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If you think money managers are overpaid, imagine how much they’d charge if they actually beat the market.
IN THE FINANCIAL world, some topics are serious, others not so much. Since it’s the holiday season, it seems appropriate to look back at some of the past year’s lighter moments.
No joke. In 2019, artist Maurizio Cattelan unveiled a collection he called Comedian. The item that received the most attention: a sculpture that consisted only of a banana duct-taped to a wall. The banana gained fame when it sold at a Miami auction for $120,000.
IT’S SEVEN MONTHS since I received my terminal diagnosis. Cancer is now the reality that looms over each day, and it’s been a rocky road, though the latest abdomen scan suggests I’ll be around for a while longer.
Where’s my head at? Here are four questions I’ve been asking myself—questions, I suspect, that might also be interesting to those who aren’t facing a terminal diagnosis.
1. Am I afraid of dying? No,
WE SUFFER LOSSES throughout our life. During our youth, we might leave old chums behind when our family starts fresh in a new town or when we go away to college. Later, a job loss or a divorce could leave us drained both financially and emotionally. But for most of us, our senior years are when loss hits hardest.
Our body is often the first casualty, especially the face we see in the mirror each morning.
DURING A PROJECT meeting at my old employer, a member of our team was constantly raising questions without offering any solutions. Afterwards, the team leader commented, “This guy always thinks his cup is half empty. Nothing will ever satisfy him.”
We’ve all known such people. Is there anything wrong with their attitude? It depends. My boss told me during my first week, “Never be satisfied with the status quo. Find ways to improve everything.
I SPENT MANY HOURS reading articles and books about retirement before I actually retired. I knew I’d retire eventually because of how often I found myself out of work. Studying retirement became one more thing I needed to do so I could be successful.
Under the category of retirement, grandparenting was a frequent subject. This is understandable since many retirees are or soon become grandparents.
My situation is different. My special-needs son will not get married or have kids.
EARLY LAST WEEK, The Wall Street Journal ran an article with the headline “Why This Frothy Market Has Me Scared.” The author cited a number of indicators that have him worried, including a survey of investor optimism that’s at a 35-year high. Investors, the Journal said, are feeling “euphoric,” and that’s often a bad sign.
So, as we head into year-end, it’s worth taking stock of where things stand. The stock market has returned nearly 25% so far this year.
ADVERSE SELECTION. We are—unsurprisingly—more likely to buy insurance products that we think we’ll need. Those in ill-health often opt to buy trip-cancellation insurance. Those who think they’ll live to a ripe old age are more likely to buy lifetime income annuities. Insurers are aware of this adverse selection—and price their products accordingly.
WRITE IT DOWN. Want to spend less, drink less coffee or booze, eat less or exercise more? Keep a diary devoted to one or more of these things. For instance, if you write down every dollar you spend, you won’t just have a better idea of where your money goes. You’ll also be more conscious of when you’re spending—and that by itself will prompt you to cut back.
NO. 92: WE THINK of a mortgage as leveraging our home—but, in truth, it leverages our entire financial life. Imagine we have $300,000 in stocks, a $300,000 home and a $250,000 mortgage. If stocks drop 50%, our total assets fall 25%, from $600,000 to $450,000. But factor in the mortgage and our net worth drops 43%, from $350,000 to $200,000.
NO. 15: WE SHOULD retire our debts before we retire from our job. Paying off debt cuts our living expenses, plus that debt is likely costing us more than we’re earning on our bonds.
IT TOOK MY HUSBAND and me several years to figure out our retirement plan—and it wasn’t an issue of money. The nagging question: How were we going to live this new life? We had both had extremely demanding careers and we were ready to move on from the stress of our work lives. But the thought of sitting at home all day watching Judge Judy or stretched out on hammocks really didn’t appeal.
Our solution: We took a page from the playbook of high school graduates—and spent a “gap year” teaching in Africa as volunteers.
WE JUST PURCHASED a new car. The whole buying process has been upended by the pandemic and today’s chip shortage, and we learned seven important lessons.
My wife and I view car buying as an unavoidable chore. We know financial experts recommend buying a car that’s a few years old, so someone else takes the big hit on the initial depreciation. We haven’t done that. We like to buy a new vehicle and keep it for 15 or 20 years.
A FEW WEEKS BACK, a reader—let’s call him Karl—challenged me with a question. Why, he asked, don’t I recommend momentum investment strategies?
If you aren’t familiar with the term, momentum strategies seek to buy stocks that have done well in the past, with the hope that they will continue rising, while also selling stocks that have done poorly, with the expectation that they will keep falling.
Karl asked why, in a recent article, I had dismissed momentum investing as the sort of thing that would turn your portfolio into an “unpredictable stew,” even though research has found that it can be profitable.
