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Investment Guide for Vermont Teachers

By Financial Advisor Carrie McDonnell

Many teachers worry about the future of their retirement. Between the constant threat of underfunded pensions and poorly managed pension plans, it's understandable why. To make matters worse, teachers have long been a common target of brokers and insurance companies selling commission-based products, such as annuities. While certain types of annuities can be a useful retirement tool, many are highly complicated, lack transparency and are not always appropriate for the investors who buy them.¹ Understandably a rocky relationship with the financial industry has many teachers wondering who to trust and what to believe when it comes to investing.

As a financial advisor who formerly worked in education, I am particularly sympathetic to educators who have been fed poor advice. I encourage teachers (and any individual investor) to spend a little time upfront educating themselves on best practices in investing. Below is a list of simple and doable self-education strategies.

What to read?

Start with The Little Book of Common Sense Investing: The Only Way to Guarantee Your Fair Share of Stock Market Returns by John Bogle, the founder of Vanguard. First published in 2007 (followed by numerous editions), this book describes one of the simplest and most effective investment strategies for building wealth over the long term: buy and hold, at very low cost, index funds.

What to listen to?

Check out the audio book, How a Second Grader Beats Wall Street: Golden Rules Any Investor Can Learn. Written by Allan Roth, this book outlines the steps to creating a portfolio with the widest diversification and lowest costs. It celebrates the brilliance of simplicity when it comes to investing.

What to do?

Seek out a fiduciary. Unlike many brokers or insurance companies, fiduciaries are legally and ethically obligated to provide advice that is in the client’s best interest, all the time. A financial advisor can also be critical to helping clients avoid common behavioral investing mistakes associated with market cycles.

What to avoid?

Financial news, like most news, is geared toward entertainment. Every little movement in the market, up or down, tends to be over analyzed and interpreted, causing both unfounded fear and overconfidence, which undoubtedly impacts investment behavior in negative ways. Investors can focus more easily on the big picture of long term investing and historical market performance without the distraction of the financial news.

As teachers know well, education is empowerment. Taking a few steps in educating oneself today could make all the difference at retirement.

1. https://www.nytimes.com/2016/10/29/your-money/403b-teachers-annuities.html

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