Adam M. Grossman

THE STOCK MARKET’S recent wrenching price swings offer a valuable investment lesson. Let’s start by reviewing the facts:

On the day after Thanksgiving, the S&P 500 suffered its worst day in months and the Dow had its worst day in more than a year. The proximate cause: news about Omicron, a new coronavirus variant. Overnight, investors seemed to revive their playbook from the early 2020 recession. Airline stocks dropped precipitously. Oil plunged 13%. Meanwhile,

RON LIEBER, in his book The Opposite of Spoiled, describes a 2012 conversation between Chris Rock and Jon Stewart. In an interview on Stewart’s show, they got around to discussing the challenges both faced in raising children who could remain grounded amid wealthy surroundings.

Rock described how his own modest upbringing differed from the comfortable life his children enjoy. “My kids are rich,” he said. “I have nothing in common with them.”

Stewart agreed.

A FRIEND DESCRIBED his recent experience trying to buy a new car. “I had two choices,” he said. “One dealer wanted full sticker price. The other wanted even more. It wasn’t much of a choice.”

The inflation situation in the car market is well understood. A shortage of components is limiting car makers’ output, driving up prices. But inflationary pressures aren’t limited to cars. The most recent reading for the Consumer Price Index was higher than it’s been in 30 years.

LIFE IS EXPENSIVE—especially for young adults contending with budget busters like housing and tuition. If you have adult children facing these expenses and want to help them financially, you may be wondering what’s the best approach. While every family is different, below are three principles that I’ve seen work well.

1. Transparency. This applies in several ways. First, you should let your children know your objectives for these gifts. Do you want to see them spend it on something specific—such as a home down payment—or are they free to use it as they see fit?

WALL STREET JOURNAL personal finance columnist Jason Zweig recently made this observation: Getting rich isn’t the hard part, he said. “Staying rich is the hard part.”

On the surface, staying rich might seem easy. After all, you simply need to build a balanced portfolio and then withdraw from it at a reasonable rate. Sure, there are stories about lottery winners and professional athletes going broke. But you might assume that phenomenon—having a hard time staying rich—is limited to such extreme cases.

A FEW WEEKS BACK, I talked about the good-is-better-than-perfect principle. A close corollary: Approach financial decisions incrementally. What do I mean by that? An example is dollar-cost averaging, where you invest a sum of money in regular increments, rather than all at once.

Does dollar-cost averaging guarantee a better outcome? No. But it takes what would be one big decision and breaks it into several smaller ones. The benefit: Each of those smaller decisions ends up carrying lower stakes.

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,

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,

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.

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.

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,

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.

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.

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.

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.