An Independent Voice That Advocates For The Classroom Educator Without The Corrupting Politics Tied To Our Union And DOE Leadership.
Tuesday, June 27, 2017
TRS Is Converting Our Bond Fund To A Balanced Fund On January 1, 2018. Should You Invest In It?
My sources tell me that the Teachers Retirement System (TRS) is finally throwing in the towel and eliminating the poorly subscribed Bond Fund that has been associated with anemic investment returns of 1.33% or lower, before investment fees, for the last five years and converting it to a Balanced Fund that is supposed to compete with the Fixed Return Fund and will consist of approximately 70% bonds and 30% equities to juice up the fund's investment returns. The question is would it be a good idea to invest in the new Balanced Fund? The simple answer is no and here's why.
TRS already has a Fixed Return Fund that pays out 7% annually, without an investment fee to UFT members and 8.25% for non UFT members. By contrast, the new Balanced Fund will have investment fees that will reduce the total investment returns. Moreover, its highly unlikely that the Balanced Fund in a low inflation environment that we are currently in, will achieve anything close to a 7% return. Finally, if equities have a bad year, its possible that the Balanced Fund will have trouble showing positive investment returns that year.
Logically, since the Balanced Fund is for very conservative investors who don't like to take risks, why would one take a chance to invest into a fund where you might have trouble getting a good return when you can stash the money into the TRS Fixed Return Fund and get a guaranteed 7% and not worry about the ups and down of the stock market?
If TRS really wants to assist their members, they should allow for a ROTH option, not a fund that shows little promise to enhance the investment returns when a superior Fixed Return option is already available, with no risk.. Personally, I see no reason whatsoever for investing in the Balanced Fund.