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A shout-out to stock-pickers: Thanks for sacrificing your portfolio’s performance to keep the markets efficient for us index-fund owners.

Inflation Ahead?

IN THE INVESTMENT world, inflation is the topic of the day. There are four key reasons:

Congress. Since March 2020, the federal government has dropped more than a trillion dollars of cash into the economy via stimulus checks and the Paycheck Protection Program. While many of the recipients were unemployed and needed these dollars to meet basic needs, others were not. The result: More money in people’s pockets allowed them to spend more,

Read more »

The Art of Spending

I GREW UP IN a middle-class family in Kolkata, India. Like most folks, my relationship with money was shaped by my parents’ financial habits. They were on different sides of the saver-spender continuum. My homemaking mother strove to live beneath our family’s means and never seemed to feel deprived. By contrast, my father—even with a modest salary from his government job—was focused on the art of spending.
At my mother’s insistence, my father bought most of our household supplies from wholesalers and cooperative stores,

Read more »

Wooden Spoons

WE ARE STARTING from scratch. After living in Spain for three years, Jiab and I have returned to Dallas to be closer to family. We still have a home here, but—when we left three years ago—we sold all our furniture, cars and many other possessions to reduce storage costs. Now we have to reacquire those things that make living possible.
Fortunately, Jiab and I share a similar outlook as we reaccumulate. That outlook is inspired by Thorstein Veblen,

Read more »

My Worst Investment

WHILE READING the great books on investing, studying financial theory and reviewing our investment performance are essential to becoming a better investor, sometimes it can be useful to learn from the mistakes of others—because what not to do can be even more important than what to do. As Otto von Bismarck may have said, “Only a fool learns from his own mistakes. The wise man learns from the mistakes of others.”
Which brings me to me.

Read more »

Five Lessons

COVID-19 WILL SOON, I hope, be in the rearview mirror. But as Winston Churchill said, “Never let a good crisis go to waste.” Here are five lessons I’m taking away from the pandemic:
1. Government spending. Some folks tell me they’re claiming Social Security retirement benefits as soon as they’re eligible because the system’s trust fund will be depleted within the next decade or so, at which point benefits could get cut.

Read more »

Two Words

I’VE LATELY BEEN having a hard time sleeping—and I have a pretty good idea why. It has to do with two words that keep bouncing around inside my head. If you let them, those two words will also keep you up at night. They’re powerful because there’s no end to them. You ask, “What are the two terrible words?” The answer: what if.
What ifs are about what could happen in the future and,

Read more »

Voices

What financial lessons did you learn from your parents?

"My parents are both savers, which is a great habit I observed and learn. My dad however only saves in cash, with zero understanding or how-to for investment. My mom knows a bit about investment by earning low/simple interest."
- SCao
Read more »

Is there a downside to the current popularity of indexing?

"For indexing to work, there must remain substantial number of investors (or gamblers) who actively trade and, more importantly, to believe in the stock market as winnable. Contempt for indexers is precisely what is needed to keep indexing viable."
- mcammer
Read more »

Should U.S. investors own foreign bonds?

"I've done well with FEMDX Franklin Templeton emerging debts fund. I have about 10% of my bond exposure there."
- Scrooge_McDuck88
Read more »

