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We are voracious acquirers of financial information, but mostly to buttress opinions we already hold.
FORD MOTOR COMPANY introduced the world to the convertible hard top in 1957 with a car called the Skyliner. It was a marvel of engineering.
To retract, the Skyliner hard top first tilted up and away from the front windshield. Then the top folded in half overhead. The trunk lid opened wide. The folded hard top swung into the trunk, which then closed. All by flipping a single dashboard switch. You can see it in operation in this commercial featuring Lucille Ball and Desi Arnaz.
MARVIN STEINBERG was a psychologist who founded the Connecticut Council on Problem Gambling. During his career, he made some uncomfortable observations about the behavior of stock market investors. In many cases, he felt, investors’ behavior veered awfully close to gambling.
This is the sort of observation that seems like it could be true, but it also seems difficult to quantify. That’s why a recent study by Morningstar analyst Jeffrey Ptak caught my eye.
Ptak wanted to examine investors’ experience with so-called thematic funds.
I LIKE TO THINK I’M rational in the way I spend my dollars, and I suspect most readers do, too.
We are, of course, deluding ourselves.
Spending is never simply about buying what we want or need. Instead, behind every dollar that leaves—or doesn’t leave—our wallet is a complex mental dance that reflects how we feel that day, the influence of others, how we want to be perceived, and our own financial history. We might declare that we’re using our money to buy happiness.
WITH THE ADVANTAGE of advanced age and flawless hindsight, I now believe the three most important contributors to retirement prosperity are a robust savings rate, an aggressive allocation to stocks and funding tax-free accounts, both Roth and health savings accounts (HSAs).
What about other financial factors, such as the investments we pick, whether we buy income annuities, when we claim Social Security and what Medicare choices we make? These matter on the margin, but I don’t think they’re as crucial to a successful retirement.
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.
NO. 19: FINANCIAL incentives drive owners to behave differently. Think about the long hours put in by small business owners, or the pride of home and car owners—and the indifference of those who rent and lease. One downside: Owners may put too high a value on property they own, making them reluctant to sell, even when offered a good price.
CORRELATIONS. Investors often buy uncorrelated investments, in the hope that some securities will post gains when others are struggling. The correlation among different stocks is usually high. Instead, to lower the volatility of a portfolio with significant stock exposure, investors typically turn to bonds, cash investments and alternative investments.
NO. 83: ROTTEN markets early in retirement can wreak havoc. At that point, our portfolio is at its largest—and the combination of lousy returns and our own spending can mean huge dollar losses. Even if we later enjoy handsome investment results, our nest egg may not benefit much, because it’s so shrunken—a danger known as sequence-of-return risk.
NO. 4: GOOD SAVINGS habits are the greatest of the financial virtues. If we aren’t good savers, it’s all but impossible to grow wealthy. What if we are? We’ll likely prosper, even if we’re mediocre investors.
I GREW UP IN a lower-middle-class family. We lived in a small apartment where I slept on the living room couch. My father sold cars for a living.
Today, my living standard is quite different. On average, 97% of retirees my age have less income and assets than my wife and me. Our friends are in similar economic circumstances. If they weren’t, they couldn’t live where we do.
The minimum needed to live in our condo community is $24,000 a year.
ONE OF THE MORE challenging changes that comes with retirement is the loss of your employer’s health care benefits—and I’m not just talking about regular health insurance. Two other benefits that employers commonly provide are dental and vision coverage.
Traditional Medicare doesn’t cover common dental procedures, such as cleanings, fillings, extractions, dentures, dental plates and other dental devices. Medicare also doesn’t cover the cost of eyeglasses, lenses or contacts, which many of us were used to obtaining using our employer’s vision coverage.
THE ECONOMY IS recovering and the stock market has recovered. The pandemic isn’t over, but it seems we’re past the worst, at least in the U.S. Feeling better? Take a deep breath, take a step back—and think about the past two decades.
Since early 2000, we’ve had three major stock market declines, or roughly one every decade:
In 2000-02, the S&P 500 tumbled 49%, excluding dividends. The first leg down was triggered by the bursting of the dot-com bubble.
