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Got enough emergency money? The self-employed might need heaps—and retirees might go without.

Home Rich Cash Poor

ACCORDING TO MY local newspaper, the average home price in my town rose 450% over the past 25 years. That made me ponder how I could use my home equity to fund my desired retirement lifestyle. I’m certainly not alone in thinking this way.
There are three ways you can access home equity. You can sell your home and downsize, you can take out a home equity line of credit or you can take out a reverse mortgage.

Read more »

June’s Hits

NOT SURPRISINGLY, many of last month’s most popular articles and blog posts were devoted to the financial markets. Here were June’s six best-read articles:

Donnie Mattox has had a perfect credit score in eight of the past 12 months. He explains how he does it.
Why is managing money so maddening? Because what seems true often isn’t. John Goodell lists his top 12 financial paradoxes.
“You might want to check your mailbox,” writes Jim Kerr. 

Read more »

Short Stuff

Fashion Statement

I’VE PREVIOUSLY written about the dramatic turn my life took when I went from carefree bachelor to husband and proud father of four. With multiple college educations looming, I drastically curtailed my spending, including on my professional wardrobe.
Initially, instead of the Hickey Freeman suits in which I’d previously indulged, I was happy with the latest sale at Jos. A. Bank. But eventually, I dipped my toe in uncharted waters—buying clothes on eBay.
This comes with risks.

Read more »

Back on Target

AS A COLLEGE professor, there are a few times during the year when things quiet down. During these lulls, I take on tasks that have moved to the bottom of the to-do list. The items include things like doctor’s appointments, home repairs and portfolio rebalancing. I can hear my students’ reaction: “But professor, you teach us about investing in companies and you write about investing. Why do you drop your portfolio review to the bottom of the list?” Valid question.

Read more »

Got Me Down

THIS IS A NEW feeling for me. I’m constantly stressed about money. The thing is, there’s no valid reason for it. Nonetheless, I’ve taken to constantly checking all the details of our finances—investments, bank accounts and, most important, spending.

All this from the guy who says a budget isn’t necessary.

While I still believe in my simple strategy—don’t worry how you spend, but never spend more than your after-tax income minus savings and never charge more on your credit cards than you can pay off each month—I couldn’t help checking exactly how we’re spending our money.

Read more »

Happier Days Ahead

STOCK INVESTORS are hanging tough. Bond investors? Not so much.
Citing flow of funds data from EPFR, Bank of America Global Research says investors collectively purchased $195 billion of stocks this year through June 22. The implication: People aren’t panicking. That’s great news, and it supports the narrative that today’s stock investors are less bullied by market volatility.
It’s a different story in the bond market, where we’ve seen so-called capitulation. Bank of America notes that $193 billion of bonds have been sold this year by investors.

Read more »

Getting Lucky

PEOPLE TEND TO attribute their investment gains to skill and their losses to bad luck. To these two categories, I’d like to suggest a third: making a fortune—thanks to good luck. Let me give you an example.
I’m a member of the National Press Club in Washington, D.C. It’s a downtown club where reporters went for a drink and a bite to eat after they filed their stories. As you might expect, business was rocky during the pandemic.

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Time for a Pep Talk

ARE WE HAVING FUN yet? I take no pleasure in seeing my portfolio shrink, but I love buying stock index funds at discount prices and I’m always amused by the hand-wringing in the financial media.
Two years ago, we were hiding out in our homes, fretting over a global pandemic and worrying about an economic collapse. Today, COVID is still spreading like wildfire, but vaccines have helped slash the number of hospitalizations and deaths,

Read more »

Longer Reads

Contain Yourself

MANY YEARS AGO, I read an article that posited that U.S. income inequality is due, in part, to the unwillingness of unemployed and underemployed Americans to move to a new state or city to take a better job.
It mentioned three reasons for this reluctance. First, folks didn’t want to sell their home, which may have decreased in value due to the recession that caused the bad job market in the first place. Second,

Read more »

Self-Inflicted

I’M NOT IN THE HABIT of celebrating half-birthdays, but my next one has me thinking. In a few days, I’ll turn age 59½.
That, of course, is the age at which you can tap your retirement accounts without paying the 10% early withdrawal penalty. Though I don’t currently need to pull spending money from my retirement accounts, I like the feeling that I can now do so penalty-free.
Even without that 10% penalty, however,

Read more »

Options in Disguise

DO YOU INVEST in options? Think twice before saying that you’d rather go to Vegas. My bold claim: Options investing has a lot in common with investing in stocks and corporate bonds.
Intrigued? Let’s recap a European style call option. It’s a discretionary contract that allows someone to buy an underlying asset at a set strike price at a future date. Let’s say the buyer of the call, Bob, has an option on a stock with a strike price of $100.

