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If you save $5 a day for 40 years by not buying coffee, you’ll miss out on an awful lot of caffeine.

No Down Less Up

INDEXED ANNUITIES have been taking the insurance world by storm. According to industry sources, sales of indexed annuities—also known as equity-indexed annuities or fixed-indexed annuities—topped $70 billion last year and estimates for 2020 call for continued growth in the market.
On the surface, indexed annuities seem simple enough: You deposit a lump sum and earn interest based on stock market returns, with a guarantee that your annual return will never be less than zero.

Read more »

June’s Hits

THE FINANCIAL markets haven’t been calm over the past month, but they have been calmer—and that’s meant readers have been interested in articles about topics other than the stock market and the coronavirus. Here are June’s seven most popular blog posts:

Is your estate plan in order? Richard Connor, who has helped settle five estates, offers his list of seven must-haves.
Adam Grossman has written 143 earlier articles for HumbleDollar. But this may be his best: Check out the five minds of the successful investor.

Read more »

Older but Wiser

A REVOLUTION in the workforce is creating an underutilized resource: workers over age 50. These workers represent more than a quarter of the U.S. labor force, and that number is expected to climb sharply as the population ages.
For these workers, it would be a boon—financially and otherwise—if they could stay in the workforce for longer. It would also be great for the economy, ensuring we continue to have enough workers to produce the goods and services that society needs.

Read more »

Right From Wrong

I’VE BEEN WRONG many times, as I’ve noted in earlier articles. But the past few months have made me—and maybe you—look like an investment genius.
I’ve had some nice “wins” since March 13, when I started buying the stock market dip. Does that make me brilliant? Of course not. Was I “right”? That depends on how I made my decisions. A quick profit doesn’t necessarily mean I made the right call.
Too often, when we analyze our investment moves,

Read more »

Too Slow?

THIS PAST WEEK, I received an email from a reader—let’s call him Tom. He described his experience during this year’s unruly stock market. After the market dropped in February and March, he said, the stock side of his portfolio lost a lot of its value. He decided to rebalance—that is, to buy more stocks so his original asset allocation would be restored. That is just what I would have done. But the key question—always,

Read more »

Breaking the Rules

YOU KNOW THOSE timeless financial principles? Sometimes they don’t age so well.
Since I started writing about money in 1985, all kinds of financial principles have gone out the window—and that’s continued right up until 2020. Indeed, if you’re still hewing to the financial wisdom of the 1980s, you’re likely hurting yourself today. Here are four examples:
1. Goodbye, Peter. In the late 1980s, America’s most celebrated fund manager was Fidelity Magellan’s Peter Lynch.

Read more »

Money Guide

Today's Markets

HERE ARE THE LATEST trends in the world of investing:
  • The S&P 500 jumped 20% in 2020's second quarter, after slumping 20% in the first quarter. But because of the way compounding works—remember, losses hurt more than gains help—the S&P 500 was down 4% in 2020's first six months. These figures don't include dividends. Since the market bottomed on March 9, 2009, the shares in the S&P 500 have climbed 358%, though they remain just 103% above their March 24, 2000, peak—a modest gain over a turbulent 20-year stretch.
  • While most stocks posted losses in 2020's first half, the pattern resembled that seen in recent years: U.S. growth stocks fared better than value shares, while large-company shares held up better than smaller-cap stocks. Similarly, both developed foreign markets and emerging markets once again lagged behind U.S. shares.
  • Treasury bond prices rose and yields fell sharply in 2020, with the benchmark 10-year Treasury note yielding 0.66% on June 30, down from 1.92% six months earlier. In early March 2020, the 10-year yield hit a record low of 0.54%.
  • The Federal Reserve slashed short-term interest in 2020, as it sought to prop up the slumping economy. One consequence: One-year Treasury bills were yielding just 0.17% as of June 30.
  • Real assets had mixed performance in 2020's first six months. Oil prices plummeted to $20 a barrel in the first quarter but recovered to $40 in the second quarter, though oil prices remain well below the $61 as of year-end 2019. Real estate investment trusts fell hard during 2020's bear market, before partially recouping their losses during the strong rally that followed. But the standout performer was gold, which climbed to $1,799 as of June 30, up from $1,520 at year-end 2019.
  • In June, the Federal Reserve projected that the U.S. economy would shrink 6.5% in 2020, with unemployment finishing the year at 9.3% and core inflation running at 1%.
  • As of 2016, 51.9% of U.S. families were invested in the stock market, up from 48.8% three years earlier, but below the 53.2% peak recorded in 2007, according to the Federal Reserve's Survey of Consumer Finances. The survey is conducted every three years.
Want to get a handle on stock and bond market valuations? Check out the chapter on financial markets. Next: Four Steps Previous: Investing Articles: Collective Wisdom and Investing: 10 Questions to Ask
Read more »

