Tempted to bail out of stocks? If the market falls, it should eventually rebound. If stocks climb, they may never return to today’s level.
WHEN MY YOUNGEST son graduated college, he had two solid job offers. One would have allowed him to live at home for free and the other was halfway across the country. Guess which one he picked?
In fairness, the job far from home was more interesting to him and provided a great start to his career. I remember him sitting down with his mother and me, and telling us he was planning to move to Texas.
IMAGINE the coronavirus caused the U.S. economy to shrink 4%. What sort of drop in share prices might this trigger?
As it happens, we already know the answer. Over the 18 months through mid-2009, U.S. inflation-adjusted GDP slipped 4%. Investors—panicked over what the future might bring—drove down the S&P 500 stocks by a jaw-dropping 57%.
In retrospect, this seems like a bit of an overreaction.
To be sure, late 2008 was a wild time.
MY THREE FAVORITE words in response to questions about investing and trading: “I don’t know.”
Nothing underscores that sentiment more than bitcoin and other cryptocurrencies. I work on a trading floor, where it pays to have an opinion on just about every tradable asset. But I’m the oddball on the floor. I roll my eyes when I hear blanket market predictions and the latest hot stock tip. I’m even on a personal crusade to remove CNBC from the TVs at work.
“FOLLOWING the market’s recent banner year, should we just sell everything and get out?” I got that question recently, and it’s entirely understandable. Since hitting bottom in 2009, U.S. share prices are up fivefold, including the S&P 500’s 31.5% total return in 2019.
Individual investors aren’t alone in asking this question. A few weeks back, at an industry conference, James Montier delivered a presentation in which he compared the U.S. stock market to “Wile E.
AFTER YEARS of handwringing, you finally concede that it’s all but impossible to beat the market over the long haul, so you shift your portfolio into index funds. Next up: the truly tough decisions.
Almost every writer for—and reader of—HumbleDollar is a fan of indexing, and there’s no doubt that index funds are a wonderful financial tool. But how will you use that tool? Let the bickering begin.
The differences of opinion show up among the articles we run on HumbleDollar.
IN EIGHT YEARS, my wife and I will be age 72—and we’ll be locked into required minimum distributions from our retirement accounts for the rest of our lives. Nearly all of our savings are in tax-deferred accounts.
At that juncture, we’ll also have begun Social Security payments. The upshot: Our tax rate will jump significantly and, thanks to the combination of required minimum distributions (RMDs) and Social Security, our income will easily exceed our expenses.
NO. 16: IT TAKES years to achieve full financial freedom. But we can quickly escape much financial worry—if we live beneath our means, pay off credit card debt and build a cash cushion.
NO. 8: DILIGENT savers need smaller nest eggs. Let’s say you save 10% of income. To retire in comfort, you might need Social Security, portfolio withdrawals and any pension income to replace 80% of your salary. But if you’ve been saving 25%, you’re used to spending far less—and might be comfortable with 65% of your preretirement income.
FUND YOUR IRA—for 2020. This time of year, folks are exhorted to get their IRAs funded for 2019 before the mid-April tax-filing deadline. That’s a good idea. But if you want the most out of your IRA, you should also make your 2020 contribution. That way, your money will be invested for longer—and there’s the potential for even more tax-advantaged growth.
VALUE AVERAGING. This variation on dollar-cost averaging involves adjusting the sum you invest each month, depending on market performance. You start by setting a target growth rate for your stock portfolio. If stocks slide and you don’t achieve your target in any given month, you increase the sum you save—a contrarian approach that could bolster long-run results.
YOU CAN THINK of retirement as having four phases. Want to make sure you make the right decisions at the right time? An age roadmap can help.
Phase No. 1 is the preretirement period beginning at age 55. Why start then? If you leave your employer after this age, you can access your 401(k) without the usual 10% tax penalty on retirement account withdrawals before age 59½. To have this option, keep your 401(k) at your old employer,
THIS TIME of year, nightly news shows often feature a montage of clips from various commencement and graduation speeches. The speakers, mostly well-known business people, politicians and celebrities, dish out anecdotes and inspirational words to hordes of newly minted college graduates.
If I were ever invited to speak at a commencement, I’d offer a more commonsense approach, sharing some of the insights I’ve gained from working in higher education for more than two decades.
A GOOD GRASP of compounding is fundamental to managing money. Without an understanding of the way money grows and shrinks over time, folks can’t fully appreciate the value of starting to save when they’re young, the damage done by large investment losses or the true cost of carrying credit-card debt.
Yet I fear compounding isn’t well understood. This has dawned on me over the past month, as I’ve been teaching an undergraduate course on personal finance.
THE FINANCIAL markets are often quick to punish investment sins. By contrast, if we err with our borrowing, spending and other personal-finance issues, problems might not show up until years later—but the damage can be just as great. Here, to complement last week’s list of 12 deadly investment sins, are 12 deadly personal-finance sins:
1. Pride: Keeping up with the Jones by buying luxury cars and fancy clothes.
Antidote: Realize the folly of buying depreciating assets you don’t need,
WHAT COUNTS as good financial advice doesn’t change much from one year to the next. In 2014, you should have owned a globally diversified portfolio, kept investment costs low, avoided credit-card debt, maxed your 401(k) and avoided annuity salesmen. Ditto for 2015.
So why do folks read the business section every day, buy personal-finance books and subscribe to business magazines? There’s an entertainment aspect: We like feeling engaged with the wider world.
