the cost is still very low.

Are these low minimum index funds and commission-free ETFs loss leaders? Maybe, but they don’t have to be short-lived. There’s enough cross-subsidy at Fidelity and Schwab to make them last.

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Among more than 100 Vanguard mutual funds, only 5 had a higher return in 2009 than I did in the game.

I only made 12 trades in this game. I did not buy on margin. Except one trade, I only traded ETFs, not individual stocks. I always had at least 25% of the portfolio in cash.

The good results are primarily driven by timing. I bought a few ETFs in February. Then I bought more in the first week of March. I took some profit in April and May (too early). When it was clear GM was going to go bankrupt, I shorted its stock. Here are my trades:

If you hear people say nobody can beat the market, it’s not exactly correct. People can and do beat the market in any year, as my trading game result shows.

I haven’t calculated my real portfolio’s rate of return for 2009. I’m confident it’s not as good as +48.6%. If I sold everything for cash on Jan. 1 and I did the same trades as I did in the game, wouldn’t I have made a lot more money? Yes, but I don’t want to do that. My future is not a game.

A game is a game. There’s no downside. I’m not going to gamble my hard-earned money. Getting the market returns is totally cool with me. I don’t *want* to beat the market because I don’t want the market to beat me. If I want to challenge myself and prove my superior skills, I can do it in a game. If I fail, I can always start over.

It’s no different from a shooting-the-enemy video game. You shoot the enemy and you advance. Once in a while, your character gets killed. But you the person is unharmed. It’s just a game. Does anyone want to play the shooting game with real guns and bullets? I don’t think so. Then why trade your real portfolio on a hunch?

If you have the urge to "play" with the market, do it in a game, not with real dollars. Have a view; act on it. Enjoy the excitement when you are proven right. Brag about it. A game won’t hurt you.

I created a new game for 2010 and beyond on Investopedia. It’s called TFB Invitational. Click here to join the game. Let’s have some fun trading fake dollars. Leave your real investments alone in a boring asset allocation. Your future is not a game.

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I read articles from both camps. I’m not convinced by the contrarians who say it wasn’t a lost decade. Hence the title of this post. Although it’s not the news everybody cheers for, I have to respect the facts. It was a lost decade. Let’s not sugar coat it and say it wasn’t.

As in any other debate, the definition is very important. What is a lost decade, really? I define it as a decade in which risk taking wasn’t rewarded. You took risk, you did what everybody says you are supposed to do, but you have nothing to show for after ten years. That’s a lost decade.

Investment advisor and book author Allan Roth wrote Why It Wasn’t a ‘Lost Decade’ for Investors. He included a chart showing that a rebalanced moderate portfolio of 60% stocks and 40% bonds had an average annual return of about 3.5%. Because that number is positive, and because it was above inflation, Roth concluded that it wasn’t a lost decade.

Not so fast. Why would someone compare a portfolio of stocks and bonds against money in the mattress? Shouldn’t it be against a money market fund at the very least?

The 10-year average annual return of Vanguard Prime Money Market Fund is 3.03%. If someone invested in a ladder of FDIC-insured CDs, the return would be even better. The no-risk benchmarks should be money market funds, Treasury Bills, and CDs, not money in the mattress. Being an investment advisor, Roth must know that, but he still chose an easier benchmark to make his argument. That’s cheating.

When you take into account the amount of work and the risk involved in diligently investing in stocks and bonds and rebalancing them versus throwing money in a money market fund or FDIC-insured CDs, you can see how the work and the risk were totally not worth it during the last decade. It’s fair to call it a lost decade.

Reporter Ron Lieber wrote in New York Times For Savers, It Was Hardly a Lost Decade. Ron is more clever than Allan. He showed that $100,000 invested 25% in U.S. stocks, 25% in international stocks, and 50% in bonds would’ve grown to $145,169 after 10 years. That’s a 3.8% return, a little higher than the 3.5% return Allan Roth showed. It’s still not much better than the 3% return from money market funds. When you take into consideration the amount of work and the risk, it’s still not worth it.

Ron Lieber adds a twist of investing $1,000 a month during the decade, on top of having $100,000 at the beginning of the decade. That portfolio would grow to $313,747 with $220,000 invested. If you do the math, that’s a 4.8% average annual return, much better than the 3% return from money market funds. Ron Lieber concluded from this exercise it wasn’t a lost decade.

Again, not so fast. The 25/25/50 portfolio is peculiar. It’s not how people are typically advised to invest. It’s a straw man.

