Bill Ehart

YOU’VE HEARD OF asset allocation. But how good are you at asset location?

On that one, I’d have to give myself a failing grade, but I hope to pass the test someday. I’ve realized I could save myself hundreds of dollars a year in taxes by relocating much of my safe money to tax-advantaged accounts, while being more aggressive with stocks in my taxable account. Those moves would leave me with the same overall stock allocation,

REMEMBER WHEN YOU got that first AARP card in the mail? I must have been 50, not at all ready to begin thinking about senior discounts, and slightly offended. That was 12 years ago.

Well, I’m feeling that way again. You see, the grim reaper—oops, I mean retirement—is getting close. That means it’s time to reduce my exposure to stocks, while boosting my holdings of income-oriented investments. It’s a strange feeling for someone who has spent his life investing almost exclusively for capital appreciation.

I INVEST FOR GROWTH, not income. That will likely change as I get closer to my 2028 planned retirement. For now, I diversify my portfolio mainly with cash and short-term bonds with the goal of stability, not yield. Yet this article is about the yield I receive.

Why focus on yield? Some say everyday investors overemphasize the importance of dividends, and maybe that’s true of me. But with much of the U.S. stock market richly valued—and now that I’m only five years from retirement—I feel pretty good about my portfolio’s yield,

WHAT’S THE BIGGEST threat to your retirement?

For young adults, we know a key pitfall is failing to invest in stocks because they’re so afraid of the market’s short-term ups and downs, thus unwittingly risking impoverishment later in life.

But for those of us nearing retirement, the market’s ups and downs can start to matter more than stocks’ long-term inflation-beating performance. An ill-timed market crash or a run of bad annual returns could ruin our retirement plans.

DON’T LOOK NOW, but value is beating growth—just not here in the U.S.

From May 31 through Sept. 29, iShares MSCI EAFE Value ETF (symbol: EFV), which invests in developed foreign markets, is up 5.6%, while iShares MSCI EAFE Growth ETF (EFG) is down 6.5%. That brings the year-to-date performance of the two funds to 9.6% for the iShares value fund and 4% for the iShares growth fund. Meanwhile, the style-neutral iShares MSCI EAFE ETF (EFA) is up 6.9% in 2023.

I ONCE DREAMED OF writing for one of the high-profile personal finance magazines—but that was before I had a rude awakening about the “journalism” they sometimes committed.
As a mid-career business journalist at a respectable daily newspaper, teaching myself about investing, I had looked up to these magazines, then in their heyday, and viewed them as a career possibility.
My worlds came together one day when a top magazine ran a story touting the stock of the electric utility that served my area.

EXPERTS HAVE LATELY been recommending that investors shift some money from short-term bonds—which offer the highest yield these days—to longer-term issues, whose prices are more sensitive to interest rates.

Had I followed this advice—and I almost did—I’d have quickly lost money in what’s supposed to be the safe part of my portfolio. Bonds did indeed rally from their October 2022 lows, but have pulled back since early May. Vanguard Intermediate-Term Treasury ETF (symbol: VGIT) was down 4.2% from its May 4 peak through last Friday,

IF YOU’RE LIKE ME, you’re always tempted to do something with your portfolio.

How should I invest if inflation stays high? What if interest rates come down? Am I well-positioned for that? Do bonds offer a better risk-reward than stocks right now and, if so, should I adjust my long-held stock-bond mix?

There’s been recent research and commentary, including two pieces from HumbleDollar’s Adam Grossman that you can find here and here,

NEW MORNINGSTAR research on bond funds echoes what the late Jack Bogle preached—and proved—for decades: Costs are the greatest predictor of fund performance, not stock or bond selection prowess. In investing, you get what you don’t pay for, said Bogle, Vanguard Group’s founder and creator of the first index mutual fund.

There’s a school of thought that claims it’s easier for active bond fund managers to beat their indexes than it is for their stock fund colleagues.