Manifesto

NO. 19: WE SHOULD make future spending as exciting as possible, so we’re less tempted to spend today. That means visualizing our goals and imagining how great it’ll be to achieve them.

Truths

NO. 101: THE TIME horizon for your portfolio may extend beyond your lifetime. Suppose you’re age 75. If you have more than enough put aside for your own retirement and plan to bequeath assets to your children or grandchildren, you might be dealing with a time horizon of a half-century or more. That’s plenty of time to make good money in stocks.

Act

TRIM YOUR CHECKING account. If there were a guaranteed way to earn an extra percentage point a year on your investments, you’d jump at the opportunity. So why would you leave excess cash in your checking account, where it likely isn’t earning interest, when that money could be in a high-yield savings account earning more than 1% a year?

Think

LEVERAGE. Using debt can boost returns—or leave us broke. Let’s say we buy a $250,000 home. We put down 20%, or $50,000, and borrow the rest. If our home’s value rises to $300,000, the price gain is 20%, but the increase in our home equity would be 100%. Leverage, however, can cut both ways: A 20% price decline would wipe out our home equity.

Second Look

Retirement

Seeking Zero

WHAT’S YOUR favorite tax rate? This isn’t meant to be a trick question. If you’re like most people, your favorite rate is probably zero.
While a 0% tax rate is great, it isn’t easy to achieve. There’s just a handful of ways to create tax-free income. If you have young children, 529 accounts are a great option. If you earn a high income, you might buy tax-exempt municipal bonds.
And, of course, there are Roth IRAs.

Read more »

Family Finance

Get a Life

IN MY ROLE as a financial planner, I hear a lot of stories. By far the most appalling and upsetting relate to life insurance. All too often, insurance salespeople leave clients with policies that are simultaneously overpriced, inadequate and inappropriate.
Are you evaluating a policy? Here’s a quick summary of the most important considerations:
What type of coverage should I have? Life insurance comes in two primary flavors: term and permanent. Term insurance,

Read more »

Investing

Mixing It Up

LOOKING TO BUILD an investment portfolio—or rethink the mix you already own? Check out HumbleDollar’s new portfolio-building guide.
The guide takes the most important advice from the site’s chapters on investing, markets and taxes, and turns it into nine simple steps that should help you build a sensible, low-cost portfolio of index funds. I’ve included step No. 1 below. If you like what you read, I encourage you to peruse the other eight steps.

Read more »

Lists

Got to Believe

AS I’VE BUILT out HumbleDollar over the past few years, I’ve come to view the site not merely as a place where folks can learn about financial issues, but as a community that thinks about money in a unique way.
This shows up repeatedly in articles from guest contributors, with their focus on topics like spending thoughtfully, helping family, behavioral finance, indexing and achieving financial freedom. It’s a community where folks are trying to be rational about money,

Read more »
Home Call to Action

Mindset

Getting Played

“IS CBS PIPING fake birds into its Masters coverage?” That was the headline on a recent Slate article, which speculated that the television network might be adding “enhanced audio” of fake bird chirping to its coverage of the golf tournament.
This is not a scandal for the ages. But it serves as a timely reminder that we have fantasized notions of life that marketers and the media don’t hesitate to exploit.
Make no mistake: The PGA,

Read more »

No Down Less Up

INDEXED ANNUITIES have been taking the insurance world by storm. According to industry sources, sales of indexed annuities—also known as equity-indexed annuities or fixed-indexed annuities—topped $70 billion last year and estimates for 2020 call for continued growth in the market.
On the surface, indexed annuities seem simple enough: You deposit a lump sum and earn interest based on stock market returns, with a guarantee that your annual return will never be less than zero.

