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Retirement Planning: Proven Retirement Strategy that Works

Retirement Savings Plans

What do Warren Buffet, Burton Malkiel and William Sharpe have in common? All three are successful prominent investors who believe investing in Index funds such as S&P 500 is critical to making sound investment decisions. For the average investor with some investing experience, there are several takeaways that can be gained from their wisdom and experience which could be applied to making the best investment strategies for retirement.

Warren Buffet

As one of the most successful and respected serial investors ever whose name is a now household word, Buffet probably needs no introduction. His investment strategy is disarmingly simple: invest in diversification and fundamentals. His methods include reading the previous year’s financial report of a prospective company, making notes as well as questions; if the report’s cover page holds too many questions, he will not invest in that company.

A strong advocate of the S&P 500 Index, Buffet recommends that average investors as well retirement plans invest at least 90% into the Index. In an annual letter to shareholders, Buffet laid out a simple yet smart savings and retirement plans for managing wealth to be left for his wife which could work for many other investors as well:

”My advice to the trustee could not be simpler: Put 10% of the cash in short-term government bonds and 90% in a very low-cost S&P 500 index fund. I believe the trust's long-term results from this policy will be superior to those attained by most investors -- whether pension funds, institutions, or individuals -- who employ high-fee managers.”

Studies by Standard and Poor’s organization underscore the truth of simplicity: it works. Over periods spanning multiple years, numerous high-cost actively-managed funds have failed to outperform the S&P Index. For example, a 2016 study showed that less than 18% of large-cap stock funds kept pace with the S&P 500 Index over the previous 10-year time period.

Burton G. Malkiel

While perhaps not as well-known as Buffet outside of academic and investment circles, Burton Malkiel’s resume is undeniably impressive.

In addition to holding the title of Chemical Bank Chairman’s professor of economics at Princeton University, his accomplishments also include serving as a member of the Council of Economic Advisors (1975-1977), a year serving as President of the American Finance Association (1978), Dean of Yale’s School of Management (1981-1988) as well as 28 years spent as Director of the Vanguard Group. Malkiel currently serves as Chief Investment Officer to the software-based financial advisor company Wealthfront, Inc. , and is a member of Rebalance IRA’s Investment Advisory Board.

In Malkiels’s best-selling book “A Random Walk down Wall Street: A time-tested Strategy for Successful Investing” (W.W. Norton & Co., 9th edition) he advises readers that “Investors would be far better off buying and holding an index fund than attempting to buy and sell individual securities or actively managed mutual funds.” This was his original message; more than 30 years later in his latest edition he states he believes this more than ever:

“I believe even more strongly in that original thesis, and there’s more than a six-figure gain to prove it. The chart on the following page makes the case with great simplicity.” (Referencing one of several charts included in the book.) “It shows how an investor with $10,000 at the start of 1969 investing in a S&P 500-Stock Index Fund. For comparison, the results are also plotted for a second investor who instead purchased shares in the average actively managed fund. The difference is dramatic. Through June 30, 1998, the index investor was ahead by almost $140,000 with her original $10,000 increasing almost 31-fold to $311,000. And the index returns were calculated after deducting the typical expenses (2/10 of one percent) charged for running an index fund.”

It should be noted that during the past 30 years, over two-thirds of professional portfolio managers have been outperformed by the S&P 500 Index, as borne out by a recent study.

William Sharpe

For Like Burton Malkiel, William Sharpe is not as well-known outside of economic and investment groups, in spite of winning a Nobel Prize (Economic Sciences, 1990), and whose theories and formulas are still considered calculation benchmarks.

As a strong advocate of passive investing (buying and holding) Sharpe’s recommendations of investing in indexes, as S&P 500, is the cost factor. As he explains it in relatively simple terms:

“There are two arguments for being passive rather than active. One is sort of explained by the complicated mathematics of the Capital Asset Pricing Model. But there’s a much simpler argument that takes you to pretty much the same place, and that is the following: think about all the securities in the marketplace and think about a strategy of investing proportionally, or broad indexing.

If I have 1% of the money in that market, I’ll buy 1% of the stocks of every company in the market and 1% of the outstanding bonds. So, I’ll have a portfolio that truly reflects the marketplace. Then think about all the people engaging in other strategies, active strategies, holding different amounts of this or that. Then you ask at the end of any period – be it a year, a month, you name it – what did the passive investors earn before costs? And let’s say that’s 12 %, just to take a number. What did the active investors make before costs? It has to be the same number. So, before costs, the total market made 12%, the indexers made 12%, and the active investors made 12%.

After costs is a different story. A well-designed index fund should have a very low cost of management. It should also have very low turnover, very low transactions costs. Actively managed funds by their very nature have higher management fees, (because) they employ more skilled people. They also have transaction costs because they’re active. So, after costs, the average passive investor must outperform the average active investor. That’s just arithmetic.”

William Sharpe’s (tongue-in-cheek) rule for investing:

“My rule in investments is that the three most important things are diversify, diversify, diversify. And then I’ll give you three more: keep costs low, keep costs low, keep costs low. The simplest way of dealing with it is via a very broadly diversified, very low-cost index fund. You can do it in other ways that would be a lot more expensive. But at least worry a lot about diversification and cost.”

Investing into index funds: a background

The S&P 500 Index is a collection of 500 different stocks chosen primarily for their size, industry category and liquidity. Their purpose is to also function as a significant gauge of United States equities and permit investors to assess the potential risks and rewards of investing in large companies. To be listed in the S&P 500, companies need market capitalization exceeding $10 billion, with common stock listed on the NASDAQ or NYSE. Some of these S&P 500 companies include Apple, Sony, Salesforce, Amazon and numerous other work-class companies.

The S&P 500 thus serves as an important indicator of market health for investors and economists, as well as offering a reliable means of identifying potential market challenges as they appear. The three experienced and enormously successful investors profiled above have come down on the side of index funds, and they’re not alone by any means.

How to Invest

You can directly purchase the S&P 500 Index units directly with you bank. Today, however, the price tag of $2,000 for buying one stock share is considerably higher than the average investor can afford to save for retirement and other goals. There are, however, alternatives to high-priced investing that offer the following advantages - The Regular Contributions S&P 500 Plan. It offers:

  • This S&P 500 investment plan provides the ability to participate in stock market growth while minimizing the downside risks.

  • Principal capital is fully guaranteed, with a minimum return of 4% annually guaranteed by HSBC. (Bear in mind that the average S&P 500 return has been over 8.5% p.a. over the past 20 years and 10% over the past 10 years – even allowing for the recession.)

  • There is an option available for making monthly, quarterly semi-annually or annual plan contributions.

  • Among the advantages of the plan are pathways for participation in the growth of the prestigious S&P 500 Index, even for the smaller investor.

  • The plan’s security and safety is through private custody of assets held by Credit Suisse, a respected and trusted financial institution.

  • The plan is offered through a prominent financial institution.

  • Investors will have secure online access 24/7 to their accounts to monitor changes and other activity concerning investments.

For additional information as well as receiving a prospectus and income illustrations, contact us at The positive track record of the S&P 500 Index over the past 30 years speaks for itself. We will respond promptly to all requests while our experienced counselors will be happy to work with you and answer any further questions.

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