HOPE SPRINGS ETERNAL for mega-cap tech, meme stocks and cryptocurrencies. And the bond market is starting to party again, too. True, the financial markets have pulled back in the two trading days since Friday morning’s strong jobs report. Still, year-to-date performance has been startling.
Investor’s Business Daily reported recently that just 10 stocks, including Apple, Amazon, Tesla, Alphabet (parent of Google), Nvidia, Microsoft and Meta (parent of Facebook), have accounted for half of the S&P 500’s 7% year-to-date rally.

INVESTING CAN AND should be simple—and yet sometimes I make it so hard. Blame it on my ego and a faulty belief in my ability to pick winners among exchange-traded funds (ETFs) and, once in a while, individual stocks.

Problem is, I’ve had a few things go my way this year. Now that know-it-all feeling is rearing its ugly head again—“hey, I can pick stocks and sectors”—even though it’s hurt me badly in the past.

A NEW RESEARCH report confirms that there are darn few reasons to consider an actively managed fund over an index fund—and, indeed, this year’s bear market has made the case for active funds even weaker.
Remember active fund managers, those stars of TV and magazines in days of yore? Purportedly, they could beat their relevant indexes by buying the best-performing stocks and bonds, shifting sector and country weights, and sidestepping market pitfalls. That notion seems almost quaint today—because it’s been proved so thoroughly and repeatedly wrong.

BEING MECHANICAL and unemotional is a poor way to live life. But when investing, it just might make you richer.
Through this year’s stock market turbulence, I’ve been even keeled. My reaction to the plunging bond market has been more agitated, as I wrote about here and here. The fact is, while I’m convinced the stock market will rebound, I don’t have the same belief in bonds.
Armed with my faith in stocks, I’ve adopted a mechanical approach to investing,

SOMEBODY OUT THERE is buying and holding longer-term bonds—but you probably shouldn’t. Yes, they’ll notch big gains if interest rates fall, but perhaps suffer even bigger losses if the upward trend in rates continues.
To be sure, investors in almost all bonds have been hit this year, with the iShares Core U.S. Aggregate Bond ETF (symbol: AGG) down 9.6% in 2022 through May 13. Shorter-term funds have fared better but are also in the red,

BOXER MIKE TYSON observed that, “Everybody has plans until they get hit for the first time.”
Well, the bond market has me black and blue and gnashing my teeth. Have Treasury bonds lost their diversifying power in these inflationary times? For decades, they’d mostly held their ground or gained during stock market routs. Not this year.
My longstanding plan has been to invest in conventional short- and intermediate-term Treasury funds to cushion volatility and as a source of money to add to my stock funds when the market tanks.

MUCH HAS BEEN written about the virtues and pitfalls of index funds that weight stocks based on their market value. In theory, every company’s stock market value reflects the collective wisdom of market participants. Apple the biggest stock in the world? Must be for good reasons, the thinking goes, so it should get a big index-fund weighting.
Well, the market cap of Russia in the Vanguard FTSE Emerging Markets ETF (symbol: VWO) as of Oct.

THERE’S A SCENE in Three Days of the Condor, that very ’70s, America-in-decline movie, where the CIA is the bad guy and Robert Redford’s character is in danger of imminent extinction.
Max von Sydow’s character Joubert—the Alsatian assassin—warns him that he has “not much future.” Then he calmly describes how the CIA will come for him.
“It will happen this way,” Joubert says. “You may be walking. Maybe the first sunny day of the spring.

WE OFTEN WRITE at HumbleDollar that saving and investing aren’t everything. Spending money on the right things—such as fulfilling experiences—can also be a great investment, especially if the dollars bring ample happiness.
Nearly seven years ago, I thought I’d wasted $4,000 on a foreign trip. But the law of unintended consequences has since worked in my favor.
The 2015 trip was supposed to be an investment in my career. I thought I could make a difference in the world and become a freelance foreign correspondent.

