FREE NEWSLETTER

Whenever we choose to own bonds rather than stocks, we reduce risk—but we’re also choosing to lower our portfolio’s expected return.

Garbage In

IN THE MID-1990s, Federal Express had a problem. Though the company’s safety record was exemplary, regulators had proposed new rules that would have posed an operational nightmare for the giant shipper.
The company flew Boeing 727 air freighters that each accommodated eight containers. Though they had never had a problem, the government’s concern was that if two heavier-than-average containers were loaded next to each other, it could cause the plane to become dangerously unbalanced.

Read more »

Newsletter No. 34

HOW CAN WE GET the most out of our income and savings? Two years ago, in a slim volume called How to Think About Money, I offered my answer. Earlier this month, a new edition of the book came out, geared toward a global audience. To mark the new edition’s publication, I’ve devoted HumbleDollar’s latest newsletter to How to Think About Money’s 12 key recommendations.
The newsletter also includes a promo code that can save you money,

Read more »

Slow Going

HAS THE PERCENTAGE of individuals across the world living in extreme poverty remained the same, doubled or halved over the past 20 years? If you answered halved, give yourself a pat on the back. According to Gapminder.org, you’re among just 9% of respondents who answered the question correctly. Despite what you hear on the news, the world is gradually becoming a better place.
It’s difficult to recognize progress, including our own financial progress, when it happens slowly over long periods of time.

Read more »

Latest Blogs

Garbage In

IN THE MID-1990s, Federal Express had a problem. Though the company’s safety record was exemplary, regulators had proposed new rules that would have posed an operational nightmare for the giant shipper.
The company flew Boeing 727 air freighters that each accommodated eight containers. Though they had never had a problem, the government’s concern was that if two heavier-than-average containers were loaded next to each other, it could cause the plane to become dangerously unbalanced.

Read more »

Newsletter No. 34

HOW CAN WE GET the most out of our income and savings? Two years ago, in a slim volume called How to Think About Money, I offered my answer. Earlier this month, a new edition of the book came out, geared toward a global audience. To mark the new edition’s publication, I’ve devoted HumbleDollar’s latest newsletter to How to Think About Money’s 12 key recommendations.
The newsletter also includes a promo code that can save you money,

Read more »

Slow Going

HAS THE PERCENTAGE of individuals across the world living in extreme poverty remained the same, doubled or halved over the past 20 years? If you answered halved, give yourself a pat on the back. According to Gapminder.org, you’re among just 9% of respondents who answered the question correctly. Despite what you hear on the news, the world is gradually becoming a better place.
It’s difficult to recognize progress, including our own financial progress, when it happens slowly over long periods of time.

Read more »

Blog archive

Numbers

A BLAST FROM THE PAST: Between 2000 and 2009, emerging markets clocked 10.1% a year, high-quality U.S. bonds 6.3% and developed foreign markets 1.6%. What about the S&P 500? It lost 1% a year.

Truths

NO. 106: THERE’S NO SUREFIRE WAY of identifying winning money managers ahead of time. For instance, fund managers who have performed well over the past five years are no more likely than other managers to perform well over the next five years. In fact, the best predictor of strong results isn’t past performance, but rather low management fees.

Truths

NO. 106: THERE’S NO SUREFIRE WAY of identifying winning money managers ahead of time. For instance, fund managers who have performed well over the past five years are no more likely than other managers to perform well over the next five years. In fact, the best predictor of strong results isn’t past performance, but rather low management fees.

Act

CHECK YOUR PORTFOLIO PERCENTAGES. In 2018, U.S. growth stocks have posted gains, U.S. value stocks have lagged, foreign shares are underwater, emerging stock markets sport double-digit losses, most bonds are down and real estate stocks are in negative territory. All this may have pushed your portfolio away from your target asset allocation—and it could be time to rebalance.

Think

MORAL LICENSING. When we’ve behaved well and feel virtuous, we often give ourselves permission to behave badly. Just signed up for your employer’s 401(k) plan? Perversely, this can weaken your willpower—and suddenly a shopping spree seems perfectly reasonable. Even thinking about good behavior can lead folks to feel justified in acting badly.

Home Call to Action

Free Newsletter

Thinking About Money

I HAVE SPENT 33 YEARS writing and thinking about money. I’m not sure it’s the most uplifting way to spend one’s life, but it’s kept me busy and—for the most part—out of trouble.
Two years ago, I took some of the financial ideas that have especially intrigued me over the past three decades, and I brought them together in a slim volume called How to Think About Money. The book proved surprisingly popular,

Read More »
Jonathan Clements

About Jonathan

Jonathan Clements is the founder and editor of HumbleDollar. He spent almost two decades at The Wall Street Journal, where he was the personal finance columnist. His latest book: From Here to Financial Happiness.

