Diversify By Yourself Or Trust the Experts

Think of the most delicious buffet in the universe. Assume there are 10 food items on the long, beautiful table. Each delicacy was prepared by a chef known the world over as one of the best in his/her specialty. As a guest, you can help yourself by placing one or more of the 10 items on your plate (one way of diversifying). You also see at the end of the long table there are plates that are already filled with various food items. You decide to trust the chefs who prepared each of the choices and carry a prearranged plate (another way of diversifying) to your table. It was a knock-out; the best meal you ever had.

Having said all that, many of you have trusted the experts retained by the Deferred Compensation Plan of the City of New York to pre-arrange or prepare your "investment plate." This is evidenced by your investment in the appropriate Pre-Arranged Portfolio (diversification). If, however, you achieve the advantages of a diversified investment portfolio by preparing your own "investment plate" directly from the list of Core Investment Funds, then you must trust yourself and not invest in any of the Pre-Arranged Portfolios. Conversely, if you achieve the advantages of a diversified investment portfolio by selecting a Pre-Arranged Portfolio (pre-arranged diversification), then you must trust the investment experts who established the investment portfolio for you and not invest directly in any of the Core Investment Funds. Just as you will suffer a "bellyache" if you eat one or more of the delicacies on the buffet table while also eating from the plate that was pre-arranged for you by the expert chefs, you will suffer a financial "bellyache" if you invest in one or more of the Core Investment Funds while also investing in a Pre- Arranged Portfolio. Either diversify yourself or appoint the Deferred Compensation Plan to diversify for you. Do not do both. Please call me if you do not understand these principles of investing.

Q.: I am a retired member of the Board of Education Retirement System of the City of New York. Why are members of Tiers 1-2 excluded from the recent $160-million settlement reached by the United Federation of Teachers and the Teachers' Retirement System of the City of New York. It makes no sense. W.T.

A.: To the contrary, it makes perfect sense because BERS members have not been damaged. BERS members' accounts were always credited with the higher rate of interest when it was set by the legislature above four percent. There was never a confiscation of any earned interest as there was with members of the TRS.