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Thanks to all those smart investors, there’s nobody smarter than the market.
MY WIFE WENT TO New York for five days with a friend. I don’t mind because I could use the rest. Over the past year, we’ve traveled from the West Coast to Europe three times, flown across the country to visit my sister and brother-in-law in Tennessee, and taken a number of car trips.
My wife loves traveling and has a lot of energy. Because of all the air miles she’s logged, she’s now qualified for United Airlines Premier Gold status.
IN WASHINGTON, 2025 is beginning to look a lot like 2017. Republicans again control the White House, the Senate and the House of Representatives. But a key difference between then and now is that today the Republican majority in the House is far narrower.
This means more negotiation will be required, and agreement on a new tax bill may take months. In the meantime, here are some key areas that investors will want to keep an eye on.
IT’S THE ONE ASSET we’re all born with, and it pretty much defines our financial life. I’m talking here about our human capital, our ability to pull in a paycheck.
That paycheck—or the lack thereof—drives our ability to save, service debt and take investment risk. It also dictates our insurance needs and how much emergency money we should hold. Put it all together, and our human capital should arguably determine how we manage our money over our lifetime.
DRIVING CROSSTOWN, my brother and I stopped at an onramp, where a man held a cardboard sign.
“Does anyone give these people money?” my brother asked, then immediately answered his own question by mentioning a friend who hands out bottles of water instead. “Anything helps,” read the man’s sign.
“Sure,” I said. “I’ve seen people pass $5 bills out the window.” A single dollar used to be enough for a panhandler to end his shift and shuffle off to the nearest mini-market.
WHEN I WAS a teenager in the 1960s, the popular expression was, “Do your own thing.” We baby boomers were supposed to reject our parents’ ways of thinking and do what we thought better. These better things included growing our hair long, wearing blue jeans, having beards, not wearing bras and making love, not war.
I liked this “do your own thing” way of thinking. But I also discovered that doing your own thing,
A QUOTE OFTEN attributed to Mark Twain goes as follows: “It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so.”
This certainly applies to personal finance, and it’s why it can be helpful to take a step back sometimes to revisit widely held notions—including these six.
1. Social Security. You may have heard of Social Security’s “earnings test,” which can reduce the size of monthly checks for those who continue working after claiming benefits.
BUY CHEAP BETA. With individual stocks and active funds, you get both alpha and beta. Beta is the return attributable to the overall market’s direction. Alpha is the variation from that return. Think you can beat the market and earn positive alpha? Even so, you might buy beta cheaply with index funds—and then seek alpha with more focused investment bets.
NO. 50: SHORT-TERM bonds typically give you much of the yield of longer-term bonds, but with far less price volatility. Because venturing into longer-term bonds doesn’t greatly boost a portfolio’s expected return, you might opt to play it safe with bonds and instead allocate more money to stocks—potentially boosting your portfolio's long-run results.
DOLLAR AVERAGING. If you put, say, $300 into stocks every month, you're dollar-cost averaging. Because you invest the same sum, you buy more shares when the market falls, thus lowering your average cost per share. Dollar averaging supposedly improves the odds of making money. Its real virtue: It helps investors to get started and then stay the course.
NO. 46: WE SHOULD favor financial advisors who focus on index funds—and who help not only with investing, but also with broader finance issues like taxes, insurance and estate planning.
SOCIAL SECURITY is a crucial source of income for many retirees. But unfortunately, there’s also much confusion, because the ways benefits are calculated sure isn’t simple.
Want to learn more? To get started, I’d suggest heading to the Social Security Administration’s website and creating a free “my Social Security” account. For those currently receiving benefits, the website allows you to:
Verify your benefit payment amount
Get a replacement Social Security card
Get a replacement Medicare card
Change your address and phone number
Start or change direct deposit of your benefit payment
Get a replacement SSA-1099 or SSA-1042S for tax purposes
If you aren’t currently receiving benefits,
I VIVIDLY REMEMBER my father explaining how small sums of money could grow exponentially. Using the example of a penny that doubled every day for a month, he showed how it could grow to more than $10 million. Indeed, as Albert Einstein didn’t say, “The most powerful force in the universe is compound interest.”