But there’s also a practical reason: Even if good financial advice doesn’t change much from one year to the next,
WHEN MY YOUNGEST son graduated college, he had two solid job offers. One would have allowed him to live at home for free and the other was halfway across the country. Guess which one he picked?
In fairness, the job far from home was more interesting to him and provided a great start to his career. I remember him sitting down with his mother and me, and telling us he was planning to move to Texas.
IMAGINE the coronavirus caused the U.S. economy to shrink 4%. What sort of drop in share prices might this trigger?
As it happens, we already know the answer. Over the 18 months through mid-2009, U.S. inflation-adjusted GDP slipped 4%. Investors—panicked over what the future might bring—drove down the S&P 500 stocks by a jaw-dropping 57%.
In retrospect, this seems like a bit of an overreaction.
To be sure, late 2008 was a wild time.
MY THREE FAVORITE words in response to questions about investing and trading: “I don’t know.”
Nothing underscores that sentiment more than bitcoin and other cryptocurrencies. I work on a trading floor, where it pays to have an opinion on just about every tradable asset. But I’m the oddball on the floor. I roll my eyes when I hear blanket market predictions and the latest hot stock tip. I’m even on a personal crusade to remove CNBC from the TVs at work.
“FOLLOWING the market’s recent banner year, should we just sell everything and get out?” I got that question recently, and it’s entirely understandable. Since hitting bottom in 2009, U.S. share prices are up fivefold, including the S&P 500’s 31.5% total return in 2019.
Individual investors aren’t alone in asking this question. A few weeks back, at an industry conference, James Montier delivered a presentation in which he compared the U.S. stock market to “Wile E.
AFTER YEARS of handwringing, you finally concede that it’s all but impossible to beat the market over the long haul, so you shift your portfolio into index funds. Next up: the truly tough decisions.
Almost every writer for—and reader of—HumbleDollar is a fan of indexing, and there’s no doubt that index funds are a wonderful financial tool. But how will you use that tool? Let the bickering begin.
The differences of opinion show up among the articles we run on HumbleDollar.
IN EIGHT YEARS, my wife and I will be age 72—and we’ll be locked into required minimum distributions from our retirement accounts for the rest of our lives. Nearly all of our savings are in tax-deferred accounts.
At that juncture, we’ll also have begun Social Security payments. The upshot: Our tax rate will jump significantly and, thanks to the combination of required minimum distributions (RMDs) and Social Security, our income will easily exceed our expenses.
NO. 16: IT TAKES years to achieve full financial freedom. But we can quickly escape much financial worry—if we live beneath our means, pay off credit card debt and build a cash cushion.
FUND YOUR IRA—for 2020. This time of year, folks are exhorted to get their IRAs funded for 2019 before the mid-April tax-filing deadline. That’s a good idea. But if you want the most out of your IRA, you should also make your 2020 contribution. That way, your money will be invested for longer—and there’s the potential for even more tax-advantaged growth.
NO. 8: DILIGENT savers need smaller nest eggs. Let’s say you save 10% of income. To retire in comfort, you might need Social Security, portfolio withdrawals and any pension income to replace 80% of your salary. But if you’ve been saving 25%, you’re used to spending far less—and might be comfortable with 65% of your preretirement income.
VALUE AVERAGING. This variation on dollar-cost averaging involves adjusting the sum you invest each month, depending on market performance. You start by setting a target growth rate for your stock portfolio. If stocks slide and you don’t achieve your target in any given month, you increase the sum you save—a contrarian approach that could bolster long-run results.
YOU CAN THINK of retirement as having four phases. Want to make sure you make the right decisions at the right time? An age roadmap can help.
Phase No. 1 is the preretirement period beginning at age 55. Why start then? If you leave your employer after this age, you can access your 401(k) without the usual 10% tax penalty on retirement account withdrawals before age 59½. To have this option, keep your 401(k) at your old employer,
THIS TIME of year, nightly news shows often feature a montage of clips from various commencement and graduation speeches. The speakers, mostly well-known business people, politicians and celebrities, dish out anecdotes and inspirational words to hordes of newly minted college graduates.
If I were ever invited to speak at a commencement, I’d offer a more commonsense approach, sharing some of the insights I’ve gained from working in higher education for more than two decades.
A GOOD GRASP of compounding is fundamental to managing money. Without an understanding of the way money grows and shrinks over time, folks can’t fully appreciate the value of starting to save when they’re young, the damage done by large investment losses or the true cost of carrying credit-card debt.
Yet I fear compounding isn’t well understood. This has dawned on me over the past month, as I’ve been teaching an undergraduate course on personal finance.
THE FINANCIAL markets are often quick to punish investment sins. By contrast, if we err with our borrowing, spending and other personal-finance issues, problems might not show up until years later—but the damage can be just as great. Here, to complement last week’s list of 12 deadly investment sins, are 12 deadly personal-finance sins:
1. Pride: Keeping up with the Jones by buying luxury cars and fancy clothes.
Antidote: Realize the folly of buying depreciating assets you don’t need,
WHAT COUNTS as good financial advice doesn’t change much from one year to the next. In 2014, you should have owned a globally diversified portfolio, kept investment costs low, avoided credit-card debt, maxed your 401(k) and avoided annuity salesmen. Ditto for 2015.
So why do folks read the business section every day, buy personal-finance books and subscribe to business magazines? There’s an entertainment aspect: We like feeling engaged with the wider world.
But there’s also a practical reason: Even if good financial advice doesn’t change much from one year to the next,