THOSE OF US WHO aspire to be shrewd investors try to buy when opportunities present themselves, while avoiding “crowded” trades.

I broke that last rule when I recently bought a second car. Yes, prices are skyrocketing as a result of supply-chain bottlenecks and strong consumer demand. But I had a good reason: My son’s entering the fulltime workforce—and he’s taking over use of my current car.

It was the worst time to put myself at the mercy of car dealers.

MY LAST BLOG POST—about value-oriented Dodge & Cox Stock Fund—got me looking at the long-term returns for some highly touted large- and mid-cap growth and blend funds from 15 years ago. My surprise: Of the 15 funds in my admittedly unscientific sample, six went on to outpace both the S&P 500 and an index fund focused on the same market segment.

The six winners are boldfaced in the accompanying table. Note: For two of the winners,

AFTER A 13-YEAR drought, value stocks surged over the past year, and arguably no fund rode the wave better than the venerable Dodge & Cox Stock Fund (symbol: DODGX), which was launched in 1965. Long one of the largest and most respected mutual funds, it’s run by a nine-member investment committee, though the fund is perhaps most associated with Charles Pohl, who has been a manager for 30 years and is set to retire in 2022.

INVESTORS SHOULD diligently track two things: their portfolio’s performance and their asset allocation.
To monitor overall performance is humbling. If you’re like me, you eventually realize how much your cockamamie market-beating schemes have lagged the market—and it dawns on you that you could do much better by simply mimicking the market with index funds and occasionally rebalancing.
What percentage of your portfolio should be in U.S. shares, foreign stocks, cash, bonds and other assets?

BEHAVIORAL ECONOMISTS long ago discovered that the pain we feel from a $1,000 loss is about twice as great as the joy we feel from a $1,000 gain. Daniel Kahneman and Amos Tversky documented the phenomenon and coined the term “loss aversion” in 1979. That was just a few years before I began investing.
Since then, I’ve made a discovery about my own psychology: I’d rather underperform in out-of-favor stocks than risk losses in glamorous ones—because my gut tells me that the more something is celebrated,

BECAUSE WE’RE HUMAN, we always find something to complain about. But I’ve come to believe there’s never been a better time to be a regular, everyday investor.
No, I’m not suggesting stocks are some great once-in-a-lifetime bargain. Rather, I mean the choices available to investors have never been greater, thanks in part to the growth of exchange-traded funds and the disappearance of brokerage commissions. On top of that, the costs of fund investing have never been lower.

CAN YOU EVER HAVE enough? Yes, I’m talking about money.
But I’m not some gazillionaire burning up billions on a rocket to space. I’m talking about emergency savings for ordinary people. A cash stash. Rainy-day funds. Mattress money.
I thought I had enough a few months ago, but then life happened. Dental work. A blown clutch. More support for my son, who has a great job offer but won’t start work until later this year.

AS AN INVESTOR, I’d describe myself as a small-cap-value-aholic with a worldly outlook. Right now, I’m betting that one of world’s least loved overseas markets will finally return to favor after decades of disappointment. You can laugh out loud now.
Last year, my investment in U.S. small-cap value stocks was a great play from the March 2020 market bottom through about mid-May of this year. I didn’t catch the market bottom perfectly, but—luckily—I was close.

TERRY ODEAN HAS been studying investor behavior for decades. The University of California at Berkeley finance professor has proven again and again that everyday investors often harm their performance by trading too much.
Last year, Odean and his fellow researchers turned their attention to the Robinhood phenomenon. Result? When I spoke to Odean, he said the only thing that surprised him was the magnitude of the self-inflicted investment wounds by users of the free-and-easy trading app.

ALMOST EVERYTHING on Wall Street went up in April, including some of 2021’s laggards, such as gold, bonds and growth stocks.
Investors may not like President Biden’s capital gains and corporate tax hike proposals. But despite the president’s somewhat stealthy pursuit of policies worthy of Franklin D. Roosevelt, stock investors could be forgiven for breaking out into FDR’s 1932 campaign song, Happy Days Are Here Again. Consider:

Stocks have risen more in Biden’s first 100 days (symbol: SPY +9.8%) than in the same period of any president’s term since—guess who—FDR’s fourth.

