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Whenever there’s an outburst at the office, it’s never about what it’s supposedly about.

15 Ways to Happy

WE DON’T PURSUE money just to put food on the table and a roof over our head. Instead, the hope is to enhance our life. On that score, it seems we aren’t doing terribly well: Our reported level of happiness is no higher than it was half a century ago.
Could we do better? I believe so. There’s been extensive research on happiness in recent decades. For those who want to dig into the details,

Read more »

It Took Decades

IF YOU’VE WORKED a lifetime—while prudently saving and investing—so that in old age you’re well off financially, should you feel guilty?
If your retirement income is greater than the income of most American families, including those still raising young children and facing college costs, as well as the cost of their own retirement, is that embarrassing?
A few years back, during a discussion about how people spend, save and invest, my son-in-law—who’s a financial advisor to high net worth families—casually said to me,

Read more »

Did It Myself

I PURCHASED my first house almost 30 years ago. To call it a “fixer” would have been an understatement. It was 800 square feet of neglected space in desperate need of repairs and updating. Being fresh out of college and working at a job that paid less than $20,000 a year, I didn’t have a lot of money to spend on improvements. But I had the energy and enthusiasm of youth.
Over a five-year period,

Read more »

Sunny Prospects

“NICE OFFICES,” offered the 30-something investor, as he cast a wary eye across the corporate art, barren desks and empty bookshelves.
“Yeah, we asked management if they could put us on the 12th floor, so our suite number could be 12b-1. Funny, right?” The financial salesman winked.
“Not sure I get it.”
“It’s a joke, but clients never get it, they pay it.”
“What qualifications do you have?”
“See those initials after my name?

Read more »

Your 10-Year Reward

IF YOU’RE MARRIED, filing for Social Security can be confusing. But there’s one group who has it even worse—those who are divorced.
In recent weeks, I’ve had a number of conversations with women who had no idea that they were even eligible for spousal benefits based on their ex-husband’s earnings record. (I also recently watched the television show Dirty John: The Betty Broderick Story, which gave completely erroneous advice on benefits for ex-spouses.) My hope: Someone reading this may learn that he or she is eligible for spousal or survivor benefits from an ex-spouse.

Read more »

Played for Fools

“THE CHINESE PLAY the long game. We play checkers, they play chess.”
You hear such sentiments from Americans a lot. It’s one of the narratives that draws foreign money to China. The story is so good, it distracts investors from an important fact: The oldest China exchange-traded fund, the iShares China Large-Cap ETF (symbol: FXI), has lost a quarter of its value since peaking in 2007. Yet somehow—helped by Chinese government pressure on index providers—China’s weight in the emerging markets indexes is higher than ever.

Read more »

Money Guide

Bond Market Costs

IN TODAY'S LOW-YIELD world, it’s more crucial than ever to hold down investment costs. Suppose a bond fund charges 1% in annual expenses. If the fund owns bonds yielding 10%, the after-cost yield collected by the fund’s investors would be 9%. That means investors are losing a tenth of their investment income to expenses. But if the fund’s bonds are yielding 3% and the fund charges 1%, investors will collect just 2%, as expenses snag a third of their potential yield. Moreover, what counts is your return after inflation and taxes. You can fend off taxes by holding your bonds in a retirement account or buying municipal bonds. But inflation is harder to combat—and high expenses, whether they’re charged by a fund or you incur them trading individual bonds, could leave you earning a yield that’s below the inflation rate. None of this would matter if bond fund managers or individual investors were skilled enough to earn back their expenses and post market-beating results. But there’s scant evidence of that. Instead, over five-year periods, the top performers in any particular bond fund category will usually be those funds with the lowest annual expenses. There’s also a danger that higher-cost funds will prove riskier than their low-cost competitors. Managers of higher-cost funds may be especially aggressive as they strive to overcome their costs and thereby keep up with lower-expense competitors. That extra risk could come back to haunt these fund managers—and their shareholders. Costs can also be a big issue when buying and selling individual bonds, thanks to the large markups that retail investors often pay. Check out the Market Data page offered by FINRA.org, where you can get details on individual bond issues. If you plan to buy or sell an individual bond in the secondary market, it’s helpful to review recent trade data to see whether you’re being offered a fair price. Better still, if you want to buy individual bonds, consider purchasing new issues and then holding the bonds to maturity. Next: New Bond Issues Previous: Bond Market Risks
Read more »

Manifesto

NO. 46: WE SHOULD favor financial advisors who focus on index funds—and who help not only with investing, but also with broader finance issues like taxes, insurance and estate planning.

Truths

NO. 66: TWENTY STOCKS aren’t enough. One rule says you need 20 individual stocks to be diversified. With that many, your portfolio’s volatility won’t be much greater than the broad market’s. Problem is, you might still earn returns that differ radically from the market averages. To avoid this tracking error, you need to own hundreds of stocks.

Act

VISUALIZE YOUR goals. Daydream about the vacation cottage, new car, remodeled kitchen and what you’ll do in retirement. Why? It will make you more motivated to save and you’ll enjoy the pleasure of anticipation. It’ll also give you a chance to ponder your goals in greater detail—and you might discover, on second thought, that some aren’t so enticing.