Read more »

June’s Hits

THE FINANCIAL markets haven’t been calm over the past month, but they have been calmer—and that’s meant readers have been interested in articles about topics other than the stock market and the coronavirus. Here are June’s seven most popular blog posts:

Is your estate plan in order? Richard Connor, who has helped settle five estates, offers his list of seven must-haves.
Adam Grossman has written 143 earlier articles for HumbleDollar. But this may be his best: Check out the five minds of the successful investor.

Read more »

Older but Wiser

A REVOLUTION in the workforce is creating an underutilized resource: workers over age 50. These workers represent more than a quarter of the U.S. labor force, and that number is expected to climb sharply as the population ages.
For these workers, it would be a boon—financially and otherwise—if they could stay in the workforce for longer. It would also be great for the economy, ensuring we continue to have enough workers to produce the goods and services that society needs.

Read more »

Right From Wrong

I’VE BEEN WRONG many times, as I’ve noted in earlier articles. But the past few months have made me—and maybe you—look like an investment genius.
I’ve had some nice “wins” since March 13, when I started buying the stock market dip. Does that make me brilliant? Of course not. Was I “right”? That depends on how I made my decisions. A quick profit doesn’t necessarily mean I made the right call.
Too often, when we analyze our investment moves,

Read more »

Too Slow?

THIS PAST WEEK, I received an email from a reader—let’s call him Tom. He described his experience during this year’s unruly stock market. After the market dropped in February and March, he said, the stock side of his portfolio lost a lot of its value. He decided to rebalance—that is, to buy more stocks so his original asset allocation would be restored. That is just what I would have done. But the key question—always,

Read more »

Breaking the Rules

YOU KNOW THOSE timeless financial principles? Sometimes they don’t age so well.
Since I started writing about money in 1985, all kinds of financial principles have gone out the window—and that’s continued right up until 2020. Indeed, if you’re still hewing to the financial wisdom of the 1980s, you’re likely hurting yourself today. Here are four examples:
1. Goodbye, Peter. In the late 1980s, America’s most celebrated fund manager was Fidelity Magellan’s Peter Lynch.

Read more »

Free Newsletter

Home Call to Action

Manifesto

NO. 19: WE SHOULD make future spending as exciting as possible, so we’re less tempted to spend today. That means visualizing our goals and imagining how great it’ll be to achieve them.

Act

TRIM YOUR CHECKING account. If there were a guaranteed way to earn an extra percentage point a year on your investments, you’d jump at the opportunity. So why would you leave excess cash in your checking account, where it likely isn’t earning interest, when that money could be in a high-yield savings account earning more than 1% a year?

Truths

NO. 101: THE TIME horizon for your portfolio may extend beyond your lifetime. Suppose you’re age 75. If you have more than enough put aside for your own retirement and plan to bequeath assets to your children or grandchildren, you might be dealing with a time horizon of a half-century or more. That’s plenty of time to make good money in stocks.

Think

LEVERAGE. Using debt can boost returns—or leave us broke. Let’s say we buy a $250,000 home. We put down 20%, or $50,000, and borrow the rest. If our home’s value rises to $300,000, the price gain is 20%, but the increase in our home equity would be 100%. Leverage, however, can cut both ways: A 20% price decline would wipe out our home equity.