Read more »

Harsh Reminder

DURING THE RECENT bull market, I fell off the wagon and bought some technology companies, once again trying my hand at stock picking. I’m talking about companies like Spotify Technology, MercadoLibre and Roblox. It was a small percentage of my portfolio, but I felt the pain.
I’d tried picking individual stocks when I was younger. I thought I had a better chance now. After all, I was more educated and knew more about researching companies.

Read more »

Built to Last

I ARGUED LAST WEEK that bitcoin wasn’t a great investment. The reality: Only a minority of investors hold cryptocurrencies, which is a good thing, in my opinion. But there are, alas, many other ways to get off track when building a portfolio.

In fact, if I ever wrote an investment book, it might be in the style of Dr. Seuss and titled Oh, the Investments I’ve Seen. Want to build a sensible portfolio and avoid common pitfalls?

Read more »

Taking Control

I WAS BORN INTO an upper-middle-class family in Thailand. My dad was a doctor and my mom was a nurse. Both had a profound effect on me—on how I tackled my career, financial issues and life more generally.
I was the oldest of four children and the only girl. My father made sure I was given the same opportunities as my brothers, whether it was education, sports or other extracurricular activities. For him, “because you’re a girl” was never a reason to do or not do something.

Read more »

Voices

What everyday purchase do you consider a bargain?

"Gift cards that sell less than face value. Retailers are betting the entire balance will not be used and forgotten or expired. I like Lowes and Home Depot and look for bargains from people who are selling them less than face value…some received as gifts and others need the cash more than the merchandise. The higher denomination, the more savings. Always buy from reputable sites though….ones that offer a full guarantee. I like eBay and Card Bear. Some of my favorite restaurants offer a free $10 gift card if you buy a gift card from them for $50 or more. These are popular around the holidays, and I use some for myself or gift them to others."
- Debbie Clay
Read more »

What’s your most prized possession?

"My health is # 1. #2 is my family and friends. # 3 is the freedom that financial independence brings. #4 is my microwave"
- M Plate
Read more »

Is a good financial advisor worth 1% of assets per year?

"No for 99% of us. See Chap 12 in Harry Sit’s concise 200 page: My Financial Toolbox: The Nuts and Bolts of Managing Your Money. Very practical, recent (Sept 2020), and full of useful information. And $10 for Kindle edition which reads fine even for diagrams, etc. I am 75, PhD in biostatistics, very interested in finance and I still picked up 8 new tricks and confirmed other items I was already doing. Harry also has a blog for late breaking news like I-bond purchases right now."
- Dennis Hurley
Read more »

Money Guide

Today's Valuations

BELOW IS A LOOK at current market valuations:
  • At the end of 2022's second quarter, the stocks in the S&P 500 were trading at a price-earnings (P/E) ratio of 19.1, based on trailing 12-month reported earnings, making them reasonably priced by historical standards. The market's P/E had been driven higher by the hit to company profits that accompanied 2020's economic turmoil. But as corporate earnings have recovered, the market's P/E ratio has come down.
  • The S&P 500 stocks ended the second quarter at a cyclically adjusted price-earnings (CAPE) ratio of 29.2, versus a 50-year average of 20.9. CAPE compares current share prices to average inflation-adjusted earnings for the past 10 years.
  • As of 2022's first quarter, stocks were at a 60% premium to the value of corporate assets. This measure of stock market value is known as Tobin’s Q.
  • U.S. equity real estate investment trusts posted strong gains in 2021, but fell during 2022's first half. As of May, equity REITs were yielding 3.2%, above the 2.6% recorded in December 2021, which was the lowest yield in the FTSE NAREIT index's 50-year history.
  • The benchmark 10-year Treasury note was yielding 2.99% as of June 30, versus 1.51% at year-end 2021. Based on the difference between that yield and the yield on inflation-indexed Treasurys, the financial markets expect inflation of 2.3% a year over the next decade.
  • At the end of 2022's second quarter, high-yield junk bonds were yielding 5.6 percentage points more than Treasurys, up from 3.1 percentage points at year-end 2021.
Next: Asset No. 1: Stocks Previous: Financial Markets Article: Signal Failure
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 1% a year or more?

Think

OVERCONFIDENCE. Most of us believe we’re above-average drivers, smarter than most and better looking. This overconfidence is often a good thing—it can boost happiness and help our careers—but it’s terrible for investment results. As they try to beat the market, the overconfident trade too much, take unnecessary risk and buy costly investments.

