Beyond the Numbers

Adam M. Grossman

Adam is the founder of Mayport, a fixed-fee wealth management firm. He advocates an evidence-based approach to personal finance. Adam has written more than 200 articles for HumbleDollar.

Beyond the Numbers

Adam M. Grossman  |  Oct 24, 2021

BACK IN THE 1950s, economists Franco Modigliani and Merton Miller developed a theory that, even today, is taught in virtually every finance class.

To understand the theory, suppose you’re running a company and want to build a new factory. To raise money for the project, you generally have two options: You can sell shares to investors or you can borrow money. No one disputes that basic framework, but Modigliani and Miller added a twist: They argued that,

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Teaching the Teacher

Adam M. Grossman  |  Oct 17, 2021

I RECENTLY STARTED reading Think Again, the new book by Adam Grant. Subtitled The Power of Knowing What You Don’t Know, Grant’s book got me thinking about all the ways that, over the years, conversations with clients have led me to look at things through different lenses. Below are eight such topics:

1. There’s one important financial question that stumps most everyone—for good reason. In building a financial plan,

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Good Trumps Perfect

Adam M. Grossman  |  Oct 10, 2021

EARLIER THIS MONTH, The Wall Street Journal carried a seemingly innocuous article by Derek Horstmeyer, a finance professor at George Mason University. Horstmeyer described an analysis he and his research assistant had recently conducted. The question they sought to answer: Could investors achieve better results in their 401(k)s by avoiding target-date funds and instead constructing their own portfolios?

If you aren’t familiar with them, target-date funds are intended as all-in-one solutions for investors.

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Giving Wisely

Adam M. Grossman  |  Oct 3, 2021

FINANCIAL PLANNING is, for the most part, straightforward. You want to save enough for the future and then avoid a shortfall by investing those savings wisely. Pretty much every other topic in the world of personal finance—from asset allocation to paying taxes to safe withdrawal rates—can be viewed through the lens of those two overall goals.
But there’s one topic that isn’t straightforward at all, and that’s philanthropy. It’s not straightforward because it runs counter to those two fundamental goals.

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Costly Arguments

Adam M. Grossman  |  Sep 26, 2021

OPEN AN ECONOMICS textbook, and you’ll find this fundamental principle: When the money supply expands—that is, when the government prints more money—higher inflation is often the result. This topic has, for good reason, been on investors’ minds lately. Since the pandemic began, the Federal Reserve has increased the money supply by several trillion dollars.

Is higher inflation inevitable? I see five possible answers to this question:

1. Yes, of course. Between 2010 and 2020,

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Fool’s Gold

Adam M. Grossman  |  Sep 21, 2021

I RECENTLY LEARNED that crooks like to use tungsten to defraud gold investors. Here’s how it works: Gold bars are typically validated by weight. If a standard size bar clocks in at the expected weight, it’s assumed to be pure. But tungsten, it turns out, has a very similar density to gold. Crooks will drill out a bar’s core, fill it with tungsten and then cover their tracks by applying a thin veneer of gold.

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Often Overlooked

Adam M. Grossman  |  Sep 19, 2021

PERSONAL FINANCE pundits love to debate safe withdrawal rates—the amount a retiree can withdraw each year from a portfolio without depleting it too quickly. I agree this is an important topic. In fact, I’ve addressed it a few times myself in recent months.

In July, I discussed the well-known 4% rule. A few weeks ago, I described an alternative called the bucket strategy. But as you build your retirement plan, withdrawal rates shouldn’t be the only consideration.

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Leaving on Bad Terms

Adam M. Grossman  |  Sep 12, 2021

I HAVE A RELATIVE—let’s call her Jane. Last year, in the early days of the pandemic, Jane had the foresight to buy shares in vaccine maker Moderna. With the benefit of hindsight, it was a smart decision.
But it wasn’t a difficult one, in Jane’s view. It was no secret that the company was working on a COVID-19 vaccine. It was also clear that vaccines would be in high demand. That made the investment case clear.

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Containing the Issue

Adam M. Grossman  |  Sep 5, 2021

THE MUCH-DEBATED 4% rule—which I wrote about back in July—is a popular way to think about portfolio withdrawals in retirement. But it isn’t the only way. Another approach, called the bucket system, is also worth understanding. Below is some background.
What is the bucket system? As its name suggests, an investor divides his or her portfolio into multiple containers. Each container, or bucket, is then assigned a different role.
The most popular implementation of the bucket system involves three containers: The first is earmarked for a year or two of spending and is held entirely in cash.

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Back to School

Adam M. Grossman  |  Aug 29, 2021

A WHILE BACK, I assembled two personal finance reading lists—what I called 101 and 201 level titles. But time doesn’t stand still. Below is a list of newer books, along with a few classics that didn’t fit on the earlier lists. They’re organized into three categories: retirement planning, investing and behavioral finance.
Retirement Planning

Can I Retire? by Mike Piper. There’s no shortage of retirement books. But if you want a straightforward guide that covers the most critical topics in an easy-to-read format,

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Rule Your World

Adam M. Grossman  |  Aug 25, 2021

I’VE NEVER BEEN a fan of financial planning rules of thumb. To understand why, consider a common shortcut for choosing an asset allocation: The allocation to bonds in a portfolio, according to this rule of thumb, should equal an investor’s age.

For example, if an investor is 65 years old, his or her allocation to bonds should be 65%. That sounds reasonable—until you realize that Microsoft founder Bill Gates is 65. Should he have the same asset allocation as everyone else his age?

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Cooling Off

Adam M. Grossman  |  Aug 21, 2021

TODAY’S STOCK MARKET reminds me of Charles Dickens’s famous line: “It was the best of times, it was the worst of times….”
It’s the best of times, of course, because the market continues to hit new highs. From a low of 2,237 in March 2020, the S&P 500 has doubled. Over the 10 years through July, the S&P has delivered an average annual return of 15.4%, including dividends, far above the historical average of 10%.

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Why They Believe

Adam M. Grossman  |  Aug 8, 2021

THE 19TH CENTURY feud between the Hatfields and the McCoys doesn’t hold a candle to the debate between supporters of index funds and supporters of active management.
Those in the index fund camp cite decades of data—going back to the 1930s—to support their view that active management is a fool’s errand. In fact, Standard & Poor’s regularly publishes a study it calls SPIVA, short for S&P Index Versus Active. Each time, analysts there reach the same conclusion—that it’s exceedingly difficult for an actively managed fund to beat its benchmark.

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Wedding Gift

Adam M. Grossman  |  Aug 1, 2021

ON THE SURFACE, Social Security seems straightforward: During our working years, we pay into the system. Then, when we’re older, the government sends a check every month for life.
But scratch the surface and you’ll find that Social Security offers a number of additional benefits. Among them: a benefit for spouses. This can be highly valuable, but the rules around it are complex and very specific. Consider, for example, the late talk show host Johnny Carson.

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Not a Law of Nature

Adam M. Grossman  |  Jul 25, 2021

THE 4% RULE IS ONE of the best-known ideas in personal finance. But is it really a rule? And does it apply to you?

Let’s start at the beginning. The father of the 4% rule is a financial planner named William Bengen. Back in the early 1990s, he became frustrated with the prevailing rules of thumb for retirement planning. He found them too informal and set out to develop a more rigorous approach. The question he sought to answer: What percentage of a portfolio could a retiree safely withdraw each year?

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