WE HAVE MUCH TO learn about the coronavirus, but we already know a great deal about financial risk—and, indeed, recent weeks have offered a brutal refresher course. What insights can we draw from investors’ reaction to this awful epidemic? Here are eight timeless lessons:
1. The greatest risks are those we never see coming.
Some risks are predictable, such as stock market volatility. Others are less probable but widely known, like the possibility of a recession.
IN HER BESTSELLING book Thinking in Bets, retired poker champion Annie Duke stresses an important point: As kids in school, it was regarded as a failure if we ever answered a question, “I don’t know.” But in the world outside the classroom, the only honest answer to many questions is, “I don’t know” or “I’m not sure.” This isn’t due to ignorance. Rather, it’s because, in many cases, the precise right answer simply isn’t knowable.
NO. 15: WE SHOULD retire our debts before we retire from our job. Paying off debt cuts our living expenses, plus that debt is likely costing us more than we’re earning on our bonds.
ADVERSE SELECTION. We are—unsurprisingly—more likely to buy insurance products that we think we’ll need. Those in ill-health often opt to buy trip-cancellation insurance. Those who think they’ll live to a ripe old age are more likely to buy lifetime income annuities. Insurers are aware of this adverse selection—and price their products accordingly.
WRITE IT DOWN. Want to spend less, drink less coffee or booze, eat less or exercise more? Keep a diary devoted to one or more of these things. For instance, if you write down every dollar you spend, you won’t just have a better idea of where your money goes. You’ll also be more conscious of when you’re spending—and that by itself will prompt you to cut back.
NO. 92: WE THINK of a mortgage as leveraging our home—but, in truth, it leverages our entire financial life. Imagine we have $300,000 in stocks, a $300,000 home and a $250,000 mortgage. If stocks drop 50%, our total assets fall 25%, from $600,000 to $450,000. But factor in the mortgage and our net worth drops 43%, from $350,000 to $200,000.
IT TOOK MY HUSBAND and me several years to figure out our retirement plan—and it wasn’t an issue of money. The nagging question: How were we going to live this new life? We had both had extremely demanding careers and we were ready to move on from the stress of our work lives. But the thought of sitting at home all day watching Judge Judy or stretched out on hammocks really didn’t appeal.
Our solution: We took a page from the playbook of high school graduates—and spent a “gap year” teaching in Africa as volunteers.
WE JUST PURCHASED a new car. The whole buying process has been upended by the pandemic and today’s chip shortage, and we learned seven important lessons.
My wife and I view car buying as an unavoidable chore. We know financial experts recommend buying a car that’s a few years old, so someone else takes the big hit on the initial depreciation. We haven’t done that. We like to buy a new vehicle and keep it for 15 or 20 years.
A FEW WEEKS BACK, a reader—let’s call him Karl—challenged me with a question. Why, he asked, don’t I recommend momentum investment strategies?
If you aren’t familiar with the term, momentum strategies seek to buy stocks that have done well in the past, with the hope that they will continue rising, while also selling stocks that have done poorly, with the expectation that they will keep falling.
Karl asked why, in a recent article, I had dismissed momentum investing as the sort of thing that would turn your portfolio into an “unpredictable stew,” even though research has found that it can be profitable.
WE HAVE MUCH TO learn about the coronavirus, but we already know a great deal about financial risk—and, indeed, recent weeks have offered a brutal refresher course. What insights can we draw from investors’ reaction to this awful epidemic? Here are eight timeless lessons:
1. The greatest risks are those we never see coming.
Some risks are predictable, such as stock market volatility. Others are less probable but widely known, like the possibility of a recession.
IN HER BESTSELLING book Thinking in Bets, retired poker champion Annie Duke stresses an important point: As kids in school, it was regarded as a failure if we ever answered a question, “I don’t know.” But in the world outside the classroom, the only honest answer to many questions is, “I don’t know” or “I’m not sure.” This isn’t due to ignorance. Rather, it’s because, in many cases, the precise right answer simply isn’t knowable.
Our perception of fairness – taxes that is says RDQ
Helping Our Neighbors by Kristine Hayes Nibler
Revising Retirement by Marjorie Kondrack
No Barriers to Entry by Jonathan Clements
Resolutions? What will you do?
Roth Conversions with Capital Loss Carryforward?
I further recommend you include in your search watching a presentation from the recent Bogleheads® Conference 2024 titled Roth Conversion Deep Dive with Mike Piper. Mike is a CPA but is primarily a writer and runs a blog that focuses on taxes and related planning at his website Oblivious Investor. https://www.youtube.com/watch?v=Wjbf9KVSG7s&ab_channel=Bogleheads I also enjoy of videos by Rob Berger on YouTube (he is a retired PCBOA attorney) who has a blog (500+ videos) that may help you address your planning questions. Mr. Berger and other financial professionals can be found on the below Bogleheads® Conference 2022 video link discussing topics that may address some of your questions. https://www.youtube.com/watch?v=5E-JG540J8g&ab_channel=Bogleheads I hope these links help. Best, Bill"