Think

TAX DEFERRAL. When you defer taxes on investment gains, you hang onto money earmarked for Uncle Sam—and use it to earn additional gains for yourself. This deferral is a key advantage of retirement accounts. You can also defer taxes in a taxable account—by holding winning investments for longer and thereby delaying the capital-gains tax bill.

Second Look

Retirement

Lucky One

I OFTEN WONDER: How did I manage to retire early, at age 58? I wasn’t born with a silver spoon in my mouth. I never earned a large salary. I wasn’t a very good investor. I didn’t start saving for retirement until I was in my late 20s.
My future did not look bright. I graduated from college at age 23 with a degree in history. There were not many job openings for a history major.

Read more »

Family Finance

Bucket List

WHEN MY WIFE and I started dating, we were both in the habit of budgeting through rough approximation. We made ballpark guesses about the percentage of our income that went toward specific spending categories and goals. But in truth, neither of us had much idea how much we spent on most things, other than obvious fixed costs like rent or car insurance. As a result, our ability to plan for long-term goals was limited.

Read more »

Investing

Slip Sliding Away

WHILE TALKING recently to an estate-planning client about investments costs, she showed me a letter from her financial advisor stating that he charges her 1% of assets a year. Maureen didn’t understand that she also pays each mutual fund’s annual expenses, a portion of which is also paid to her advisor. Her fund expense ratios average 1.14%, which includes a 0.25% 12b‑1 fee that her advisor pockets. Result: Maureen’s total cost is 2.14% a year,

Read more »

Lists

Got to Believe

I CAN ALREADY hear the groans. “Oh brother, here we go again with another of those religious wackos. I’m glad I don’t have to worry about all of that faith-based nonsense. My finances have nothing to do with faith.”
Really?
How about the guy spending his last dollar on a lottery ticket at the corner market? Or the victims of Bernie Madoff? Or the 65-year-old Enron employee fully invested in company stock in summer 2001?

Read more »
Home Call to Action

Mindset

Spoonful of Advice

MORE THAN 100 years ago, Thorstein Veblen, the father of behavioral economics, explained the thinking behind most of our purchases and investments with the help of two spoons. In his seminal 1899 book, The Theory of the Leisure Class, Veblen compared a handmade silver spoon, which back then could cost up to $20 ($600 in today’s money) with a machine-made aluminum spoon that cost about 20 cents ($6 today).
Based on strict utility of purpose,

Read more »

15 Ways to Happy

WE DON’T PURSUE money just to put food on the table and a roof over our head. Instead, the hope is to enhance our life. On that score, it seems we aren’t doing terribly well: Our reported level of happiness is no higher than it was half a century ago.
Could we do better? I believe so. There’s been extensive research on happiness in recent decades. For those who want to dig into the details,

Read more »

It Took Decades

IF YOU’VE WORKED a lifetime—while prudently saving and investing—so that in old age you’re well off financially, should you feel guilty?
If your retirement income is greater than the income of most American families, including those still raising young children and facing college costs, as well as the cost of their own retirement, is that embarrassing?
A few years back, during a discussion about how people spend, save and invest, my son-in-law—who’s a financial advisor to high net worth families—casually said to me,

Read more »

Did It Myself

I PURCHASED my first house almost 30 years ago. To call it a “fixer” would have been an understatement. It was 800 square feet of neglected space in desperate need of repairs and updating. Being fresh out of college and working at a job that paid less than $20,000 a year, I didn’t have a lot of money to spend on improvements. But I had the energy and enthusiasm of youth.
Over a five-year period,

Read more »

Sunny Prospects

“NICE OFFICES,” offered the 30-something investor, as he cast a wary eye across the corporate art, barren desks and empty bookshelves.
“Yeah, we asked management if they could put us on the 12th floor, so our suite number could be 12b-1. Funny, right?” The financial salesman winked.
“Not sure I get it.”
“It’s a joke, but clients never get it, they pay it.”
“What qualifications do you have?”
“See those initials after my name?

Read more »

Your 10-Year Reward

IF YOU’RE MARRIED, filing for Social Security can be confusing. But there’s one group who has it even worse—those who are divorced.
In recent weeks, I’ve had a number of conversations with women who had no idea that they were even eligible for spousal benefits based on their ex-husband’s earnings record. (I also recently watched the television show Dirty John: The Betty Broderick Story, which gave completely erroneous advice on benefits for ex-spouses.) My hope: Someone reading this may learn that he or she is eligible for spousal or survivor benefits from an ex-spouse.

Read more »

Played for Fools

“THE CHINESE PLAY the long game. We play checkers, they play chess.”
You hear such sentiments from Americans a lot. It’s one of the narratives that draws foreign money to China. The story is so good, it distracts investors from an important fact: The oldest China exchange-traded fund, the iShares China Large-Cap ETF (symbol: FXI), has lost a quarter of its value since peaking in 2007. Yet somehow—helped by Chinese government pressure on index providers—China’s weight in the emerging markets indexes is higher than ever.

