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Wall Street feeds the fantasy that we can beat the market, because the fantasy is a great moneymaker—for Wall Street.

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TWO YEARS AGO, at age 59½, I thought I was on the verge of taking a major step toward retirement. At the time, my usual zest for my work as a physical therapist was waning. Though I don’t think the quality of my patient care suffered, I found it took more effort to maintain the energy needed to complete a day at the clinic, and concentrating on work became tougher.
In addition to the tension building on the inside,

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Friend Request

HOW’S YOUR FRIENDSHIP account balance looking? I spent my life watching my bank account, and taking great pleasure as it grew and grew. I never cared much for what I could buy with the money, but I loved the feeling of security it offered.
Friendships, meanwhile, took a back seat. That was pretty much normal for my family, and maybe it’s more normal for most folks than we like to admit. We have a tight little circle that includes family,

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Recent Writing

Know the Score

IF YOU’RE IN THE market for a home and a mortgage, this is a tough time, with shrinking inventory, lofty home prices and interest rates that feel overwhelming. I know all about this—because I’m a mortgage broker.
For many, today’s housing and mortgage market mean putting their homebuying dreams on hold. What if you go ahead, despite 30-year fixed-rate mortgages above 7%? I advocate controlling what you can. One of the variables that you can influence—and which can help save a tremendous amount of money—is your credit score.

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Reader Beware

I ONCE DREAMED OF writing for one of the high-profile personal finance magazines—but that was before I had a rude awakening about the “journalism” they sometimes committed.
As a mid-career business journalist at a respectable daily newspaper, teaching myself about investing, I had looked up to these magazines, then in their heyday, and viewed them as a career possibility.
My worlds came together one day when a top magazine ran a story touting the stock of the electric utility that served my area.

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A Half-Century Later

MY PARENTS RECENTLY moved out of the house they’d lived in for 50 years. A half-century might sound like quite an accomplishment. But they stayed too long.
Their home was a 1940s two-story gray stone house north of Pittsburgh, with a three-quarter acre yard. At the 40-year mark, when my parents were in their mid-to-late 60s, the house began evolving from a safe shelter to a hidden hazard zone. The comfort and familiarity of four decades overshadowed the emerging challenges that would affect them as aging seniors.

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My No-Lose Strategy

FROM AN EARLY AGE, whenever I heard the word “stock,” it was said with a derisive tone. My father hadn’t owned any shares, but the 1929 stock market crash and Great Depression still hit him hard. He wasn’t able to find steady work until after the 1941 attack on Pearl Harbor.
Given its effect on our family, my father had a pathological disdain for the market that was, inadvertently, passed on to me. Without being aware of it,

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Home Call to Action

Live to 100

MY WIFE AND I JUST finished watching the Netflix documentary Live to 100, which I highly recommend. The four-part series focuses on Dan Buettner’s study of pockets of people around the world who achieve amazing longevity, including many residents who live to age 100 and beyond.
The seven longevity locations include Okinawa, Japan; Sardinia, Italy; Ikaria, Greece; Nicoya, Costa Rica; and Loma Linda, California. These locations of long-lived people have been labeled “blue zones” based on the seminal demographic work on Sardinia by Giovanni Mario Pes,

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Why the Long Face?

AS I READ ARTICLES and comments on HumbleDollar, I see concerns about taxes, Medicare, Social Security, health care costs, college, inflation, investing—and the anxiety caused by the complexity of it all. I also see very different views on what’s earned and deserved. In some ways, it’s about what we consider fair.

I suspect the HumbleDollar community is more aware and more involved in their overall financial life than the majority of Americans,

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There Always

DON’T BE TOO IMPRESSED with the magnificent chandelier hanging from the ceiling or the tastefully furnished lobby. A nursing home is a nursing home. It’s not the best answer, but sometimes it’s the only answer.

