Ten-Hut: About Insurance, Stocks

In honor of Memorial Day, the Motley Fool salutes current and former military personnel and their families with a series of articles addressing common financial issues they face. Check out all of the Fool's Memorial Day articles.

Gather round, military folks -- and don't be shy. We've got to fit an awful lot of you in here for some financial tips in honor of Memorial Day. According to Wikipedia, there are nearly 1.5 million members of the U.S. military, with another 800,000 or so in the reserves. And let's include their families, too -- giving us a sizable chunk of the U.S. population.

I spent some time in our Fool community of discussion boards recently (we have boards for Military Fools, Military Brats, U.S. Military Investors, and Motley Military Money Matters) to see what I could learn and pass on. Below are a few useful things.

Don't be prey
Many times, companies will target members of the military and try to sell them unnecessary or unnecessarily expensive financial products. For example: insurance. You probably should carry life insurance if people depend on your income (for example, your spouse or children). But if you're young and single, even if you have a high-risk job right now, you probably don't need insurance if no one is depending on your income. (Learn much more about insurance.)

As fellow Fool John Rosevear has written about in his Memorial Day article, some companies have sold service people investments where as much as 50% of their "investment" in the first year went toward fees and commissions. So if you invested $200 per month, for a total of $2,400 in the first year, more than $1,000 would have been wasted. (There are lots of very inexpensive investment options -- such as many index funds.)

Such "deals" depress me. They're clearly taking advantage of people, and not just any people, but those who are putting their lives on the line for the rest of us. If you spend a needless $1,000 on fees, you've forsaken all the money that $1,000 could have grown into in the future. For instance, defense-oriented stocks like Boeing (NYSE: BA  ) and General Dynamics (NYSE: GD  ) have pummeled the market averages over the past several years. If you'd invested $1,000 in each of them five years ago, you'd have more than $4,200 now. Now isn't that a prettier picture than spending it all on needless fees?

Fortunately, companies preying on the military are not going unnoticed. One company that got in trouble for its sales methods to service people is First Command. The National Association of Securities Dealers fined it $12 million for making misleading statements in its pitches. Meanwhile, last year President Bush signed the Military Personnel Financial Services Protection Act, which is designed to protect service members from "predatory sales practices for financial products and the sale of inappropriate financial products" on U.S. military bases.

Some good guys
One company with financial products targeting those in the military is USAA, and it has received many high marks over the years. (In fact, I can recall more than one occasion when I've seen one of its offerings rated very highly, only to end up disappointed that it wasn't available to me because I wasn't in the military.)

On our boards, Community member 5and10, a 22-year Navy retiree, offered this experience with USAA:

"I started with USAA for automobile and renters & homeowners insurance sometime in the early to mid '70s and still have them today. In 1987 I started a conventional IRA in their mutual funds and have maintained/added to that IRA on a routine basis ever since. Both of my sons have mutual fund accounts with them and one has his house and car insurance there, also. Their money market fund has some of our 'short term/emergency fund and buy a house/condo money.' USAA is certainly not my only egg basket, but my experience with their offerings, returns, and responsive customer service pretty much guarantees that they will be among the last places that I will close an account. 'Exceptional' is the word I would use to describe them. And, no, I don't work there."

Jtallenmd offered this take:

"I switched to E*Trade (Nasdaq: ETFC  ) before USAA started offering brokerage services. I recently looked at going back to them. I was not impressed with their research tools. If you have other sources for doing research, they are probably a good company, but just realize that some of the other brokerage services offer much better research for similar trading prices."

USAA might not be the answer to all your financial needs, but if you're in the military, it's well worth looking at its offerings. When it comes to choosing the best brokerage for yourself, check out some non-USAA options, as well, at our Broker Center.

More from our boards
Here are some additional topics of possible interest. Click in to read along, and consider adding your own thoughts:

Longtime Fool contributor Selena Maranjian owes her yo-yo talent to a soldier. She doesn't own shares of the companies mentioned in this article. For more about Selena, view her bio and her profile. The Motley Fool is Fools writing for Fools.

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