Read more »

Free Newsletter

Home Call to Action

Manifesto

NO. 46: WE SHOULD favor financial advisors who focus on index funds—and who help not only with investing, but also with broader finance issues like taxes, insurance and estate planning.

Act

VISUALIZE YOUR goals. Daydream about the vacation cottage, new car, remodeled kitchen and what you’ll do in retirement. Why? It will make you more motivated to save and you’ll enjoy the pleasure of anticipation. It’ll also give you a chance to ponder your goals in greater detail—and you might discover, on second thought, that some aren’t so enticing.

Truths

NO. 66: TWENTY STOCKS aren’t enough. One rule says you need 20 individual stocks to be diversified. With that many, your portfolio’s volatility won’t be much greater than the broad market’s. Problem is, you might still earn returns that differ radically from the market averages. To avoid this tracking error, you need to own hundreds of stocks.

Think

TAX DEFERRAL. When you defer taxes on investment gains, you hang onto money earmarked for Uncle Sam—and use it to earn additional gains for yourself. This deferral is a key advantage of retirement accounts. You can also defer taxes in a taxable account—by holding winning investments for longer and thereby delaying the capital-gains tax bill.

Money Guide

Start Here

Bond Market Costs

IN TODAY'S LOW-YIELD world, it’s more crucial than ever to hold down investment costs. Suppose a bond fund charges 1% in annual expenses. If the fund owns bonds yielding 10%, the after-cost yield collected by the fund’s investors would be 9%. That means investors are losing a tenth of their investment income to expenses. But if the fund’s bonds are yielding 3% and the fund charges 1%, investors will collect just 2%, as expenses snag a third of their potential yield. Moreover, what counts is your return after inflation and taxes. You can fend off taxes by holding your bonds in a retirement account or buying municipal bonds. But inflation is harder to combat—and high expenses, whether they’re charged by a fund or you incur them trading individual bonds, could leave you earning a yield that’s below the inflation rate. None of this would matter if bond fund managers or individual investors were skilled enough to earn back their expenses and post market-beating results. But there’s scant evidence of that. Instead, over five-year periods, the top performers in any particular bond fund category will usually be those funds with the lowest annual expenses. There’s also a danger that higher-cost funds will prove riskier than their low-cost competitors. Managers of higher-cost funds may be especially aggressive as they strive to overcome their costs and thereby keep up with lower-expense competitors. That extra risk could come back to haunt these fund managers—and their shareholders. Costs can also be a big issue when buying and selling individual bonds, thanks to the large markups that retail investors often pay. Check out the Market Data page offered by FINRA.org, where you can get details on individual bond issues. If you plan to buy or sell an individual bond in the secondary market, it’s helpful to review recent trade data to see whether you’re being offered a fair price. Better still, if you want to buy individual bonds, consider purchasing new issues and then holding the bonds to maturity. Next: New Bond Issues Previous: Bond Market Risks
Read more »

Second Look

Retirement

Lucky One

I OFTEN WONDER: How did I manage to retire early, at age 58? I wasn’t born with a silver spoon in my mouth. I never earned a large salary. I wasn’t a very good investor. I didn’t start saving for retirement until I was in my late 20s.
My future did not look bright. I graduated from college at age 23 with a degree in history. There were not many job openings for a history major.

Read more »

Family Finance

Bucket List

WHEN MY WIFE and I started dating, we were both in the habit of budgeting through rough approximation. We made ballpark guesses about the percentage of our income that went toward specific spending categories and goals. But in truth, neither of us had much idea how much we spent on most things, other than obvious fixed costs like rent or car insurance. As a result, our ability to plan for long-term goals was limited.

Read more »

Investing

Slip Sliding Away

WHILE TALKING recently to an estate-planning client about investments costs, she showed me a letter from her financial advisor stating that he charges her 1% of assets a year. Maureen didn’t understand that she also pays each mutual fund’s annual expenses, a portion of which is also paid to her advisor. Her fund expense ratios average 1.14%, which includes a 0.25% 12b‑1 fee that her advisor pockets. Result: Maureen’s total cost is 2.14% a year,

Read more »

Lists

Got to Believe

I CAN ALREADY hear the groans. “Oh brother, here we go again with another of those religious wackos. I’m glad I don’t have to worry about all of that faith-based nonsense. My finances have nothing to do with faith.”
Really?
How about the guy spending his last dollar on a lottery ticket at the corner market? Or the victims of Bernie Madoff? Or the 65-year-old Enron employee fully invested in company stock in summer 2001?

Read more »

Mindset

Spoonful of Advice

MORE THAN 100 years ago, Thorstein Veblen, the father of behavioral economics, explained the thinking behind most of our purchases and investments with the help of two spoons. In his seminal 1899 book, The Theory of the Leisure Class, Veblen compared a handmade silver spoon, which back then could cost up to $20 ($600 in today’s money) with a machine-made aluminum spoon that cost about 20 cents ($6 today).
Based on strict utility of purpose,

Read more »