Many authors tout the benefits of saving beginning at a young age. Radio personality Dave Ramsey and his daughter Rachel Cruze,
THERE’S SOMETHING ODD going on in the housing market. Mortgage rates are appreciably higher than they were a year ago, but home prices—on average—have yet to fall. As of the most recent reading, prices continue to rise on a year-over-year basis. It reminds me of the cartoon character Wile E. Coyote, who experiences a delayed reaction every time he runs off the edge of a cliff. It’s only after he looks down that he realizes he has a problem.
JAMES J. CHOI is a finance professor at Yale University. But in a recent paper titled “Popular Personal Financial Advice versus the Professors,” Choi played the role of (somewhat) neutral arbiter. The question he sought to answer: Do popular—that is, non-academic—personal finance books offer advice consistent with the academic literature? And if not, is that a problem?
To conduct his study, Choi looked at 50 personal finance titles including The Millionaire Next Door,
MANY EMPLOYEES deliberately have too much income tax withheld from their paycheck, so they receive a fat refund each spring. Federal refunds averaged $2,850 per income-tax return in 2014, the latest year for which data is available.
This is completely irrational and entirely sensible.
It’s irrational, because we’re making an interest-free loan to Uncle Sam. Why not have the correct amount of tax withheld, and then take a sliver of each paycheck and pop it in a high-yield savings account,
NO. 46: WE SHOULD favor financial advisors who focus on index funds—and who help not only with investing, but also with broader finance issues like taxes, insurance and estate planning.
BUY CHEAP BETA. With individual stocks and active funds, you get both alpha and beta. Beta is the return attributable to the overall market’s direction. Alpha is the variation from that return. Think you can beat the market and earn positive alpha? Even so, you might buy beta cheaply with index funds—and then seek alpha with more focused investment bets.
NO. 50: SHORT-TERM bonds typically give you much of the yield of longer-term bonds, but with far less price volatility. Because venturing into longer-term bonds doesn’t greatly boost a portfolio’s expected return, you might opt to play it safe with bonds and instead allocate more money to stocks—potentially boosting your portfolio's long-run results.
DOLLAR AVERAGING. If you put, say, $300 into stocks every month, you're dollar-cost averaging. Because you invest the same sum, you buy more shares when the market falls, thus lowering your average cost per share. Dollar averaging supposedly improves the odds of making money. Its real virtue: It helps investors to get started and then stay the course.
SOCIAL SECURITY is a crucial source of income for many retirees. But unfortunately, there’s also much confusion, because the ways benefits are calculated sure isn’t simple.
Want to learn more? To get started, I’d suggest heading to the Social Security Administration’s website and creating a free “my Social Security” account. For those currently receiving benefits, the website allows you to:
Verify your benefit payment amount
Get a replacement Social Security card
Get a replacement Medicare card
Change your address and phone number
Start or change direct deposit of your benefit payment
Get a replacement SSA-1099 or SSA-1042S for tax purposes
If you aren’t currently receiving benefits,
I VIVIDLY REMEMBER my father explaining how small sums of money could grow exponentially. Using the example of a penny that doubled every day for a month, he showed how it could grow to more than $10 million. Indeed, as Albert Einstein didn’t say, “The most powerful force in the universe is compound interest.”
Many authors tout the benefits of saving beginning at a young age. Radio personality Dave Ramsey and his daughter Rachel Cruze,
THERE’S SOMETHING ODD going on in the housing market. Mortgage rates are appreciably higher than they were a year ago, but home prices—on average—have yet to fall. As of the most recent reading, prices continue to rise on a year-over-year basis. It reminds me of the cartoon character Wile E. Coyote, who experiences a delayed reaction every time he runs off the edge of a cliff. It’s only after he looks down that he realizes he has a problem.
JAMES J. CHOI is a finance professor at Yale University. But in a recent paper titled “Popular Personal Financial Advice versus the Professors,” Choi played the role of (somewhat) neutral arbiter. The question he sought to answer: Do popular—that is, non-academic—personal finance books offer advice consistent with the academic literature? And if not, is that a problem?
To conduct his study, Choi looked at 50 personal finance titles including The Millionaire Next Door,
MANY EMPLOYEES deliberately have too much income tax withheld from their paycheck, so they receive a fat refund each spring. Federal refunds averaged $2,850 per income-tax return in 2014, the latest year for which data is available.
This is completely irrational and entirely sensible.
It’s irrational, because we’re making an interest-free loan to Uncle Sam. Why not have the correct amount of tax withheld, and then take a sliver of each paycheck and pop it in a high-yield savings account,
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