The typical moderate allocation is 60% in stocks. During the last decade, bonds outperformed stocks by 6% a year. By having less invested in stocks, Ron’s hypothetical portfolio had a higher return than a typical portfolio.

He also has 50% of stocks invested in international. The typical recommendation is 20-30% of stocks in international. During the last decade, international stocks outperformed U.S. stocks by 2.6% a year. By having more invested in international stocks, the hypothetical portfolio gained another edge over a typical portfolio.

If we are going to use a straw man,  we might as well say it wasn’t a lost decade at all if people invested 100% in emerging markets, energy, or precious metals and mining. All those investments paid off well in the last decade.

Instead of looking at an atypical portfolio, I think it’s more reasonable to look at the returns of “funds of funds.” These are mutual funds that invest in other mutual funds. Target date retirement funds are such funds. They are supposed to be a one-stop investment for people who delegate the investment decisions to experts.

Vanguard’s Target Retirement funds don’t have 10-year history. Their LifeStrategy funds do. I calculated the returns with the same spec as in the New York Times article: $100,000 at the beginning of the decade plus $1,000 invested every month. Because Vanguard only reports quarterly return numbers on its website, instead of having $1,000 invested every month, I’m doing $3,000 invested every quarter. It should be close enough.

Here’s a summary of how three LifeStrategy funds and a money market fund performed:

If you’d like to see how I did the calculation or check my numbers, the spreadsheet is here:

Vanguard LifeStrategy Funds: 2000-2009

Investing in the middle-of-the-road Vanguard LifeStrategy Moderate Growth Fund for ten years beat the money market fund, but only barely. When you take risk into consideration, it was not worth it. That makes the decade a lost decade.

Now, I can understand why they want to make the last decade look better than it really was. They want to encourage people to do the right thing: not lose faith in investing in a diversified portfolio. However, the tortured mental gymnastics is unnecessary. People should understand that a good strategy does not always lead to a good outcome.

Lost decade happens, like it did in the last decade. That’s the risk in investing. Ten years can’t cure that risk. Even if you do everything by the book (have a moderate asset allocation, keep investing through thick and thin, diversify your investments, rebalance your portfolio), you can still end up worse off than putting money into a money market fund or CDs. Risk really means risk. People don’t like to hear it but it’s the truth.

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I know about 529 plans. Every state has at least one plan. Some states have several plans. I quickly identified Ohio CollegeAdvantage 529 plan as the best plan for my niece. Her parents live in a state that does not give a tax deduction for 529 plan contributions. They can use a plan offered by any other state. The Ohio CollegeAdvantage 529 plan has low cost Vanguard index funds.

Like many other 529 plans, the Ohio CollegeAdvantage 529 plan offers age-based investment options. There are actually four age-based options, three of which offer exclusively Vanguard funds. Within the Vanguard age-based options, there are conservative, moderate, and aggressive tracks. Here’s how the middle-of-the-road Vanguard Moderate Age-Based Option will invest:

At a first glance, age-based options seem to offer convenient, expert-constructed balanced portfolios. They are modeled after the target date funds for retirement. As the child gets closer toward college age, the assets are automatically shifted into less risky investments. However, when I think about them a little more, they don’t make sense to me.

Take the transition at age 6 for example. Switching from 75% stocks 25% bonds to 50% stocks 50% bonds means selling 25% of the portfolio from stocks to bonds. With regard to that 25% of the portfolio being sold from stocks to bonds, assuming annual contributions at the beginning of each year, the longest time the contributions stayed in stocks is six years. The shortest time is just one year (contributed at age 5). Investing in stocks for just one year before selling for bonds is too much a gamble.

Even six years isn’t that long. Suppose the stock market doesn’t do well in the first six years but it does well in the next five years. You eagerly invest 75% in stocks for six years, but you are forced to sell down to 50% in stocks when the child reaches age 6, only to see the stock market taking off afterwards. You get the double whammy. You are much better off keeping 62.5% in stocks until age 11. Then it doesn’t matter if stocks do better in the first six years or the second five years.

This transition pattern is not unique to the Ohio CollegeAdvantage 529 plan. Age-based options in other 529 plans work pretty much the same way. There are some age brackets. When the child reaches a milestone, you sell stocks for bonds and you sell bonds for cash. In effect, some of your investments in stocks stay in stocks for only a few years before you sell.

Besides the transition problem, I think even the Moderate option is too risky.

When we invest for retirement, the age-in-bonds rule of thumb says to invest for retirement at age 65, a 25-year-old should have 75% in stocks and 25% in bonds. That’s a 40-year time frame until retirement, plus another another 20 years for drawing down. Here we have a child needing college money in 15-20 years investing 75% in stocks. That’s equivalent to a 55-year-old investing 75% in stocks for retirement. And they call it moderate?