Mom grew very frail when she entered her 90s. She’d already been diagnosed with late onset Alzheimer’s. At age 91, she fell and broke her right hip and shoulder. At 93, she broke her left hip and, at 95,

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Long and Short of It

BACK IN THE 1980s, Michael Milken earned notoriety as “the junk bond king.” With his swagger—and his toupee—Milken was an outsized personality in a normally staid industry. But that was four decades ago. It may have been the last time that bonds were truly interesting.
On most days, bonds are about as dull a topic in finance as you can find. But here’s the challenge for investors: While bonds might be boring, they’re important—and they can be tricky.

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Get Educated

Truths

NO. 116: AVOIDING probate is a big cost savings in some states—but not others. A local attorney can tell you how things stand in your state. If probate is costly, you might place assets in a revocable living trust. That can also be a smart move if you own a house in another state—and face the prospect of your estate passing through probate in two states.

Act

SEARCH FOR UNCLAIMED property. Every state has a program for returning lost and forgotten assets to their rightful owners. Those assets include stocks, uncashed dividends, bank accounts, traveler’s checks, the contents of safe deposit boxes and utility company security deposits. You can find further details and links to state websites at Unclaimed.org.

Think

ILLUSION OF CONTROL. If we shake the dice vigorously, we feel we’re more likely to get the roll we want. Similarly, if we follow the stock market closely and trade often, we feel more control over our returns. But in truth, this can hurt results, as we act impulsively and rack up costs. A better strategy: Focus on things we can control, like risk, taxes and expenses.

Money Guide

Mutual Fund Costs

AS A FUND INVESTOR, you incur the fund’s trading costs—but you also have the costs associated with buying, owning and selling the fund itself. Mutual fund commissions. Broker-sold funds, sometimes referred to as load funds, might charge a commission when you buy, an ongoing commission that’s levied every year (known as a 12b-1 fee) and a commission when you sell. Investing on your own? You can buy no-load funds, which don’t charge any sort of commission. That means that, when you invest $100, the full $100 is added to your account, versus $94.25 with the typical broker-sold front-end load stock fund. What if, instead of buying your no-load funds directly from the mutual fund company involved, you invest through one of the fund marketplaces operated by discount brokerage firms? You may pay a transaction fee when you buy or you could find that the funds sold through the marketplace levy somewhat higher annual expenses. Annual fund expenses. All funds, both load and no-load, charge annual expenses to cover the cost of managing the fund and handling administrative tasks. In addition, the annual expenses may include a 12b-1 fee to cover marketing and distribution. This fee is often used to compensate brokers. A fund’s trading costs aren’t included in its published annual expenses. Fund expenses are expressed as a percentage of fund assets, so a fund with a 1.5% expense ratio is charging you $1.50 a year for every $100 you have invested. You can also think of this as the breakeven hurdle rate. If a fund charges 1.5% a year, it has to pick securities that beat the market by 1.5 percentage points just to match the performance of the fund’s benchmark index. Account maintenance fees. You might be charged an annual fee if you hold your funds in a brokerage account or in an IRA. On top of all this, there’s the biggest investment cost of all: taxes. We tackle that at greater length in the chapter on taxes. Next: Load Funds Previous: Trading Costs Articles: Adding the Minuses and Separated at Birth
Read more »

Manifesto

NO. 3: WE SHOULD focus relentlessly on what we want from our financial life. That’ll motivate us to save, drive our investment strategy—and help ensure we pursue the goals we care about most.

Voices

Which investments will perform worst over the next 10 years?

"I would be very cautious about investing in any company that profited from the current pandemic. Many of these companies will see their market shrink over time."
- Arpe Gio
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Would you risk your finances to help your retired parents?

"“Risk” implies jeopardizing my own financial future and that of the following generation by jumping onto the sinking ship of my parents’s financial life, thus perpetuating the misery. There is a limit to the pure financial risk I would take. Thankfully, I don’t expect to face the decision. My wife and I have, however, committed resources of both time and money toward helping our parents to remain in their homes to a very old age. The most important service to both them and ourselves is the hands-on management of their finances to make sure all is well as they end their days."
- Edmund Marsh
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What everyday purchase do you consider a bargain?