Money Guide

Improving 401(k)s

AN EMPLOYER'S 401(K) or 403(b) is typically the best place to stash your savings, thanks to the initial tax deduction, tax-deferred growth and any matching employer contribution. Yet many employees fail to take full advantage of these plans, contributing little or no money. And those who do contribute either never make an investment choice or, if they do, never revisit it. To improve employee decision-making, many employer-sponsored retirement plans have been revamped. New employees are often automatically enrolled in the plan and their annual contribution is automatically increased, unless they opt out. To help employees make better investment decisions, many plans have reduced the number of investment options, so employees are less overwhelmed by the choice. More important, plans have also changed their default investment option. Before, if you didn’t make a choice, your contributions would often end up in a low-risk, low-return investment, such as the plan’s money-market fund or stable-value fund.  The latter is typically invested in short-term bonds, with an insurance wrapper added, which allows the fund to maintain a stable share price. Now, many plans have designated target-date retirement funds as their default investment option. These funds have broadly diversified portfolios of stocks and bonds that are geared to particular retirement dates. As that date approaches, the funds become more conservative. Next: Pray for Bad Markets Previous: Savings Priorities Articles: No Free LunchB Is for Bias403 BewareSeparated at Birth and Five Steps to a Better 401(k)
Read more »

Manifesto

NO. 13: FACED with an unknown future, we should diversify our investments, buy insurance, keep some cash—and accept that, in retrospect, these precautions will often seem unnecessary.

Truths

NO. 22: MONEY BUYS happiness, but this could be partly explained by a focusing illusion: When asked about their happiness, the wealthy ponder their good fortune, prompting them to say they’re happy. Moreover, research suggests happiness doesn’t rise in lockstep with income. Instead, as our income increases, it takes more and more dollars to boost our happiness.

Act

CHECK YOUR FUND expenses. If you own index funds, aim for weighted average annual expenses below 0.15%. If you own active funds, you’ll pay more—but allocate enough to index funds to push your portfolio average below 0.4%. By holding down costs, you’ll keep more of what you make, plus low-cost funds typically beat high-cost competitors.

Think

SIGNALING. How we spend and invest our money often has less to do with what we want—and instead it’s driven more by the signals we want to send to others. Owning a hedge fund signals we’re wealthy. Driving a Prius signals we’re concerned about the environment. Going to a classical music concert tells our friends that we’re cultured.

Second Look

Retirement

Reality Check

CAN YOU LIVE on Social Security alone? The answer is a big fat “it depends.”
I was recently taken to task by a reader, who stated he and his wife live just fine on their combined $30,000 in Social Security benefits. I also know of a retiree who says he’s quite happy living in a trailer out west on $1,300 a month. How does that square with the conventional wisdom that, once retired, you need 80% of preretirement income,

Read more »

Family Finance

My Regrets

EVERY SO OFTEN, I’m asked about my biggest investment mistakes—and I really don’t have much to say. Yes, like many others, I dabbled in individual stocks and actively managed mutual funds early in my investing career. Yes, like everybody who’s truly diversified, there are always parts of my portfolio that are generating disappointing short-term results. But such things don’t cause me any regrets.
Instead, as I look back, my big financial regrets fall into four buckets:
Pound foolish.

Read more »

Investing

Aiming High

BACK IN 2013, I was recently divorced, living on my own for the first time and utterly naïve about investing. I was in my late 40s, I’d lost half of my small state pension in the divorce and I was afraid I’d be working well into my 70s if I didn’t get my financial life on track.
I set the ambitious goal of having a net worth of $500,000 by 2022, when I’ll turn 55.

Read more »

Lists

Eight Heroes

A CURIOUS THING happened in Stockholm in 2013. The Royal Swedish Academy of Sciences awarded the Nobel Prize in economics to three academics who had developed theories about stock prices. What was odd was that two of the recipients—Eugene Fama and Robert Shiller—couldn’t have been more opposed in their viewpoints.
Fama believes that stock prices are always rational and that there’s no such thing as a market bubble. Shiller believes that stock prices are often irrational and that bubbles do occur.

Read more »
Home Call to Action

Mindset

Think Like Eeyore

FOR THOSE WHO know their A.A. Milne, they’ll recall Eeyore as Winnie the Pooh’s perennially gloomy donkey friend. Which brings me to my inner Eeyore—and a thought provoked by the stock market’s astonishing recovery.
Now that the S&P 500 is once again hitting new highs, it’s time to prepare for the next bear market. No, I haven’t reduced my stock holdings as share prices have bounced back and, no, I’m not predicting that another crash is imminent.