WAS MARCH WHEN YOU learned what a nonfungible token was, because a digital file sold for $69 million? Was it when you told yourself you just had to find out more about SPACs? When you realized that the nation’s hottest fund manager, Cathie Wood, who you first heard about in February, was now a household name referred to simply as Cathie? As in, “Why does Cathie own Deere and Netflix in her new space exploration ETF?”
Then you and I are most definitely late to the party—and it’s probably best not to start dancing on the tables with the others.

IT’S BUYER BEWARE for bond fund investors. Three big risks have snuck up on today’s fund shareholders, which—taken together—mean higher volatility and lower returns.
I discussed these pitfalls with Ben Johnson, director of global exchange-traded fund research at Morningstar, the Chicago investment research firm. “In recent years, the market’s standards have loosened significantly and durations have lengthened,” Johnson told me. “People are generally willing to lend money to less creditworthy borrowers for longer terms….

RAMPANT SPECULATION in parts of the market has been obvious for months. Less obvious is whether investors collectively will pay a substantial price for it. Can a reflation trade end up piercing a market bubble?
Stocks posted solid gains in February—with the S&P 500 touching a record high on Feb. 12—but the final week felt a bit precarious, even if the benchmark ended the month down just 3.5% from that high. (Insert your favorite adjective to describe the correction so far: normal,

WELCOME TO OUR inaugural monthly personal-finance update. I was all ready to write about January’s robust stock market—and then the GameStop saga garnered national headlines, with short-selling hedge funds losing billions, everyday investors crowing and politicians piping up. Some bashed Wall Street for allegedly thwarting retail traders, while others worried about the financial system’s stability.
Amid the tumult, the S&P 500 fell into the red for the year-to-date, despite blockbuster earnings reports from two of the market’s longtime leaders,

MY OLD INVESTING self was like the guy in the meme who twists around to ogle a woman in a red dress, while his girlfriend looks ready to break his neck.
Just as jumping from one relationship to another introduces new risks, the same holds true for jumping in and out of different investments. For me—and for most people, I’d wager—investing in individual stocks and narrowly focused funds involves a certain amount of trading,

IT ISN’T EVERY personal finance book that includes a chapter entitled, “You Will Lose Money.” But that’s Ben Carlson laying down the harsh truth for inexperienced investors in his self-published fourth book, Everything You Need to Know About Saving for Retirement.
I interviewed Carlson recently because I find his A Wealth of Common Sense blog among the most useful for a small investor like me—someone with an intermediate level of market knowledge.

WELL, IT SOUNDED good. Academic theory and nearly a century of investment experience supported the argument that small-cap value is the most promising market segment over the long term, since it offers the superior risk-adjusted return that comes with owning both neglected small-cap shares and shunned value stocks.
But as legendary economist John Maynard Keynes observed, in the long run, we are all dead. In my 36-year investment career, both small- and large-cap value have lagged large-cap growth.

THEY WERE GURUS and gunslingers. Market mavens. Stock pickers and sector bettors. Over in the bond market, there was even a king. They were star fund managers—but most were shooting stars, destined to crash.
Yes, we’ve had managers like Peter Lynch, Will Danoff and Bill Gross, whose long-term returns did indeed beat the indexes. But for every winner like them, there have been—statistically speaking—seven who failed. Between 74% and 93% of funds in a variety of broad categories—small-cap,

TARGET-DATE FUNDS offer one-stop investment shopping. But what exactly are you buying?
These funds are intended to offer a diversified portfolio that’ll carry you through to retirement and beyond. Each follows a “glide path,” reducing its stock exposure over time. But the substantial differences among the funds means that some roads will be rockier than others, so it’s important to understand what you’re getting.
For instance, young investors in 2060 target-date funds—like my children—will have 90% or more in stocks.