After the child enrolls in college (age 19+), the entire college fund is about to be spent in four years. The average dollar in the fund has only two years to go. However the “moderate” age-based option is still 75% in intermediate term bond funds. That’s not moderate. That’s gambling on interest rates.

Investing for college is much harder than investing for retirement. The timeframe is much shorter. The drawdown is much faster. The investment strategy has to be much more conservative than investing for retirement because there is simply not much time to make up for losses. I will not use the age-based options at all.

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But the conventional wisdom is wrong. I patiently waited until I can have a real life example.

After Vanguard published the blog post, Ella posted on the Bogleheads investment forum and asked if she should invest in two ETFs right away or wait until the ex-dividend date.

OK to buy an ETF just before the dividend?

The ex-dividend date is the date when the investor will not receive the dividend. Not receiving the dividend means not paying the tax on the dividend now but paying a higher capital gains tax in the future. In effect, the tax is deferred, but not avoided.

Ella got the conventional wisdom answer from the forum participants: don’t buy a distribution; wait until the ex-dividend date. One of the replies came from Taylor Larimore. Taylor is a respected forum leader and the lead author of two Bogleheads books. On December 10, Ella decided to wait.

The two ETFs Ella asked about were Vanguard Total Stock Market ETF (ticker VTI) and Vanguard Europe Pacific ETF (ticker VEA).

On December 10, VTI traded between a low of $55.61 and a high of $55.97 a share. Let’s take an average and call it $55.79. The ex-dividend date for VTI is December 22. On that day, VTI traded between $56.30 and $56.59. Let’s take an average and call it $56.45.

If Ella bought VTI on Dec. 10, for every $10,000 she could have bought $10,000 / $55.79 = 179 shares. Those 179 shares were worth $56.45 * 179 = $10,105 on Dec. 22. In addition, she would also receive a dividend of $0.358 per share. That’s $0.358 * 179 = $64 in dividends. Together with a leftover $13 from the share purchase, Ella would have $10,182 in shares and cash if she bought on Dec. 10, versus $10,000 if she bought on Dec. 22.

The conventional wisdom market timing advice cost Ella $182 for the sake of deferring tax on the $64 dividend, which comes out to $10 at 15% qualified dividend tax rate. Giving up $182 to defer $10 is penny wise pound foolish.

The story on VEA is a little better. VEA’s ex-dividend date was December 24. Doing the same math shows Ella was worse off by $98 for the sake of deferring $34 tax.

Although the story “don’t buy a distribution” sounds credible, its base assumption “ignoring market appreciation/depreciation” is false. The market appreciation/depreciation is many times the size of the tax effect on distributions. It can’t be ignored. Worrying about the tax effect while ignoring the market movement is missing the forest for the tree leaves.

Of course someone can argue the market could’ve gone the other way and Ella would be better off waiting. But that’s precisely my point. Whether some one is better off waiting is determined by the market movements, not by buying before or after the ex-dividend date. Trying to be clever about the distribution and the ex-dividend date is unproductive in the face of market movements.

If an investor is going to time the market on the purchases, he/she should time on market movements, not on distributions and ex-dividend dates, because the former’s effect is a magnitude larger. Of course we all know one shouldn’t time the market. Therefore, don’t worry about the distributions and ex-dividend dates when their effect is just a tiny blip overwhelmed by daily volatility.

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It sounds like a 401(a) money purchase plan. The decision is one-time: if she doesn’t join now, she won’t be able to join later. If she joins, she must contribute 5% of her pay and the college puts in 8%.  But, she’s tight in her budget. You can imagine so after her husband’s pay was cut in half. So she asked the radio program if she should join the retirement plan.

Listen to Q&A online

What do you think? I don’t know how much colleges pay part-time instructors. Let’s say she earns $40,000 a year from this job. So we are talking about $2,000 a year.

It turns out she and her husband have substantial savings, both retirement and non-retirement, to the tune of $200k in each bucket. It makes the question such a no-brainer.

Money is fungible. If she uses her savings to make up for the reduced pay because of retirement plan contributions, she effectively moves the money from non-retirement savings into a retirement plan, eliminating taxes on the future growth of that money, and earning a 160% match to boot. What a deal!

What if she doesn’t have any non-retirement savings to make up for the shortfall in pay? Should she still join the retirement plan? What if she doesn’t have any savings at all, retirement or otherwise? Should she still join the plan? If she does join, where does the money come from? I will leave these questions to you. I trust you will be able to figure them out.

