Financial danger sign: All your stocks are penny stocks, but they weren’t when you bought them.
IT ISN’T EASY sticking to a budget. I get it. Surprise expenses pop up all the time. How can you possibly be expected to live on a strict dollar amount each and every month?
The answer is, you don’t. But the key is to make sure you have enough financial breathing room, so you aren’t living paycheck to paycheck. That brings me to three common budget busters. These areas of your financial life, if ignored,
WE LIKE TO THINK we’re rational, especially when it comes to spending and investing. But in truth, all of us are susceptible to impulsive decision-making and unconscious persuasion. Result? We often end up wasting our hard-earned money.
According to traditional economics—which depicts humans as conscious, rational decision-makers—this shouldn’t happen. But this traditional view has been under attack since the late 1800s, when Thorstein Veblen explored conscious irrational decisions, such as buying items simply to impress others.
I SUBSCRIBE to a number of financial magazines, as well as a daily newspaper. Lately, they’ve been piling up in my garage unread. I scan the front cover of the magazines and the headlines of the newspaper, but I’m not that interested. I don’t care about “Where to Invest Your Money in 2019” or “The Best Stocks for the Long Run.”
I guess it’s because I’m no longer in charge of my investment portfolio.
IN SUMMER 2000, the Art Institute of Chicago fell under the spell of a young hedge fund manager named Conrad Seghers. The allure? Seghers claimed that his funds, called Integral, offered “the highest Sharpe ratios in the industry.” The Sharpe ratio is supposed to measure an investment’s risk relative to its returns and is popular in the world of hedge funds. Convinced by this pitch, the Art Institute committed more than $40 million of its endowment to Seghers’s funds.
WHAT DOES OUR financial journey look like? Obviously, we hope to grow wealthier over time. But our journey also reflects our changing thinking about money—as well as changes in how we use those dollars to make our lives better. I sketch out that journey in HumbleDollar’s latest newsletter.
The newsletter also includes our usual list of the articles run by the site over the past two weeks. And don’t forget: HumbleDollar is about more than just blog posts.
AFTER THE MARKET turbulence of recent months, the idea of a 100% stock portfolio would strike many folks as crazy. Yet, when I was in the workforce, that’s pretty much what I owned.
I never felt my all-stock portfolio was particularly risky. My wife and I had solid paychecks to rely on. We always maxed out our retirement plans, while also adding to other accounts, and then lived on whatever remained.
While the stock market’s volatility and the occasional downturns may have been disconcerting,
A YEAR FROM NOW, do you expect to be better or worse off financially? A Gallup poll found that 69% expect to be better off, just two points shy of the all-time high of 71%, recorded in 1998.
WE CAN MEASURE our financial progress by the size of our net worth. But that’s hardly the only gauge. Equally important, I’d argue, is the evolution in how we think about money—and how we use it to improve our lives.
What does this journey look like? I picture it as having five stages:
1. Head above water. This is when you emerge from the primordial financial swamp and begin to walk upright.
NO. 111: WALL STREET tries never to send a bill, so we’re unaware of what we’re paying. Fund expenses and advisory fees are quietly subtracted throughout the year. Stock trading spreads and bond markups are built into security prices. Load fund commissions are swiped from our initial investment or deducted when we sell.
FUND YOUR IRA—FOR 2019. This time of year, folks are exhorted to get their IRAs funded for 2018 before the mid-April tax-filing deadline. That’s a good idea. But if you want to get the most out of your IRA, you should also make your 2019 contribution. That way, your money will be invested for longer—and there’s the potential for even more tax-advantaged growth.
HOME BIAS. We’re most comfortable owning familiar investments. That’s why we often invest heavily in shares of our employer, local companies and corporations whose products we use, as well as in rental properties. Meanwhile, we shy away from foreign stocks. While the result may be a portfolio we’re comfortable with, it’s often a badly diversified one.
HumbleDollar is edited by Jonathan Clements, author of From Here to Financial Happiness.