YEARS AGO, WHEN THE kids were teenagers, single Dad here was cooking dinner. You guessed it, hot dogs.
I skillfully picked one up from the hot pan with my fingers and tossed it in a bun.
When my daughter began to imitate me, I nearly shrieked. She lacked my years of experience in gauging exactly how hot the sides of the dog would be, how far from the splattering grease I needed to position my fingers,

“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.

I’VE BEEN WRONG many times, as I’ve noted in earlier articles. But the past few months have made me—and maybe you—look like an investment genius.
I’ve had some nice “wins” since March 13, when I started buying the stock market dip. Does that make me brilliant? Of course not. Was I “right”? That depends on how I made my decisions. A quick profit doesn’t necessarily mean I made the right call.
Too often, when we analyze our investment moves,

CHINA’S CRUSHING of Hong Kong’s independence is just the latest aggressive move to raise my hackles—and make me question the wisdom of investing there, as well as in much of Asia. Which puts me in a tough position, since the Pacific Rim represents nearly 70% of the emerging markets indexes.
I hear you saying that politics shouldn’t factor into investment decisions. True, if returns are your only consideration, political and moral issues don’t belong in the conversation.

“TAKE FIVE” IS JAZZ great Dave Brubeck’s most popular and enduring number—but it’s also a darn good piece of decision-making advice.
A few weeks ago, my son was struggling with exams and papers ahead of his graduation from the University of Pennsylvania. Though he would go on to graduate magna cum laude, he was in a dark place. I said, “Imagine a time two weeks from now when you’re back home and can relax,

DID I GET SPOOKED? Or did I respond rationally? Possibly a little of both. After buying as the stock market plunged from its Feb. 19 peak, I sold shares into the rally from the March 23 low, though my portfolio remains strongly tilted toward stocks.
Waving the caution flag may even turn out to be the right call over the short term. Still, most of us—me included—shouldn’t be in the business of making market calls,

HERE IS WHY I DON’T trade, and don’t make big market bets, and why you shouldn’t, either.
Headlines last Monday at 6 a.m.: Nation Braces for Brutal Week, At Least a Fourth of U.S. Economy Goes Idle, British Prime Minister Boris Johnson Hospitalized.
Headline at 9:30 a.m.: Dow Surges as Tech Stocks Rally
I got spooked last weekend. It was epic. I was actually scared after days of hearing about the bungled federal response to the pandemic and about states fighting over medical supplies.

I’M DETERMINED NOT to repeat my mistakes of 2008-09. I was ruined by that financial crisis or, more accurately, I let it ruin me. I led into it with my chin.
I’ll spare you the details of my personal situation in the years leading up to the crash, but the upshot is I was egotistical, financially reckless and looking for a big score. As the crisis unfolded, I piled risk upon risk, mistake upon mistake.

LAST FRIDAY AT 7:16 A.M., I sent an email to HumbleDollar’s editor. We were discussing what this blog post should be about. This was before I got the news alert that S&P 500 futures were up bigtime, following the historic selloff the day before.
I concluded my email to Jonathan this way: “The market never gives you the big fat target you want. I’ve got great plans if the market behaves today like it did yesterday,

I’M STRUCK BY HOW calmly I’m taking this fast-and-furious coronavirus selloff. The human toll is getting worse every day, and the economic and other consequences could be catastrophic. But I’m not tempted to sell. I’m also not in a hurry to buy the dip, though admittedly my pulse quickened Friday afternoon when the market was down 15% from its Feb. 19 high.
There’s absolutely no way to know what will happen first: Whether I’ll regret not buying the dip or Dustin Hoffman will knock on my door in a biohazard suit.

I CAN TELL I’M a little squishy on my investment plan, because the thought of making a public New Year’s resolution fills me with all the dread of a reluctant groom.
As I linger outside my metaphorical church, I imagine my bride wants to shackle me to allocation targets and rebalancing rules that I announce to the whole congregation. My aversion to such commitments competes with my realization that—without them—I’ll be back to my free-wandering self.