Second Look

Retirement

Second Childhood

IN COLLEGE, I WAS the kid who swore he would never get married and never have children. A year later, I was engaged. Two years later, I was married. Three years later, I had a newborn.
And three decades later, I’m 55 years old, with a daughter who will turn 30 later this year.
I have no regrets about having children so young. Far from it. It does mean I missed out on the romancing,

Read more »

Family Finance

Heading Home (V)

WITH MY OFFER of $375,000 accepted, I was faced with coming up with $80,000 to cover my 20% down payment and other closing costs. I had additional expenses as well: There was a home inspection, radon test and sewer assessment that all had to be paid for. And because I’d be breaking the lease on my apartment, I would also need an additional $1,800 for that.
Coming up with the first $50,000 was easy.

Read more »

Investing

The View From Here

HOW THINGS LOOK depend on where you stand. Trying to figure out how to respond to the market drop? After the initial slump, a brief rally and then another decline, the S&P 500 is down 10% from its September all-time closing high of 2930.75.
History suggests that, five years from now, share prices will be no lower than they are today, and 10 years from now they’ll be handsomely higher. But at times like this,

Read more »

Lists

Want $870,000?

SENTENCES THAT begin with “I can’t” drive me nuts—and I especially dislike the sentence, “I can’t save.”
“Pish-tosh,” I say.  Every household in America earning at least the median income can save for the future. If they try hard, many lower-income Americans could also save.
Of course, the amount saved will vary, but even small amounts can help over the long haul. If a household earning $40,000 a year can sock away enough to generate $300 or $400 in monthly retirement income to supplement whatever they get from Social Security,

Read more »
Home Call to Action

Mindset

A Man Possessed

IT’S NEVER GOOD to be self-indulgent, and that’s doubly true on a day like this. Still, while the rest of you relish the gifts that came your way this holiday season, let me offer a guided tour of my most prized possessions.
I now have a firm idea of what they are, thanks to a ruthless process of subtraction. I’ve spent the past four months throwing out and selling countless things I don’t greatly care about. 

Read more »

Longer Reads

Contain Yourself

MANY YEARS AGO, I read an article that posited that U.S. income inequality is due, in part, to the unwillingness of unemployed and underemployed Americans to move to a new state or city to take a better job.
It mentioned three reasons for this reluctance. First, folks didn’t want to sell their home, which may have decreased in value due to the recession that caused the bad job market in the first place. Second,

Read more »

Self-Inflicted

I’M NOT IN THE HABIT of celebrating half-birthdays, but my next one has me thinking. In a few days, I’ll turn age 59½.
That, of course, is the age at which you can tap your retirement accounts without paying the 10% early withdrawal penalty. Though I don’t currently need to pull spending money from my retirement accounts, I like the feeling that I can now do so penalty-free.
Even without that 10% penalty, however,

Read more »

Options in Disguise

DO YOU INVEST in options? Think twice before saying that you’d rather go to Vegas. My bold claim: Options investing has a lot in common with investing in stocks and corporate bonds.
Intrigued? Let’s recap a European style call option. It’s a discretionary contract that allows someone to buy an underlying asset at a set strike price at a future date. Let’s say the buyer of the call, Bob, has an option on a stock with a strike price of $100.

Read more »

Harsh Reminder

DURING THE RECENT bull market, I fell off the wagon and bought some technology companies, once again trying my hand at stock picking. I’m talking about companies like Spotify Technology, MercadoLibre and Roblox. It was a small percentage of my portfolio, but I felt the pain.
I’d tried picking individual stocks when I was younger. I thought I had a better chance now. After all, I was more educated and knew more about researching companies.

Read more »

Built to Last

I ARGUED LAST WEEK that bitcoin wasn’t a great investment. The reality: Only a minority of investors hold cryptocurrencies, which is a good thing, in my opinion. But there are, alas, many other ways to get off track when building a portfolio.

In fact, if I ever wrote an investment book, it might be in the style of Dr. Seuss and titled Oh, the Investments I’ve Seen. Want to build a sensible portfolio and avoid common pitfalls?

Read more »

Taking Control

I WAS BORN INTO an upper-middle-class family in Thailand. My dad was a doctor and my mom was a nurse. Both had a profound effect on me—on how I tackled my career, financial issues and life more generally.
I was the oldest of four children and the only girl. My father made sure I was given the same opportunities as my brothers, whether it was education, sports or other extracurricular activities. For him, “because you’re a girl” was never a reason to do or not do something.

Read more »

Free Newsletter

Voices

Is buying long-term-care insurance a good idea?

