Misery lies in the mismatch between the decades needed to score fabulous gains in the stock market—and investors’ relentless focus on today.
IS IT WORTH OWNING international stocks? There’s far from universal agreement. The traditional argument for investing outside the U.S. is straightforward: diversification—since domestic and international stocks don’t move in lockstep, and sometimes diverge significantly.
At the same time, however, international stocks have lagged behind their U.S. counterparts for so many years that it’s been trying the patience of even the most tenacious investors. Domestic stocks have outpaced international stocks in eight of the past 10 years.
FOUR MONTHS AGO, I was told I might have just a year to live. It’s been a whirlwind ever since.
I’ve been inundated with messages from acquaintances and readers, gone to countless medical appointments, my diagnosis has received a surprising amount of media attention, I’ve been hustling to organize my financial affairs, and Elaine and I have taken two trips.
Where do things stand today? Here’s what’s been going on.
Medical update. After three radiation treatments to zap the 10 cancerous lesions on my brain and an intense opening round of infusion sessions,
WHEN I WAS A YOUNG adult, my parents sat me down and explained that I might at some point inherit money from my grandfather’s trust, which had also helped put me through college. My grandfather passed away in 1984, and his wife—my father’s stepmother—became the trust’s beneficiary.
My father was an only child. The trust stipulated that, if his stepmother died before him, he would receive two-thirds of the trust, while my two siblings and I would share the other third.
I LOVE TO TRAVEL—and it runs in the family. My parents were avid travelers, with my father receiving a generous travel allowance from his work every four years.
In addition, my father always managed his time and budget for numerous other trips. After his passing, my brother and I took turns maintaining the travel tradition with our mom, until plans were disrupted by the pandemic.
After retiring this year, I eagerly anticipated visiting my mother in India and taking her on a grand tour.
YEARS AGO, I SAW a Looney Tunes cartoon starring Daffy Duck and Elmer Fudd. As always, good old Elmer was trying to kill a duck for dinner, only to be outsmarted by the much cleverer Daffy.
In this particular episode, Daffy is playing a game of catch with his duck friends outside Elmer’s house. An overthrown ball crashes through a window. Elmer comes out and says, “Who broke that glass? Someone is going to pay for that.” The ducks all bump into each other in their efforts to run away.
I’VE TAUGHT BEHAVIORAL economics, which holds that even our most important decisions are influenced by unrecognized biases. For my students, there’s no better example than the choice of where they went to college.
Although the cost is enormous, the decision of where to go hinges on the smallest things. A teenager who says, “I want to be close to my boyfriend,” will zero in on a nearby college, even if her high school romance is fading.
NO. 27: WE THINK we can forecast the stock market’s direction. Most experts agree it’s impossible to predict where stocks will head next, and yet almost every investor has an opinion. Why? Partly, it’s because market swings have a huge impact on our day-to-day wealth. But partly, it’s hindsight bias: Bull and bear markets seem all too predictable—in retrospect.
NO. 94: IF YOU REFINANCE your mortgage to take advantage of lower rates, you’ll cut your monthly payment, but you may also set yourself back financially. Suppose you’re eight years into a 30-year mortgage. If you refinance with another 30-year loan, your monthly payment could drop sharply—but it’ll also be eight extra years until you’re debt-free.
GENERATE TAXABLE income if this will be a low-income year. You might sell winning stocks in your taxable account, cash in savings bonds or convert part of your traditional IRA to a Roth. Result: You could end up paying federal taxes at just 10% or 12%, and perhaps 0% on your capital gains—a bargain if you foresee getting taxed at higher rates down the road.
NO. 51: RENTAL real estate can be a great investment. But it’s also a big, leveraged, undiversified bet and a lot of hassle. A diversified stock portfolio is less work—and arguably less risky.
IN A RECENT ONLINE discussion, I compared the benefits of an immediate-fixed annuity with the 4% retirement-income rule. The 4% rule suggests that investors can withdraw 4% from a well-balanced investment portfolio in the first year of retirement, and then add annual inflation adjustments without fear of running out of money over a 30-year retirement.
Using the NewRetirement annuity calculator, I found that a 65-year-old man could purchase an immediate annuity for $1 million,
TOWARD THE END of high school, I landed in some predictably adolescent legal trouble: I purchased alcohol underage and had to shamefully explain what happened to my parents. As I dejectedly declared that I would pay the fine and admit guilt, my parents—concerned about potential career implications—instead insisted that I hire a lawyer with my own money. I had to work for more than a year as a busboy and caterer to reimburse my parents for the cost,
WITH EVERYTHING that’s been going on recently, one story that’s received less attention is the ongoing spat between the White House and the board of the Thrift Savings Plan (TSP). As of a few days ago, there had been a ceasefire in the debate, but it isn’t over. It’s worth understanding what’s at stake—because the underlying issue has been a recurring theme in the investment industry.