"Food. Gasoline. Water. Food is less of American household spend. Gas, adjusted for inflation and better gas mileage is half the cost of 40 years ago. Water, precious at any price. sure some other countries may have better bargains when it comes to food or gas or water, but you can count the ones where all three are better on fingers on one hand. watch Moscow on the Hudson - coffee, coffee, coffee"
- BenefitJack
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

The $121,500 Room

I HAVE A WIFE, two children, two dogs, and the need for three bedrooms and two bathrooms. In March 2015, I purchased a four bedroom, 3½ bath, 3,000-square-foot house in a nice neighborhood with quality public schools.
The fourth bedroom was largely unnecessary but, like many people, we occasionally get visitors and feel it’s nice to have an extra bedroom for them, instead of spending money on a hotel room. This is the story of how that fourth bedroom cost me more than $121,500,

Read more »

Investing

Crash Course

THE JAPANESE JUST “celebrated” the 30th anniversary of their stock market’s peak. The Nikkei 225 hit an all-time high of 38,916 in December 1989. Today, it stands at 23,320, or 40% below 1989’s level.
“But the Japanese stock market in the 1980s was the mother of all bubbles,” you might respond. Perhaps. But what about the Nasdaq bubble of the late ’90s? True, the Nasdaq Composite Index has finally returned to its 2000 peak.

Read more »

Lists

Bad News

I’M MANAGING MY MONEY with an eye to making it last another three decades. And yet, everywhere I turn, it seems somebody’s insisting I pay attention to what’s happening in the financial markets right now.
This isn’t just a coronavirus phenomenon. It is, alas, standard operating procedure for the financial media.
I understand the game. I’ve spent most of my career as a journalist, so I realize it’s no small undertaking to fill up a newspaper,

Read more »
Home Call to Action

Mindset

Not My Thing

NOT LONG AGO, I RAN into my friend Martin, who works as a cardiologist at a local hospital. In the course of our conversation, I commented on the construction equipment outside his facility and asked what they were building.
His answer: “Building? No, they’re actually un-building.”
He explained that recently his hospital had been sold and the new owner was a for-profit company. As part of the transition, the new owner had evaluated the hospital’s facilities and discovered that a group of older buildings was largely unused.

Read more »

Free Newsletter

Get Educated

Manifesto

NO. 3: WE SHOULD focus relentlessly on what we want from our financial life. That’ll motivate us to save, drive our investment strategy—and help ensure we pursue the goals we care about most.

Act

SEARCH FOR UNCLAIMED property. Every state has a program for returning lost and forgotten assets to their rightful owners. Those assets include stocks, uncashed dividends, bank accounts, traveler’s checks, the contents of safe deposit boxes and utility company security deposits. You can find further details and links to state websites at Unclaimed.org.

Truths

NO. 116: AVOIDING probate is a big cost savings in some states—but not others. A local attorney can tell you how things stand in your state. If probate is costly, you might place assets in a revocable living trust. That can also be a smart move if you own a house in another state—and face the prospect of your estate passing through probate in two states.

Think

ILLUSION OF CONTROL. If we shake the dice vigorously, we feel we’re more likely to get the roll we want. Similarly, if we follow the stock market closely and trade often, we feel more control over our returns. But in truth, this can hurt results, as we act impulsively and rack up costs. A better strategy: Focus on things we can control, like risk, taxes and expenses.

