Question:

Is investing in the S & P 500, a good place to be?

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I am under the alabama state retirement system, and a part of that is a rsa1 account which invests in the S& P 500. I don't get a choice of what to invest in.

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  1. S&P 500 is a good place to be. I would have no prob putting 30% of retirement in this index with 10+ years time frame.

    I cannot believe you have no other investment option in a state plan.

    Under the Employee Retirement Income and Security Act of 1974 ("ERISA") - ALL employers that offer a retirement plan that is NOT self-directed MUST have a min number of choices in the plan or they could be in violation of ERISA law.

    Generally a plan needs to include – a no risk cash/ money market; a growth fund, and a bond fund.

    Even though the S&P 500 index is a great long term index, to place 100% of your money in even a historically proven index can be deemed risky under ERISA.

    A person who is 20-30-40 might be ok; a person who is 5 years from retirement or less with 100% of funds in a single asset, is EXTREMELY RISKY move. The employer could be sued for bank if the employee loses any money.

    There is a ton of case law that I have read on this. I used to be a 401(k) and Retirement Planning Specialist with a top Wall Street firm. I helped companies get into compliance with ERISA, and education employees about their plan.

    If you only have one fund option, I would file a complaint with the DOL (Department of Labor) who is the regulating authority over ERISA Law. or Contact an attorney who has expertise in ERISA and securities law.


  2. My personal opinion is that it depends on the November election.  Historically, the stock market does about 9% better per year when Democrats are elected.

  3. It depends on your time horizon and asset allocation model. If it's your only choice and your time horizon is over 5 years.... go for it.  Adjust your asset allocation outside of the plan. Make sure you're covered on international, mid & small cap, at appropriate percentages, outside your plan.

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  5. what's your investment horizon?  if you are young and have say 10+ years until you retire, then history shows that an investment in teh S&P 500 index should be ok.  long term returns on the S&P average around 12%, but consider yourself fortunate if that continues.   again, history shows that it should, but there is new research out there that shows that somethingk 7 to 8% is far more realistic.  

    MAKE SURE to look for a passive fund, meaning that it should have low management fees.  also make sure you are investing in teh class A shares.  otherwise, they'll take a chunk of your money right off the bat.  make sure to look into the whole 'Class' issue.

    so, say you expect 7% returns from investing in SPX (the s and p 500).   look at less risky investments such as long term CDs and inflations indexed treasury bills.   on a RISK ADJUSTED basis, you may be better off investing in those, or in some sort of balanced fund.   also, dividends are good, so see what kind of dividend yield you'll be getting.

    but again, the most important thing is how long your money will be there and what are the management fees.

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