IT ISN’T EASY sticking to a budget. I get it. Surprise expenses pop up all the time. How can you possibly be expected to live on a strict dollar amount each and every month?
The answer is, you don’t. But the key is to make sure you have enough financial breathing room, so you aren’t living paycheck to paycheck. That brings me to three common budget busters. These areas of your financial life, if ignored,
WE LIKE TO THINK we’re rational, especially when it comes to spending and investing. But in truth, all of us are susceptible to impulsive decision-making and unconscious persuasion. Result? We often end up wasting our hard-earned money.
According to traditional economics—which depicts humans as conscious, rational decision-makers—this shouldn’t happen. But this traditional view has been under attack since the late 1800s, when Thorstein Veblen explored conscious irrational decisions, such as buying items simply to impress others.
I SUBSCRIBE to a number of financial magazines, as well as a daily newspaper. Lately, they’ve been piling up in my garage unread. I scan the front cover of the magazines and the headlines of the newspaper, but I’m not that interested. I don’t care about “Where to Invest Your Money in 2019” or “The Best Stocks for the Long Run.”
I guess it’s because I’m no longer in charge of my investment portfolio.
IN SUMMER 2000, the Art Institute of Chicago fell under the spell of a young hedge fund manager named Conrad Seghers. The allure? Seghers claimed that his funds, called Integral, offered “the highest Sharpe ratios in the industry.” The Sharpe ratio is supposed to measure an investment’s risk relative to its returns and is popular in the world of hedge funds. Convinced by this pitch, the Art Institute committed more than $40 million of its endowment to Seghers’s funds.
WHAT DOES OUR financial journey look like? Obviously, we hope to grow wealthier over time. But our journey also reflects our changing thinking about money—as well as changes in how we use those dollars to make our lives better. I sketch out that journey in HumbleDollar’s latest newsletter.
The newsletter also includes our usual list of the articles run by the site over the past two weeks. And don’t forget: HumbleDollar is about more than just blog posts.
AFTER THE MARKET turbulence of recent months, the idea of a 100% stock portfolio would strike many folks as crazy. Yet, when I was in the workforce, that’s pretty much what I owned.
I never felt my all-stock portfolio was particularly risky. My wife and I had solid paychecks to rely on. We always maxed out our retirement plans, while also adding to other accounts, and then lived on whatever remained.
While the stock market’s volatility and the occasional downturns may have been disconcerting,
A YEAR FROM NOW, do you expect to be better or worse off financially? A Gallup poll found that 69% expect to be better off, just two points shy of the all-time high of 71%, recorded in 1998.
FUND YOUR IRA—FOR 2019. This time of year, folks are exhorted to get their IRAs funded for 2018 before the mid-April tax-filing deadline. That’s a good idea. But if you want to get the most out of your IRA, you should also make your 2019 contribution. That way, your money will be invested for longer—and there’s the potential for even more tax-advantaged growth.
NO. 111: WALL STREET tries never to send a bill, so we’re unaware of what we’re paying. Fund expenses and advisory fees are quietly subtracted throughout the year. Stock trading spreads and bond markups are built into security prices. Load fund commissions are swiped from our initial investment or deducted when we sell.
HOME BIAS. We’re most comfortable owning familiar investments. That’s why we often invest heavily in shares of our employer, local companies and corporations whose products we use, as well as in rental properties. Meanwhile, we shy away from foreign stocks. While the result may be a portfolio we’re comfortable with, it’s often a badly diversified one.
WE CAN MEASURE our financial progress by the size of our net worth. But that’s hardly the only gauge. Equally important, I’d argue, is the evolution in how we think about money—and how we use it to improve our lives.
What does this journey look like? I picture it as having five stages:
1. Head above water. This is when you emerge from the primordial financial swamp and begin to walk upright.
HumbleDollar is edited by Jonathan Clements, author of From Here to Financial Happiness.