1. Retirement Investing: The Five Most Important Things You Need to Know LSU Faculty Senate Workshop April 19, 2016 Don Chance, PhD, CFA James C. Flores Chair of MBA Studies & Professor of Finance

2. And Here They Are: Diversify Do not be overwhelmed or impressed by the choices Do not get caught up in performance Cost is everything Do it yourself April 19, 2016 Don Chance - LSU Faculty Senate Workshop 2

3. Diversify “Don’t put all of your eggs in one basket” But – how far should you go?  Can you get over-diversified? Too many eggs in one basket? April 19, 2016 Don Chance - LSU Faculty Senate Workshop 3

4. Do not be Overwhelmed or Impressed by the Choices Investment choices  Mutual funds  Individual stocks & bonds  ETFs (exchange-traded funds) Size, value, global/emerging, retirement date, asset allocation, blended There is an enormous amount of duplication, repackaging, and just plain clever marketing April 19, 2016 Don Chance - LSU Faculty Senate Workshop 4

5. Do not Get Caught up in Performance Money chases money There is no performance consistency, because … No one consistently knows what the market will do Every time you chase performance, you give them money Performance is fleeting April 19, 2016 Don Chance - LSU Faculty Senate Workshop 5

6. Cost is Everything! What are the components of the cost?  Fund management and administration  which includes commissions, bid- ask spreads  the funds pass on this cost to you, and,  most people pay too little attention to cost April 19, 2016 Don Chance - LSU Faculty Senate Workshop 6

7. (Cost is Everything!) Assume you deposit $5,000 in 1980 and increase it by 5% a year through 2015 That would add up to about $508,000 saved Look at how much money you would have under the following alternatives: April 19, 2016 Don Chance - LSU Faculty Senate Workshop 7

8. (Cost is Everything!) April 19, 2016 Don Chance - LSU Faculty Senate Workshop 8

9. (Cost is Everything!) April 19, 2016 Don Chance - LSU Faculty Senate Workshop 9

10. (Cost is Everything!) Over 35 years, after accounting for the interest you could have earned on your money, you invested a total of $906,659. After accounting for compounding, the mutual fund companies took the following: April 19, 2016 Don Chance - LSU Faculty Senate Workshop 10

11. (Cost is Everything!) April 19, 2016 Don Chance - LSU Faculty Senate Workshop 11

12. (Cost is Everything!) LSU ORP (alternative to TRS)  Three fund companies (TIAA, Voya, VALIC)  82 fund choices  Average cost: 0.38%  Maximum cost: 1.14%  Minimum cost: 0.04%  These are pretty good choices April 19, 2016 Don Chance - LSU Faculty Senate Workshop 12

13. (Cost is Everything!) LSU Supplemental (403b & 457)  Six fund companies (TIAA, Voya, VALIC, MetLife, Fidelity, Empower)  316 fund choices  Average cost: 0.74%  Maximum cost: 2.21%  Minimum cost: 0.04%  Some good choices but too much expensive junk April 19, 2016 Don Chance - LSU Faculty Senate Workshop 13

14. (Cost is Everything!) Homework  Identify which funds you are in  Go to http://www.lsu.edu/hrm/http://www.lsu.edu/hrm/  Choose “Employee Benefits”  Choose “Additional Employee Benefits – Retirement”  Choose “ORP Vendors”  For each vendor, click on the link that mentions “Fund Performance”  Compare the cost of your funds to 0.7% April 19, 2016 Don Chance - LSU Faculty Senate Workshop 14

15. (Cost is Everything!) Homework (continued)  Back to “Employee Benefits”  Choose “Additional Employee Benefits – Supplemental Retirement”  Choose “ORP Vendors”  For each vendor, click on the link that mentions “Fund Performance”  Compare the cost of your funds to 0.7% April 19, 2016 Don Chance - LSU Faculty Senate Workshop 15

16. Do It Yourself Buy and hold Invest steadily, as long as you remain confident of the long-run performance of companies Resist the temptation to trade frequently Ride out the storms, if you can stand it April 19, 2016 Don Chance - LSU Faculty Senate Workshop 16

17. To Recap Diversify Do not be overwhelmed or impressed by the choices Do not get caught up in performance Cost is everything! Do it yourself April 19, 2016 Don Chance - LSU Faculty Senate Workshop 17

18. Many thanks! April 19, 2016 Don Chance - LSU Faculty Senate Workshop 18