A BURNING QUESTION has only gotten hotter as foreign stocks have lagged disastrously over the past dozen years: Should any of your stock market money be overseas?
Most experts say “yes.” Vanguard Group, for one, recommends investors allocate 40% of their stock investments to foreign markets. In fact, some pundits have smugly derided what they call the “home bias” of those U.S. investors who avoid or underweight foreign stocks. Those stocks currently make up about 45% of world market capitalization.

BAD INVESTMENT AND personal finance books get cranked out every year with catchy titles and celebrity authors. But skip such pulp fiction. Instead, give yourself or someone you know the gift of timeless investment wisdom with one—or all—of the following classics. 

Why? Perhaps you’ve heard that indexing is the way to go. Or that you should insist on low-cost funds. Or that stocks are the best asset class, and should be bought and held.

BALANCED FUNDS ARE a great first investment for those with a moderate risk tolerance. But which fund? Vanguard Balanced Index Fund Admiral Shares, with its incredibly low 0.07% expense ratio, $3,000 investment minimum and mix of 60% stocks and 40% bonds, is the standard by which all balanced funds should be judged—and it’s likely your best choice.
But if it isn’t one of your 401(k) options, chances are you’ll find the plan includes one or more of the other five funds in the accompanying chart.

MICHAEL BURRY WAITED years to be rewarded for his bet against subprime mortgages. Actor Christian Bale, in the movie version of Michael Lewis’s book, The Big Short, portrays Burry curled up in the fetal position on the floor of his office. When the financial crisis finally hit in 2008, he made $100 million.
I’m no Michael Burry and the chance I’ll ever see $100 million is about 100 million to one.

A LOT OF INVESTORS have spent a lot of time, hope and energy trying to emulate guru portfolios. I’m no different.
When I read Unconventional Success by Yale University’s chief investment officer, David Swensen, I felt like The Truth was being revealed. Here was the wisdom of the country’s top endowment manager with, at the time of publication, a benchmark-crushing 20-year record of 16.1% a year. This wasn’t an attention-seeking fund manager or TV host,

INDEX DESIGNERS FTSE Russell and MSCI are jumping on China’s A train this year—and index-fund investors should watch out. There’s a $6 trillion wild-and-woolly domestic Chinese stock market slowly chugging your way, whether you like it or not. Yes, it may bring riches—and it’ll definitely bring huge risks.
In fact, your emerging markets index fund may already have 34% in Chinese stocks, and it could exceed 50% in years to come. Sound unnerving? For those with a position in an emerging markets index fund—or are considering one—good alternatives are hard to come by.

THE SUDDEN BULL MOVE of 1991 enraged me. Mr. Market waved the red flag and I charged. Forget balanced, S&P 500 and large-cap value funds. I was gonna get me one of them aggressive funds that goes up 99% in a year.
I greedily and resentfully scanned the list of 1991’s 10 top-performing mutual funds. Why didn’t I own any of them? Oppenheimer Global Biotech was up 121%. Vanguard Windsor II, which I owned around that time,

LESS IS MORE when it comes to investing. Less effort. Fewer transactions. Lower costs. Less worry. Lower taxes. Less ego. Less clickbait.
We’re wired to try hard. To do well. Especially if you’ve had some success in your life, and built up some money to invest, you probably got there by working harder than others. Problem is, the same rule doesn’t apply to investing. There is no A for effort. But there is an F for frenetic.

DAD GAVE ME $1,000 in the mid-1980s on condition I start an IRA and make my own annual contributions, which I did at least some of the time. He recommended doing business with Vanguard Group, which was headquartered near my hometown of Wayne, Pennsylvania.
I can remember reading about the STAR fund, Windsor II, Wellington, Wellesley, the gold and precious metals fund, and the very highly regarded health care and energy funds.