This will be the last post for the week. Happy Holidays!

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To qualify for 100 free trades, you only need $25,000 in any combination of banking, brokerage, and credit balances with Wells Fargo (mortgage balance counts at 10%). The brokerage piece is the key. Bank of America also offers free trades but the qualifying balance has to be 100% on the banking side. You can’t use the brokerage balance to qualify.

100 free trades per account include open-end mutual funds in addition to stocks and ETFs. No other brokerage accounts let you buy Vanguard mutual funds for free. Small online broker Zecco offers free trades with $25k balance but the free trades don’t cover open-end mutual funds.

The catch with WellsTrade is that you have to open a Wells Fargo checking account. It’s a feature-rich checking account called PMA. The checking account is also free if you have $25,000 in the brokerage account. You don’t really have to use the checking account much, just enough to keep it open; Wells Fargo closes dormant accounts. If you do use it, it has quite a few freebies, although it doesn’t pay much interest.

The cash account in the brokerage account does not pay much interest either. It’s less of an issue now because even good money market funds don’t pay much. However, you can use an external checking account for settlement. All the buys and sells will automatically generate ACH debits or credits to an external checking account, like the Alliant Credit Union checking account, which earns good interest. To set up external settlement, fill out the Electronic Funds Transfer Authorization and fax it in.

Inside the brokerage account, the tax lots are tracked well. It offers specific lot identification, which helps minimize taxes. End of year statements and supplementary tax information are detailed and clear. Customer service reps are competent and helpful.

WellsTrade does not offer online trading for bonds. It wins the TFB Award 2009 for Best Brokerage Account for Stocks, Mutual Funds and ETFs.

To open an account, apply online, or call 866-243-0931.

Wells Fargo does not pay me in any way if you open an account.

Elsewhere on the Internet: FatWallet thread.

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"It’s a stock picker’s market."

I heard a guest say this in a recent episode of WealthTrack. Is it true?

Absolutely. If someone picks the right stocks, they will have a better performance than the market. There’s no doubt about it. It’s a tautology.

In any market, whether it’s going up, down, or flat line, there will always be stocks that do better than others and stocks that do worse. There will be stocks that do much better than the market and there will be stocks that do much worse. That’s what makes up a market. If you happen to have picked the stocks that do better, you will do really well. Therefore it’s a stock picker’s market. It always is and it always will be.

There’s only one small problem. The right picks are defined by whether they do better after the fact. You can have a thousand good reasons why a stock should go up. Just going up is not enough. It has to go up more than the market does. That’s the holy grail. Whoever know the secret are not speaking. They are busy making money.

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After rolling over my IRA to my solo 401k at Fidelity, I want invest a small sum in the solo 401k account in short-term fixed income. I went and looked at my  options.

Treasuries

I can buy Treasury notes from Treasury auctions. Fidelity doesn’t charge me any fee for that. The problem is the yields are so low. According to Bloomberg, the current Treasury yields are:

If I buy an equal amount in these, my average yield will be 1.29%. I’d like to do a little better than that.

Bond Funds

Fidelity has a low cost short-term Treasury bond index fund. The problem is because it invests in Treasuries, the yield on the bond fund is also very low. A bond fund can’t earn more than the underlying bonds do.

Fidelity also has a short-term bond fund which invests in Treasuries and government agency bonds (~40%), corporate bonds (~25%), and other bonds. It’s more expensive. I’m also wary of the alphabet soup in the fund: MBS, ABS, CMBS, CMO.

Vanguard has a short-term investment grade bond fund. Fidelity charges $75 for the initial purchase and $5 for each subsequent purchase if I set up an automatic investment plan. The Vanguard fund invests less in Treasuries and government agency bonds (~10%) and more in corporate bonds (~60%). It also has about 20% in asset-backed and mortgage-backed bonds (securitized credit card and consumer loans). The yield on the Vanguard fund is little higher than the yield on the Fidelity fund because the Vanguard fund has less in Treasuries and more in corporate bonds, and because it’s less expensive.

The duration of a bond portfolio indicates its sensitivity to interest changes and the amount of time it takes to recover from an interest rate increase. Because interest rates are low, I’d like to keep my duration low.

Bond ETFs

Like index funds, ETFs have low expense ratios. The commission on purchasing an ETF is a lot lower than the $75 Fidelity charges for buying a Vanguard fund. I already know a Treasury ETF can’t do any better than Treasuries I can buy myself. If I buy an ETF, I’m only interested in a corporate bond ETF.