"Another "insurance" option that's often overlooked: A Continuing Care Retirement Community" (CCRC) where you plunk down a lump sum for a guarantee of access to an appropriate level of care for life, even if you run out of money. Not a solution for the less affluent, and it can be a very complex buying decision, but it may be the right one for folks averse to traditional or hybrid insurance."
- Neil Gartner
Read more »

If you lived your financial life again, what would you change?

"Rent my house in California and not sell it."
- Don Southworth
Read more »

What’s your No. 1 goal for retirement?

"Work consistently on my health ... without it none of the other things (travel,golf,hobbies etc) are enjoyable"
- George Counihan
Read more »
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 1% a year or more?

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

OVERCONFIDENCE. Most of us believe we’re above-average drivers, smarter than most and better looking. This overconfidence is often a good thing—it can boost happiness and help our careers—but it’s terrible for investment results. As they try to beat the market, the overconfident trade too much, take unnecessary risk and buy costly investments.

Money Guide

Start Here

Today's Valuations

BELOW IS A LOOK at current market valuations:
  • At the end of 2022's second quarter, the stocks in the S&P 500 were trading at a price-earnings (P/E) ratio of 19.1, based on trailing 12-month reported earnings, making them reasonably priced by historical standards. The market's P/E had been driven higher by the hit to company profits that accompanied 2020's economic turmoil. But as corporate earnings have recovered, the market's P/E ratio has come down.
  • The S&P 500 stocks ended the second quarter at a cyclically adjusted price-earnings (CAPE) ratio of 29.2, versus a 50-year average of 20.9. CAPE compares current share prices to average inflation-adjusted earnings for the past 10 years.
  • As of 2022's first quarter, stocks were at a 60% premium to the value of corporate assets. This measure of stock market value is known as Tobin’s Q.
  • U.S. equity real estate investment trusts posted strong gains in 2021, but fell during 2022's first half. As of May, equity REITs were yielding 3.2%, above the 2.6% recorded in December 2021, which was the lowest yield in the FTSE NAREIT index's 50-year history.
  • The benchmark 10-year Treasury note was yielding 2.99% as of June 30, versus 1.51% at year-end 2021. Based on the difference between that yield and the yield on inflation-indexed Treasurys, the financial markets expect inflation of 2.3% a year over the next decade.
  • At the end of 2022's second quarter, high-yield junk bonds were yielding 5.6 percentage points more than Treasurys, up from 3.1 percentage points at year-end 2021.
Next: Asset No. 1: Stocks Previous: Financial Markets Article: Signal Failure
Read more »

Second Look

Retirement

Second Childhood

IN COLLEGE, I WAS the kid who swore he would never get married and never have children. A year later, I was engaged. Two years later, I was married. Three years later, I had a newborn.
And three decades later, I’m 55 years old, with a daughter who will turn 30 later this year.
I have no regrets about having children so young. Far from it. It does mean I missed out on the romancing,

Read more »

Family Finance

Heading Home (V)

WITH MY OFFER of $375,000 accepted, I was faced with coming up with $80,000 to cover my 20% down payment and other closing costs. I had additional expenses as well: There was a home inspection, radon test and sewer assessment that all had to be paid for. And because I’d be breaking the lease on my apartment, I would also need an additional $1,800 for that.
Coming up with the first $50,000 was easy.

Read more »

Investing

The View From Here

HOW THINGS LOOK depend on where you stand. Trying to figure out how to respond to the market drop? After the initial slump, a brief rally and then another decline, the S&P 500 is down 10% from its September all-time closing high of 2930.75.
History suggests that, five years from now, share prices will be no lower than they are today, and 10 years from now they’ll be handsomely higher. But at times like this,

Read more »

Lists

Want $870,000?

SENTENCES THAT begin with “I can’t” drive me nuts—and I especially dislike the sentence, “I can’t save.”
“Pish-tosh,” I say.  Every household in America earning at least the median income can save for the future. If they try hard, many lower-income Americans could also save.
Of course, the amount saved will vary, but even small amounts can help over the long haul. If a household earning $40,000 a year can sock away enough to generate $300 or $400 in monthly retirement income to supplement whatever they get from Social Security,

Read more »

Mindset

A Man Possessed

IT’S NEVER GOOD to be self-indulgent, and that’s doubly true on a day like this. Still, while the rest of you relish the gifts that came your way this holiday season, let me offer a guided tour of my most prized possessions.
I now have a firm idea of what they are, thanks to a ruthless process of subtraction. I’ve spent the past four months throwing out and selling countless things I don’t greatly care about. 

Read more »