Worst Investment Moves Educators Make

Here are the worst investment moves that I have found over my 30+ years as a teacher. They are in order of worst to best. Drum roll, please…

  1. Do nothing. Meaning not investing in your 403b even a bad one.
  2. Choosing or listening to a bad broker and investing in a guaranteed investment contract. Many times these are referred to as GIC’s. They basically guarantee that you will lose money after the fees, commissions, and inflation.
  3. Doing it yourself and not knowing what you are doing. I find that these people are too conservative and don’t understand the time value of money.
  4. Investing in a variable annuity. The fees and commissions are high and they reduce your investment returns.
  5. Doing it yourself and picking a target-date retirement fund. This is simple and better than a variable annuity, usually, but can cost you significantly on your investment returns. Teachers don’t need these because they have a state pension plan.
  6. Use a financial advisor and buy commission-based mutual funds, usually Class A shares with a 5.75% sales/load on the contributions from your paycheck.
  7. Do it yourself and know what you are doing. This is very rare for a teacher because it takes a lot of time to do the research. You have to love finance which 95% of teachers don’t. I was a DIY person but I could fill my house with books and journals on investing and finance.
  8. The best way for teachers to invest is by finding a Financial Advisor they can trust – no easy task but well worth it! This is why some people choose #5 which is still pretty good but can cost you many thousands of dollars over time. I put them above the DIY person in #7 because now I now have access to professional investment tools that assist me in generating higher returns over time. Even Jack Bogle of Vanguard invested most of his money in actively managed funds. According to the Vanguard Study, financial advisors add about 3% on average to investment returns. https://www.advisor.ca/my-practice/conversations/advisors-add-2-88-in-value-study-finds/. The moral is don’t be lazy and do your due diligence. This person should act like a fiduciary and advise you on what is best for you. This advisor should: be very familiar with your situation, return your calls within 24 hours, and charge reasonable transparent fees. If you answer no to any of these questions, you should find a new advisor and feel free to contact me