Read more »

Inflation Ahead?

IN THE INVESTMENT world, inflation is the topic of the day. There are four key reasons:

Congress. Since March 2020, the federal government has dropped more than a trillion dollars of cash into the economy via stimulus checks and the Paycheck Protection Program. While many of the recipients were unemployed and needed these dollars to meet basic needs, others were not. The result: More money in people’s pockets allowed them to spend more,

Read more »

The Art of Spending

I GREW UP IN a middle-class family in Kolkata, India. Like most folks, my relationship with money was shaped by my parents’ financial habits. They were on different sides of the saver-spender continuum. My homemaking mother strove to live beneath our family’s means and never seemed to feel deprived. By contrast, my father—even with a modest salary from his government job—was focused on the art of spending.
At my mother’s insistence, my father bought most of our household supplies from wholesalers and cooperative stores,

Read more »

Wooden Spoons

WE ARE STARTING from scratch. After living in Spain for three years, Jiab and I have returned to Dallas to be closer to family. We still have a home here, but—when we left three years ago—we sold all our furniture, cars and many other possessions to reduce storage costs. Now we have to reacquire those things that make living possible.
Fortunately, Jiab and I share a similar outlook as we reaccumulate. That outlook is inspired by Thorstein Veblen,

Read more »

My Worst Investment

WHILE READING the great books on investing, studying financial theory and reviewing our investment performance are essential to becoming a better investor, sometimes it can be useful to learn from the mistakes of others—because what not to do can be even more important than what to do. As Otto von Bismarck may have said, “Only a fool learns from his own mistakes. The wise man learns from the mistakes of others.”
Which brings me to me.

Read more »

Five Lessons

COVID-19 WILL SOON, I hope, be in the rearview mirror. But as Winston Churchill said, “Never let a good crisis go to waste.” Here are five lessons I’m taking away from the pandemic:
1. Government spending. Some folks tell me they’re claiming Social Security retirement benefits as soon as they’re eligible because the system’s trust fund will be depleted within the next decade or so, at which point benefits could get cut.

Read more »

Two Words

I’VE LATELY BEEN having a hard time sleeping—and I have a pretty good idea why. It has to do with two words that keep bouncing around inside my head. If you let them, those two words will also keep you up at night. They’re powerful because there’s no end to them. You ask, “What are the two terrible words?” The answer: what if.
What ifs are about what could happen in the future and,

Read more »

Free Newsletter

Voices

Which life decisions shouldn’t involve financial considerations?

"Having children. For every other reason, kids are worth it except from an financial POV."
- Edwin Belen
Read more »

What financial lessons did you learn from your parents?

"My parents are both savers, which is a great habit I observed and learn. My dad however only saves in cash, with zero understanding or how-to for investment. My mom knows a bit about investment by earning low/simple interest."
- SCao
Read more »

When have you regretted paying the lowest cost possible?

"Flying commercial... sitting in a middle row in the back sandwiched between two strangers whom were both overweight and sweaty, boarding last so no space for my carry-on... then you have to go to the carousel to get your bag. Gah!"
- Scrooge_McDuck88
Read more »
Home Call to Action

Manifesto

NO. 13: FACED with an unknown future, we should diversify our investments, buy insurance, keep some cash—and accept that, in retrospect, these precautions will often seem unnecessary.

Act

CHECK YOUR FUND expenses. If you own index funds, aim for weighted average annual expenses below 0.15%. If you own active funds, you’ll pay more—but allocate enough to index funds to push your portfolio average below 0.4%. By holding down costs, you’ll keep more of what you make, plus low-cost funds typically beat high-cost competitors.

Truths

NO. 22: MONEY BUYS happiness, but this could be partly explained by a focusing illusion: When asked about their happiness, the wealthy ponder their good fortune, prompting them to say they’re happy. Moreover, research suggests happiness doesn’t rise in lockstep with income. Instead, as our income increases, it takes more and more dollars to boost our happiness.