Money Guide

Begin Here

Mutual Fund Costs

AS A FUND INVESTOR, you incur the fund’s trading costs—but you also have the costs associated with buying, owning and selling the fund itself. Mutual fund commissions. Broker-sold funds, sometimes referred to as load funds, might charge a commission when you buy, an ongoing commission that’s levied every year (known as a 12b-1 fee) and a commission when you sell. Investing on your own? You can buy no-load funds, which don’t charge any sort of commission. That means that, when you invest $100, the full $100 is added to your account, versus $94.25 with the typical broker-sold front-end load stock fund. What if, instead of buying your no-load funds directly from the mutual fund company involved, you invest through one of the fund marketplaces operated by discount brokerage firms? You may pay a transaction fee when you buy or you could find that the funds sold through the marketplace levy somewhat higher annual expenses. Annual fund expenses. All funds, both load and no-load, charge annual expenses to cover the cost of managing the fund and handling administrative tasks. In addition, the annual expenses may include a 12b-1 fee to cover marketing and distribution. This fee is often used to compensate brokers. A fund’s trading costs aren’t included in its published annual expenses. Fund expenses are expressed as a percentage of fund assets, so a fund with a 1.5% expense ratio is charging you $1.50 a year for every $100 you have invested. You can also think of this as the breakeven hurdle rate. If a fund charges 1.5% a year, it has to pick securities that beat the market by 1.5 percentage points just to match the performance of the fund’s benchmark index. Account maintenance fees. You might be charged an annual fee if you hold your funds in a brokerage account or in an IRA. On top of all this, there’s the biggest investment cost of all: taxes. We tackle that at greater length in the chapter on taxes. Next: Load Funds Previous: Trading Costs Articles: Adding the Minuses and Separated at Birth
Read more »

Voices

Which aspect of the tax code do you hate the most?

"It's not really a "tax" issue per se, but what irritates me most is the IRMAA surcharge on Medicare premiums. It drives me nuts every year trying to stay short of the triggering limits. Here's what Harry Sit says about it on his site--The Finance Buff: "In the grand scheme, when a couple on Medicare has over $194,000 in income, they’re already paying a large amount in taxes. Does making them pay another $1,600 make that much difference? It’s less than 1% of their income but nickel-and-diming just makes people mad. People caught by surprise when their income crosses over to a higher bracket by just a small amount are angry at the government. Rolling it all into the income tax would be much more effective.""
- Michael Hennessy
Read more »

Can the market be beaten?

"''a strange game. the only winning move is not to play.'' i am an orphan widower. i got what i wanted from the market and sold off/out last month. no need for a legacy. the dog and i are retiring with a large nest egg of cash and SS to 100 acres. will have more than enuf that inflation is not a concern and my remaining life span[ of a may fly] will see me thru. the dog and any $ left will be in good hands. enjoy your time and worries, you youngsters..."
- alex scott
Read more »

Does it ever make sense to buy actively managed funds?

"It definitely could although probably rarely. I might choose to do so when considering variability/volatility, steadiness of income stream, taxation consequences and indecisiveness about alternatives."
- jayne brownlee
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

The $121,500 Room

I HAVE A WIFE, two children, two dogs, and the need for three bedrooms and two bathrooms. In March 2015, I purchased a four bedroom, 3½ bath, 3,000-square-foot house in a nice neighborhood with quality public schools.
The fourth bedroom was largely unnecessary but, like many people, we occasionally get visitors and feel it’s nice to have an extra bedroom for them, instead of spending money on a hotel room. This is the story of how that fourth bedroom cost me more than $121,500,

Read more »

Investing

Crash Course

THE JAPANESE JUST “celebrated” the 30th anniversary of their stock market’s peak. The Nikkei 225 hit an all-time high of 38,916 in December 1989. Today, it stands at 23,320, or 40% below 1989’s level.
“But the Japanese stock market in the 1980s was the mother of all bubbles,” you might respond. Perhaps. But what about the Nasdaq bubble of the late ’90s? True, the Nasdaq Composite Index has finally returned to its 2000 peak.

Read more »
Home Call to Action

Lists

Bad News

I’M MANAGING MY MONEY with an eye to making it last another three decades. And yet, everywhere I turn, it seems somebody’s insisting I pay attention to what’s happening in the financial markets right now.
This isn’t just a coronavirus phenomenon. It is, alas, standard operating procedure for the financial media.
I understand the game. I’ve spent most of my career as a journalist, so I realize it’s no small undertaking to fill up a newspaper,

Read more »

Mindset

Not My Thing

NOT LONG AGO, I RAN into my friend Martin, who works as a cardiologist at a local hospital. In the course of our conversation, I commented on the construction equipment outside his facility and asked what they were building.
His answer: “Building? No, they’re actually un-building.”
He explained that recently his hospital had been sold and the new owner was a for-profit company. As part of the transition, the new owner had evaluated the hospital’s facilities and discovered that a group of older buildings was largely unused.

Read more »