Money Guide

Start Here

Today's Markets

HERE ARE THE LATEST trends in the world of investing:
  • The S&P 500 jumped 20% in 2020's second quarter, after slumping 20% in the first quarter. But because of the way compounding works—remember, losses hurt more than gains help—the S&P 500 was down 4% in 2020's first six months. These figures don't include dividends. Since the market bottomed on March 9, 2009, the shares in the S&P 500 have climbed 358%, though they remain just 103% above their March 24, 2000, peak—a modest gain over a turbulent 20-year stretch.
  • While most stocks posted losses in 2020's first half, the pattern resembled that seen in recent years: U.S. growth stocks fared better than value shares, while large-company shares held up better than smaller-cap stocks. Similarly, both developed foreign markets and emerging markets once again lagged behind U.S. shares.
  • Treasury bond prices rose and yields fell sharply in 2020, with the benchmark 10-year Treasury note yielding 0.66% on June 30, down from 1.92% six months earlier. In early March 2020, the 10-year yield hit a record low of 0.54%.
  • The Federal Reserve slashed short-term interest in 2020, as it sought to prop up the slumping economy. One consequence: One-year Treasury bills were yielding just 0.17% as of June 30.
  • Real assets had mixed performance in 2020's first six months. Oil prices plummeted to $20 a barrel in the first quarter but recovered to $40 in the second quarter, though oil prices remain well below the $61 as of year-end 2019. Real estate investment trusts fell hard during 2020's bear market, before partially recouping their losses during the strong rally that followed. But the standout performer was gold, which climbed to $1,799 as of June 30, up from $1,520 at year-end 2019.
  • In June, the Federal Reserve projected that the U.S. economy would shrink 6.5% in 2020, with unemployment finishing the year at 9.3% and core inflation running at 1%.
  • As of 2016, 51.9% of U.S. families were invested in the stock market, up from 48.8% three years earlier, but below the 53.2% peak recorded in 2007, according to the Federal Reserve's Survey of Consumer Finances. The survey is conducted every three years.
Want to get a handle on stock and bond market valuations? Check out the chapter on financial markets. Next: Four Steps Previous: Investing Articles: Collective Wisdom and Investing: 10 Questions to Ask
Read more »

Second Look

Retirement

Seeking Zero

WHAT’S YOUR favorite tax rate? This isn’t meant to be a trick question. If you’re like most people, your favorite rate is probably zero.
While a 0% tax rate is great, it isn’t easy to achieve. There’s just a handful of ways to create tax-free income. If you have young children, 529 accounts are a great option. If you earn a high income, you might buy tax-exempt municipal bonds.
And, of course, there are Roth IRAs.

Read more »

Family Finance

Get a Life

IN MY ROLE as a financial planner, I hear a lot of stories. By far the most appalling and upsetting relate to life insurance. All too often, insurance salespeople leave clients with policies that are simultaneously overpriced, inadequate and inappropriate.
Are you evaluating a policy? Here’s a quick summary of the most important considerations:
What type of coverage should I have? Life insurance comes in two primary flavors: term and permanent. Term insurance,

Read more »

Investing

Mixing It Up

LOOKING TO BUILD an investment portfolio—or rethink the mix you already own? Check out HumbleDollar’s new portfolio-building guide.
The guide takes the most important advice from the site’s chapters on investing, markets and taxes, and turns it into nine simple steps that should help you build a sensible, low-cost portfolio of index funds. I’ve included step No. 1 below. If you like what you read, I encourage you to peruse the other eight steps.

Read more »

Lists

Got to Believe

AS I’VE BUILT out HumbleDollar over the past few years, I’ve come to view the site not merely as a place where folks can learn about financial issues, but as a community that thinks about money in a unique way.
This shows up repeatedly in articles from guest contributors, with their focus on topics like spending thoughtfully, helping family, behavioral finance, indexing and achieving financial freedom. It’s a community where folks are trying to be rational about money,

Read more »

Mindset

Getting Played

“IS CBS PIPING fake birds into its Masters coverage?” That was the headline on a recent Slate article, which speculated that the television network might be adding “enhanced audio” of fake bird chirping to its coverage of the golf tournament.
This is not a scandal for the ages. But it serves as a timely reminder that we have fantasized notions of life that marketers and the media don’t hesitate to exploit.
Make no mistake: The PGA,

Read more »