Think

SIGNALING. How we spend and invest our money often has less to do with what we want—and instead it’s driven more by the signals we want to send to others. Owning a hedge fund signals we’re wealthy. Driving a Prius signals we’re concerned about the environment. Going to a classical music concert tells our friends that we’re cultured.

Money Guide

Start Here

Improving 401(k)s

AN EMPLOYER'S 401(K) or 403(b) is typically the best place to stash your savings, thanks to the initial tax deduction, tax-deferred growth and any matching employer contribution. Yet many employees fail to take full advantage of these plans, contributing little or no money. And those who do contribute either never make an investment choice or, if they do, never revisit it. To improve employee decision-making, many employer-sponsored retirement plans have been revamped. New employees are often automatically enrolled in the plan and their annual contribution is automatically increased, unless they opt out. To help employees make better investment decisions, many plans have reduced the number of investment options, so employees are less overwhelmed by the choice. More important, plans have also changed their default investment option. Before, if you didn’t make a choice, your contributions would often end up in a low-risk, low-return investment, such as the plan’s money-market fund or stable-value fund.  The latter is typically invested in short-term bonds, with an insurance wrapper added, which allows the fund to maintain a stable share price. Now, many plans have designated target-date retirement funds as their default investment option. These funds have broadly diversified portfolios of stocks and bonds that are geared to particular retirement dates. As that date approaches, the funds become more conservative. Next: Pray for Bad Markets Previous: Savings Priorities Articles: No Free LunchB Is for Bias403 BewareSeparated at Birth and Five Steps to a Better 401(k)
Read more »

Second Look

Retirement

Reality Check

CAN YOU LIVE on Social Security alone? The answer is a big fat “it depends.”
I was recently taken to task by a reader, who stated he and his wife live just fine on their combined $30,000 in Social Security benefits. I also know of a retiree who says he’s quite happy living in a trailer out west on $1,300 a month. How does that square with the conventional wisdom that, once retired, you need 80% of preretirement income,

Read more »

Family Finance

My Regrets

EVERY SO OFTEN, I’m asked about my biggest investment mistakes—and I really don’t have much to say. Yes, like many others, I dabbled in individual stocks and actively managed mutual funds early in my investing career. Yes, like everybody who’s truly diversified, there are always parts of my portfolio that are generating disappointing short-term results. But such things don’t cause me any regrets.
Instead, as I look back, my big financial regrets fall into four buckets:
Pound foolish.

Read more »

Investing

Aiming High

BACK IN 2013, I was recently divorced, living on my own for the first time and utterly naïve about investing. I was in my late 40s, I’d lost half of my small state pension in the divorce and I was afraid I’d be working well into my 70s if I didn’t get my financial life on track.
I set the ambitious goal of having a net worth of $500,000 by 2022, when I’ll turn 55.

Read more »

Lists

Eight Heroes

A CURIOUS THING happened in Stockholm in 2013. The Royal Swedish Academy of Sciences awarded the Nobel Prize in economics to three academics who had developed theories about stock prices. What was odd was that two of the recipients—Eugene Fama and Robert Shiller—couldn’t have been more opposed in their viewpoints.
Fama believes that stock prices are always rational and that there’s no such thing as a market bubble. Shiller believes that stock prices are often irrational and that bubbles do occur.

Read more »

Mindset

Think Like Eeyore

FOR THOSE WHO know their A.A. Milne, they’ll recall Eeyore as Winnie the Pooh’s perennially gloomy donkey friend. Which brings me to my inner Eeyore—and a thought provoked by the stock market’s astonishing recovery.
Now that the S&P 500 is once again hitting new highs, it’s time to prepare for the next bear market. No, I haven’t reduced my stock holdings as share prices have bounced back and, no, I’m not predicting that another crash is imminent.

Read more »