Each year, the market is skewed higher by a minority of stocks with spectacular performance—which means most stocks end up as laggards.
LOOKING BACK, our financial choices almost never seem optimal. Why not? When we stared into the future and made those choices, we didn’t know what we were going to get—and that meant the only prudent course was to hedge our bets. I explore this issue in HumbleDollar’s latest newsletter.
While we ought to prepare our finances for a host of possible outcomes, we’re simply not very good at doing so. In the newsletter, I offer a slew of statistics on our prowess when it comes to risk management.
WHAT DO YOU believe about money? I’m talking here about money scripts—subconscious beliefs developed since childhood that influence your financial behavior.
These beliefs have been studied extensively by Ted and Brad Klontz, the father-and-son team who founded the Financial Psychology Institute and authored Mind Over Money. Here are some common money scripts:
“Avoid debt at all costs.”
“Money is the root of all evil.”
“We can always make more money.”
While there’s an element of truth to each,
“I DON’T GET IT.” That’s what my friend said when I told him I would consider marrying my significant other.
“Why do you feel you need to get married?” he continued. “You’re both in your 60s. You’re not going to have any children. There’s no reason you should get married. If you did, you would make the relationship more complicated. You both probably would want a prenuptial agreement protecting your assets. That, in itself,
WITHOUT A DOUBT, John C. Bogle is the greatest man I’ve had the privilege of knowing. Tomorrow, the newspapers will run obituaries detailing his many accomplishments—how he launched Vanguard Group, started the first index mutual and was, right up until the end, a fierce advocate for the everyday investor.
I first met Jack in 1987, when I was a callow 24-year-old reporter at Forbes magazine. I last saw him in October, at the Bogleheads’
GLOBAL LIFE expectancy for almost every nation will rise during the next two decades, with Spain overtaking Japan as the country with the longest life expectancy. Meanwhile, on the list of 195 countries, the U.S. will fall 20 places, from 43rd to 64th. The average U.S. lifespan as of birth is still projected to increase slightly, from 78.7 years to 79.8, but at a slower rate than the rest of the world.
That isn’t great news for the U.S.—but it isn’t necessarily bad news for you,
GENWORTH’S 2018 Cost of Care Survey puts the average annual cost of a semi-private nursing home room at $89,297. You might pay $351,495 in Alaska, $151,475 in Connecticut and $144,175 in Massachusetts, but just $57,579 in Texas and $55,663 in Oklahoma.
WHEN FOLKS have financial questions, they go hunting for the right answer. But what if there’s no right answer to be found?
To be sure, in retrospect, the correct answer is often crystal clear. Looking back at 2018, we should have owned growth stocks until September and then gone to 100% cash. If our home didn’t burn down and our health was good, we shouldn’t have bothered with homeowner’s and health insurance. If we kept our job and survived the year,
NO. 10: WALL STREET always strives to look its best. To ensure fund expenses and advisory fees appear small, they’re expressed as a percent of the dollars we invest, not as a percent of our likely gain. To make results appear impressive, money managers pick their benchmark indexes carefully and use cumulative return “mountain” charts.
ELIMINATE DUPLICATION. Many folks have multiple bank and brokerage accounts, multiple funds that invest in the same market sector and even multiple advisors. This can make sense if, say, the goal is to increase FDIC insurance. But often it reflects a naïve notion of diversification—that more accounts somehow mean greater safety. Our advice: Simplify—for your sake and the sake of your heirs.
EFFICIENT FRONTIER. What mix of investments offers the highest expected return for a given level of risk—or the lowest risk for a target return? In theory, these optimal portfolios can be found on the so-called efficient frontier. Their key characteristic: broad diversification, thus reducing volatility by combining investments that don’t always move in sync.
HumbleDollar is edited by Jonathan Clements, author of From Here to Financial Happiness.
LOOKING BACK, our financial choices almost never seem optimal. Why not? When we stared into the future and made those choices, we didn’t know what we were going to get—and that meant the only prudent course was to hedge our bets. I explore this issue in HumbleDollar’s latest newsletter.
While we ought to prepare our finances for a host of possible outcomes, we’re simply not very good at doing so. In the newsletter, I offer a slew of statistics on our prowess when it comes to risk management.
WHAT DO YOU believe about money? I’m talking here about money scripts—subconscious beliefs developed since childhood that influence your financial behavior.
These beliefs have been studied extensively by Ted and Brad Klontz, the father-and-son team who founded the Financial Psychology Institute and authored Mind Over Money. Here are some common money scripts:
“Avoid debt at all costs.”
“Money is the root of all evil.”
“We can always make more money.”
While there’s an element of truth to each,
“I DON’T GET IT.” That’s what my friend said when I told him I would consider marrying my significant other.
“Why do you feel you need to get married?” he continued. “You’re both in your 60s. You’re not going to have any children. There’s no reason you should get married. If you did, you would make the relationship more complicated. You both probably would want a prenuptial agreement protecting your assets. That, in itself,
WITHOUT A DOUBT, John C. Bogle is the greatest man I’ve had the privilege of knowing. Tomorrow, the newspapers will run obituaries detailing his many accomplishments—how he launched Vanguard Group, started the first index mutual and was, right up until the end, a fierce advocate for the everyday investor.
I first met Jack in 1987, when I was a callow 24-year-old reporter at Forbes magazine. I last saw him in October, at the Bogleheads’
GLOBAL LIFE expectancy for almost every nation will rise during the next two decades, with Spain overtaking Japan as the country with the longest life expectancy. Meanwhile, on the list of 195 countries, the U.S. will fall 20 places, from 43rd to 64th. The average U.S. lifespan as of birth is still projected to increase slightly, from 78.7 years to 79.8, but at a slower rate than the rest of the world.
That isn’t great news for the U.S.—but it isn’t necessarily bad news for you,
GENWORTH’S 2018 Cost of Care Survey puts the average annual cost of a semi-private nursing home room at $89,297. You might pay $351,495 in Alaska, $151,475 in Connecticut and $144,175 in Massachusetts, but just $57,579 in Texas and $55,663 in Oklahoma.
ELIMINATE DUPLICATION. Many folks have multiple bank and brokerage accounts, multiple funds that invest in the same market sector and even multiple advisors. This can make sense if, say, the goal is to increase FDIC insurance. But often it reflects a naïve notion of diversification—that more accounts somehow mean greater safety. Our advice: Simplify—for your sake and the sake of your heirs.
NO. 10: WALL STREET always strives to look its best. To ensure fund expenses and advisory fees appear small, they’re expressed as a percent of the dollars we invest, not as a percent of our likely gain. To make results appear impressive, money managers pick their benchmark indexes carefully and use cumulative return “mountain” charts.
EFFICIENT FRONTIER. What mix of investments offers the highest expected return for a given level of risk—or the lowest risk for a target return? In theory, these optimal portfolios can be found on the so-called efficient frontier. Their key characteristic: broad diversification, thus reducing volatility by combining investments that don’t always move in sync.
WHEN FOLKS have financial questions, they go hunting for the right answer. But what if there’s no right answer to be found?
To be sure, in retrospect, the correct answer is often crystal clear. Looking back at 2018, we should have owned growth stocks until September and then gone to 100% cash. If our home didn’t burn down and our health was good, we shouldn’t have bothered with homeowner’s and health insurance. If we kept our job and survived the year,
HumbleDollar is edited by Jonathan Clements, author of From Here to Financial Happiness.