Money Guide

Start Here

Closed-End Funds

EXCHANGE-TRADED INDEX FUNDS have exploded in popularity since the first U.S. fund was launched in 1993. But ETFs weren’t the first investment funds to be listed on the stock market. That distinction belongs to closed-end funds, which have traded in the U.S. since 1893. According to the Investment Company Institute's Fact Book, there were 530 closed-end funds at of year-end 2017, which collectively managed $275.2 billion in assets. Municipal bond funds were the largest category, accounting for $89 billion of that total. Indeed, the world of closed-end funds includes a vast array of single-state, tax-free municipal bond funds. For more on closed-ends, check out the Closed-End Fund Center at CEFA.com. Every closed-end fund has two prices. There’s the price of the publicly traded shares—and then there’s the value of the fund’s assets expressed on a per-share basis, otherwise known as its net asset value. Closed-end fund shares are initially sold at a premium to net asset value, with the premium representing the money earned by the brokerage firms concerned. Often, funds quickly fall to a discount, at which point you might be able to buy a dollar of assets for just 90 cents. An obvious lesson: Never buy a closed-end fund at the initial public offering. There's a good chance you'll suffer a steep short-term loss as the fund's share price goes from a premium above net asset value to a discount. Another potential pitfall: Many closed-end bond funds use leverage to boost returns. The funds issue short-term debt at relatively low interest rates and then use the proceeds to buy longer-term bonds offering higher yields. The interest rate differential helps pad the yield paid to shareholders. But those higher yields come at a price: When bond prices fall, owners of leveraged closed-end funds will suffer steeper losses than those in unleveraged funds. Next: Unit Investment Trusts Previous: Emerging-Market Debt
Read more »

Archive

What It Takes

SAVING DILIGENTLY sounds like such a rudimentary skill that it gets scant respect. Who couldn’t spend 10% or 15% less than they earn, so they set aside a little money for the future? And yet the U.S. savings rate remains miserably low and many folks are pitifully ill-prepared for retirement. The reality: Saving money may be simple but, clearly, it isn’t easy. What does it take? Here are six key ingredients. 1. There’s the obvious: We need an income. The more we earn, the easier it should be to save. But it doesn’t always work out that way. I have met many folks with modest incomes who sock away impressive sums, and others with fat paychecks who manage to save very little. 2. Low fixed costs. Why do many families fail to save? Often, they simply can’t, because they’ve boxed themselves in with a litany of monthly fixed costs, everything from mortgage payments to insurance premiums to recurring fees for phone, internet, cable, music streaming and more. Result: They have so little financial wiggle room that it’s almost impossible to save. 3. Self-control. Even with low fixed costs, saving can be a struggle, because temptation abounds. When something catches our eye, we need to squash the impulse to immediately open our wallet. By delaying gratification, we’ll have time to consider whether it’s truly money well-spent. For some, this is easy. For many, it’s hard—in the same way it’s hard to eat less and exercise more. For instance, if I’ve had a long day banging away at the computer keyboard, I’ll often forget all my good intentions, and reward myself with some unhealthy food and a glass or two of wine. For others, spending serves the same purpose. It makes them feel better in the moment, even if they won’t feel good when the credit card bill arrives. 4. An aversion to financial stress. Spending may give us a short-term thrill. But excessive spending can also lead to ongoing financial stress, as we discover we can’t pay the credit card bill and maybe not even the rent. As we come to appreciate how terrible that stress can be and how great it feels to have our finances under control, spending can lose its allure. 5. Self-reflection. When we’re young, it isn’t surprising that we spend too much on items that deliver little happiness. We simply haven’t had time to learn from experience. But as the spending disappointments pile up, we gradually come to appreciate how little happiness we receive from our purchases. Self-control is no longer a problem, because the goodies no longer seem tantalizing. The sooner we get to this point, the easier it’ll be to lasso our spending and get on the right financial track. 6. A fondness for our future self. If we spend money today, we can’t spend it tomorrow, let alone in 30 years. If we’re rational, we would care more about the future when we’re younger, because there’s potentially so many years ahead of us. But ironically, it seems our concern for our future self grows as we get older.
Read more »