THIS IS MY 150TH article for HumbleDollar. My first appeared on Aug. 12, 2019. I’m not sure when I became aware of the site, but it’s become an important part of my life. I’ve truly enjoyed the writing, along with reading the work of others and interacting with the editor, other contributors and readers.
For my 150th, I thought about looking back over the past five years and compiling a list of 150 observations.
WE LIKE TO THINK we’re rational, especially when it comes to spending and investing. But in truth, all of us are susceptible to impulsive decision-making and unconscious persuasion. Result? We often end up wasting our hard-earned money.
According to traditional economics—which depicts humans as conscious, rational decision-makers—this shouldn’t happen. But this traditional view has been under attack since the late 1800s, when Thorstein Veblen explored conscious irrational decisions, such as buying items simply to impress others.
NO. 4: GOOD SAVINGS habits are the greatest of the financial virtues. If we aren’t good savers, it’s all but impossible to grow wealthy. What if we are? We’ll likely prosper, even if we’re mediocre investors.
NO. 19: FINANCIAL incentives drive owners to behave differently. Think about the long hours put in by small business owners, or the pride of home and car owners—and the indifference of those who rent and lease. One downside: Owners may put too high a value on property they own, making them reluctant to sell, even when offered a good price.
CORRELATIONS. Investors often buy uncorrelated investments, in the hope that some securities will post gains when others are struggling. The correlation among different stocks is usually high. Instead, to lower the volatility of a portfolio with significant stock exposure, investors typically turn to bonds, cash investments and alternative investments.
NO. 83: ROTTEN markets early in retirement can wreak havoc. At that point, our portfolio is at its largest—and the combination of lousy returns and our own spending can mean huge dollar losses. Even if we later enjoy handsome investment results, our nest egg may not benefit much, because it’s so shrunken—a danger known as sequence-of-return risk.
I GREW UP IN a lower-middle-class family. We lived in a small apartment where I slept on the living room couch. My father sold cars for a living.
Today, my living standard is quite different. On average, 97% of retirees my age have less income and assets than my wife and me. Our friends are in similar economic circumstances. If they weren’t, they couldn’t live where we do.
The minimum needed to live in our condo community is $24,000 a year.
ONE OF THE MORE challenging changes that comes with retirement is the loss of your employer’s health care benefits—and I’m not just talking about regular health insurance. Two other benefits that employers commonly provide are dental and vision coverage.
Traditional Medicare doesn’t cover common dental procedures, such as cleanings, fillings, extractions, dentures, dental plates and other dental devices. Medicare also doesn’t cover the cost of eyeglasses, lenses or contacts, which many of us were used to obtaining using our employer’s vision coverage.
THE ECONOMY IS recovering and the stock market has recovered. The pandemic isn’t over, but it seems we’re past the worst, at least in the U.S. Feeling better? Take a deep breath, take a step back—and think about the past two decades.
Since early 2000, we’ve had three major stock market declines, or roughly one every decade:
In 2000-02, the S&P 500 tumbled 49%, excluding dividends. The first leg down was triggered by the bursting of the dot-com bubble.
THIS IS MY 150TH article for HumbleDollar. My first appeared on Aug. 12, 2019. I’m not sure when I became aware of the site, but it’s become an important part of my life. I’ve truly enjoyed the writing, along with reading the work of others and interacting with the editor, other contributors and readers.
For my 150th, I thought about looking back over the past five years and compiling a list of 150 observations.
WE LIKE TO THINK we’re rational, especially when it comes to spending and investing. But in truth, all of us are susceptible to impulsive decision-making and unconscious persuasion. Result? We often end up wasting our hard-earned money.
According to traditional economics—which depicts humans as conscious, rational decision-makers—this shouldn’t happen. But this traditional view has been under attack since the late 1800s, when Thorstein Veblen explored conscious irrational decisions, such as buying items simply to impress others.
Bond Index Funds or Something Else?
They’re Right, I’m Wrong, Sort Of
Social Security vs. Private Investment Accounts – RCC runs some numbers.
The Draw of Cash
Necessary Skills
Some Good News