If you aren’t familiar with the TSP, it’s one of the retirement plans available to federal government workers.
TALKING TO A BROKER or insurance salesman? Here are 10 things you’ll likely never hear:
“Wow, your 401(k) has great low-cost institutional funds. There’s no way you should roll that money into an IRA.”
“Do you know that you could buy these funds outside a variable annuity and pay a fraction of the price?”
“Sure, you could make that trade—but probably the only person who will get richer is me.”
“My hunch is, this closed-end fund you’re buying will be at discount within a few months of the IPO.”
“Given the markup on that bond you just bought,
WARREN BUFFETT doesn’t have the best investment record over the past three decades. That accolade apparently belongs to Jim Simons. Buffett also isn’t the world’s richest person. In fact, he hasn’t held that title for the past dozen years and currently ranks No. 6, with barely half the wealth of today’s richest person, Jeff Bezos.
I doubt Buffett feels bad about this. Is your surname neither Simons nor Bezos? I don’t think you should feel bad,
NO. 51: RENTAL real estate can be a great investment. But it’s also a big, leveraged, undiversified bet and a lot of hassle. A diversified stock portfolio is less work—and arguably less risky.
NO. 27: WE THINK we can forecast the stock market’s direction. Most experts agree it’s impossible to predict where stocks will head next, and yet almost every investor has an opinion. Why? Partly, it’s because market swings have a huge impact on our day-to-day wealth. But partly, it’s hindsight bias: Bull and bear markets seem all too predictable—in retrospect.
NO. 94: IF YOU REFINANCE your mortgage to take advantage of lower rates, you’ll cut your monthly payment, but you may also set yourself back financially. Suppose you’re eight years into a 30-year mortgage. If you refinance with another 30-year loan, your monthly payment could drop sharply—but it’ll also be eight extra years until you’re debt-free.
GENERATE TAXABLE income if this will be a low-income year. You might sell winning stocks in your taxable account, cash in savings bonds or convert part of your traditional IRA to a Roth. Result: You could end up paying federal taxes at just 10% or 12%, and perhaps 0% on your capital gains—a bargain if you foresee getting taxed at higher rates down the road.
IN A RECENT ONLINE discussion, I compared the benefits of an immediate-fixed annuity with the 4% retirement-income rule. The 4% rule suggests that investors can withdraw 4% from a well-balanced investment portfolio in the first year of retirement, and then add annual inflation adjustments without fear of running out of money over a 30-year retirement.
Using the NewRetirement annuity calculator, I found that a 65-year-old man could purchase an immediate annuity for $1 million,
TOWARD THE END of high school, I landed in some predictably adolescent legal trouble: I purchased alcohol underage and had to shamefully explain what happened to my parents. As I dejectedly declared that I would pay the fine and admit guilt, my parents—concerned about potential career implications—instead insisted that I hire a lawyer with my own money. I had to work for more than a year as a busboy and caterer to reimburse my parents for the cost,
WITH EVERYTHING that’s been going on recently, one story that’s received less attention is the ongoing spat between the White House and the board of the Thrift Savings Plan (TSP). As of a few days ago, there had been a ceasefire in the debate, but it isn’t over. It’s worth understanding what’s at stake—because the underlying issue has been a recurring theme in the investment industry.
If you aren’t familiar with the TSP, it’s one of the retirement plans available to federal government workers.
TALKING TO A BROKER or insurance salesman? Here are 10 things you’ll likely never hear:
“Wow, your 401(k) has great low-cost institutional funds. There’s no way you should roll that money into an IRA.”
“Do you know that you could buy these funds outside a variable annuity and pay a fraction of the price?”
“Sure, you could make that trade—but probably the only person who will get richer is me.”
“My hunch is, this closed-end fund you’re buying will be at discount within a few months of the IPO.”
“Given the markup on that bond you just bought,
WARREN BUFFETT doesn’t have the best investment record over the past three decades. That accolade apparently belongs to Jim Simons. Buffett also isn’t the world’s richest person. In fact, he hasn’t held that title for the past dozen years and currently ranks No. 6, with barely half the wealth of today’s richest person, Jeff Bezos.
I doubt Buffett feels bad about this. Is your surname neither Simons nor Bezos? I don’t think you should feel bad,
I’m depressed, not very optimistic about retirement 😱 by R Quinn
Our annual give it away meeting 🤑
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