Money Guide

Start Here

Closed-End Funds

EXCHANGE-TRADED INDEX FUNDS have exploded in popularity since the first U.S. fund was launched in 1993. But ETFs weren’t the first investment funds to be listed on the stock market. That distinction belongs to closed-end funds, which have traded in the U.S. since 1893. According to the Investment Company Institute's Fact Book, there were 530 closed-end funds at of year-end 2017, which collectively managed $275.2 billion in assets. Municipal bond funds were the largest category, accounting for $89 billion of that total. Indeed, the world of closed-end funds includes a vast array of single-state, tax-free municipal bond funds. For more on closed-ends, check out the Closed-End Fund Center at CEFA.com. Every closed-end fund has two prices. There’s the price of the publicly traded shares—and then there’s the value of the fund’s assets expressed on a per-share basis, otherwise known as its net asset value. Closed-end fund shares are initially sold at a premium to net asset value, with the premium representing the money earned by the brokerage firms concerned. Often, funds quickly fall to a discount, at which point you might be able to buy a dollar of assets for just 90 cents. An obvious lesson: Never buy a closed-end fund at the initial public offering. There's a good chance you'll suffer a steep short-term loss as the fund's share price goes from a premium above net asset value to a discount. Another potential pitfall: Many closed-end bond funds use leverage to boost returns. The funds issue short-term debt at relatively low interest rates and then use the proceeds to buy longer-term bonds offering higher yields. The interest rate differential helps pad the yield paid to shareholders. But those higher yields come at a price: When bond prices fall, owners of leveraged closed-end funds will suffer steeper losses than those in unleveraged funds. Next: Unit Investment Trusts Previous: Emerging-Market Debt
Read more »
Home Call to Action
Jonathan Clements

About Jonathan

Jonathan Clements is the founder and editor of HumbleDollar. He spent almost two decades at The Wall Street Journal, where he was the personal finance columnist. His latest book: From Here to Financial Happiness.

Free Newsletter

Thinking About Money

I HAVE SPENT 33 YEARS writing and thinking about money. I’m not sure it’s the most uplifting way to spend one’s life, but it’s kept me busy and—for the most part—out of trouble.
Two years ago, I took some of the financial ideas that have especially intrigued me over the past three decades, and I brought them together in a slim volume called How to Think About Money. The book proved surprisingly popular,

Read More »

Archive

What It Takes

SAVING DILIGENTLY sounds like such a rudimentary skill that it gets scant respect. Who couldn’t spend 10% or 15% less than they earn, so they set aside a little money for the future? And yet the U.S. savings rate remains miserably low and many folks are pitifully ill-prepared for retirement. The reality: Saving money may be simple but, clearly, it isn’t easy. What does it take? Here are six key ingredients. 1. There’s the obvious: We need an income. The more we earn, the easier it should be to save. But it doesn’t always work out that way. I have met many folks with modest incomes who sock away impressive sums, and others with fat paychecks who manage to save very little. 2. Low fixed costs. Why do many families fail to save? Often, they simply can’t, because they’ve boxed themselves in with a litany of monthly fixed costs, everything from mortgage payments to insurance premiums to recurring fees for phone, internet, cable, music streaming and more. Result: They have so little financial wiggle room that it’s almost impossible to save. 3. Self-control. Even with low fixed costs, saving can be a struggle, because temptation abounds. When something catches our eye, we need to squash the impulse to immediately open our wallet. By delaying gratification, we’ll have time to consider whether it’s truly money well-spent. For some, this is easy. For many, it’s hard—in the same way it’s hard to eat less and exercise more. For instance, if I’ve had a long day banging away at the computer keyboard, I’ll often forget all my good intentions, and reward myself with some unhealthy food and a glass or two of wine. For others, spending serves the same purpose. It makes them feel better in the moment, even if they won’t feel good when the credit card bill arrives. 4. An aversion to financial stress. Spending may give us a short-term thrill. But excessive spending can also lead to ongoing financial stress, as we discover we can’t pay the credit card bill and maybe not even the rent. As we come to appreciate how terrible that stress can be and how great it feels to have our finances under control, spending can lose its allure. 5. Self-reflection. When we’re young, it isn’t surprising that we spend too much on items that deliver little happiness. We simply haven’t had time to learn from experience. But as the spending disappointments pile up, we gradually come to appreciate how little happiness we receive from our purchases. Self-control is no longer a problem, because the goodies no longer seem tantalizing. The sooner we get to this point, the easier it’ll be to lasso our spending and get on the right financial track. 6. A fondness for our future self. If we spend money today, we can’t spend it tomorrow, let alone in 30 years. If we’re rational, we would care more about the future when we’re younger, because there’s potentially so many years ahead of us. But ironically, it seems our concern for our future self grows as we get older.
Read more »