Vanguard Short-Term Bond ETF (BSV) is the ETF equivalent to its short-term bond index fund. It has 70% in Treasuries and agency bonds. iShares Barclays 1-3 Year Bond ETF (CSJ) invests primarily in corporate bonds. I like its portfolio. The problem is it trades at 1% premium to the underlying net asset value (NAV). If I put $10,000 in it, I’m paying an extra $100 plus a $11 commission. That’s more than what I’d pay if I buy the Vanguard open-end fund.

CDs

CDs offer a unique advantage to retail savers. When you buy Treasuries or bonds, either directly or indirectly through mutual funds or ETFs, you are competing against institutional investors. They set the price; you follow. You may also pay a markup to some middlemen unless you buy in Treasury auctions.

Retail savers rule in CDs. Institutions with hundreds of millions to invest can’t be bothered to open a $250,000 CD here and there. Treasuries will never be "on sale." On the other hand, different banks will have different eagerness to attract deposits at different times. When one bank wants money more badly than another, they will have a "sale" on their CD rates. As long as the CDs are FDIC insured, you don’t care who’s putting the CDs on sale.

If you don’t mind the hassle of opening and closing accounts, you can shop the highest rates wherever they are. Bank Deals publishes a weekly summary of the best CD deals. Bank Deals is better than BankRate.com because Bank Deals does not limit itself to banks that pay its operator for the lead. As I’m writing this, the best deals I see on Bank Deals with a low minimum deposit requirement are:

If you compare these rates with the Treasury yields, you see the CD yields are much better. An equal amount in these CDs will earn an average yield of 2.86%, versus 1.28% in Treasuries. The best rate CDs have a higher yield and a lower risk than bond funds and ETFs that invest in corporate bonds.

Brokered CDs

Unfortunately opening accounts wherever the best deals are is not an option for me in my solo 401k account. My money has to stay within Fidelity.

Fidelity sells brokered CDs. These CDs are also FDIC insured. Instead of selling directly to individual savers, some banks sell their CDs through brokers. There is no fee for buying brokered CDs, but the best rates on brokered CDs don’t match the best rates on retail CDs. Here’s what I see in Fidelity:

There’s quite a gap between these yields and the yields on best available CDs. If I put an equal amount in these CDs, I will have an average yield of 1.96%, still higher than the Treasury yields. The yield is somewhat lower than that on corporate bond funds and ETFs, but CDs have less risk.

Secondary CDs

Fidelity also sells secondary CDs. These are CDs other investors wanted to get out of before the maturity date. If I buy them, I take over the remaining term, very much like when one buys a bond on the secondary market. They are still FDIC insured. Fidelity charges a fee of $1 per $1,000 (min. $8). If the interest rate on the CD is above market, I will also have to pay a premium. I see these secondary CDs in Fidelity:

When someone wanted to get out early, they will have to offer a better yield than comparable new issue CDs. If I put an equal amount in these four CDs, I will get an average yield of 2.66%, higher than the yield on new issue CDs, matching the yield on corporate bond funds and ETFs with lower risk.

There is one caveat in secondary CDs: the FDIC call. The CDs are insured by FDIC for their face value plus accrued interest. If the CD’s interest rate is higher than market and I have to pay a premium, the premium I pay is not protected by the FDIC. In essence, I’m short a call option at par to the FDIC.

For example, paying $1,052.71 for a $1,000 CD from Capmark Bank with an interest rate of 4.7% will give me a yield of 2.87% if Capmark Bank doesn’t fail before the CD matures on October 29, 2012. If it fails tomorrow, I only get back $1,000 from the FDIC, and I lose $52.71. That’s a risk in buying secondary CDs.

If I buy secondary CDs, I will limit myself to CDs selling below 100 or CDs issued by well known too-big-to-fail banks.

Structured Products

Savers don’t like low interest rates. That’s for sure. I was waiting for someone outside a bank branch the other day and I saw some brochures and forms the in-branch investment advisors stacked by the window: index linked CDs and absolute return funds. They are targeted at people who are not satisfied with their CD rates. People want something for nothing. The advisors in the bank branches have a ready audience.

If you want safety, go with safety. If you want to take risks on the stock market for its higher expected return, go with the stock market. Blend the two and you will have a balanced portfolio. The structured products only enrich the producers and the advisors. I won’t touch them with a ten-foot pole.

After weighing all my options, I decided to do a mix of new issue brokered CDs and secondary CDs. This CD ladder I put together will have an average yield comparable to corporate bond funds and ETFs, but the CDs will have lower risk. The FDIC insurance comes as close to a free lunch as it can get.

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