THIS MONTH saw the publication of a remarkable biography: The Man Who Solved the Market chronicles the life and career of hedge fund manager James Simons. Over the past 31 years, Simons’s Medallion Fund has clocked average returns of 66% per year. Even after Medallion’s fees—which are the highest in the industry—investors took home average returns of 39% a year.
By way of comparison, the U.S. stock market historically has returned about 10% a year.
WHEN WE THINK about portfolio building, we tend to think first about stocks. They’re our engine of investment growth—and the source of endless anxiety. Indeed, to make stock market investing palatable, we take all kinds of precautionary measures, including diversifying broadly, adding bonds, throwing in cash, purchasing gold and goodness knows what else.
But maybe we have this all wrong. Perhaps, instead, we should start with cash: how much we currently have in safe,
A WRITER RECENTLY asked my opinion of gig economy jobs and how they could benefit retirees looking for extra income. I looked up the term to be sure my understanding was correct. It was—except we used to call the jobs “temporaries,” “part-time,” “project work” or “consulting.” As I told the writer, a gig economy job sounds pretty good for us retirees who want to keep active or supplement our income, especially if it doesn’t involve being a crossing guard.
IT BAFFLES ME that people often favor stock-picking over index funds—and yet they fail to measure their portfolio’s performance against a proper benchmark. I’m not talking about those who buy a few individual stocks for entertainment or education. For them, it’s a worthwhile pastime and the stakes are low.
But there are others who ignore the evidence and arguments against active management, and devote serious money to picking stocks and timing the market in hopes they’ll earn market-beating returns.
MY GREAT-UNCLE, Jerry Kelly, was an American pilot in the Second World War. On Oct. 20, 1944, he was flying a close-support mission over Germany when his P-47 Thunderbolt was hit by anti-aircraft fire. After he radioed that he had smoke in the cockpit, his plane began losing altitude and was last seen disappearing into a cloud. Jerry was 20 years old.
More than 71 years later, a UPS carrier delivered a blue box to my home.
I HAVEN’T BEEN feeling myself lately. Until now, I didn’t understand what had brought this on. You see, I have this different attitude toward money—and it’s changed the way I behave.
Before, it seemed like money was always on my mind. I used to love to read Barron’s every week. Now, I just pick it up in front of my house and toss it in the garage, where it joins 20 other unread copies.
I’M JUST A FEW years from age 65—and being eligible for Medicare. One of my concerns: making a mistake that could trigger penalties.
If you file for Social Security before age 65, you’ll be automatically enrolled in Medicare Part A and B. What if you’re still working at 65? Ask your human resources department for advice. Your coverage at work will dictate whether you should file for Medicare.
If you aren’t covered by an employer’s health insurance plan and you aren’t yet collecting Social Security benefits,
WHEN STEWART MOTT died in 2008, his obituary in The New York Times described him as offbeat. That’s probably a fair description. Mott’s father, Charles Mott, had been one of the founding shareholders of General Motors. As a result, the younger Mott didn’t need to work and instead pursued other passions.
Among his many activities, Mott enjoyed political activism, but he wasn’t a strict partisan. To underscore this, he once brought both a live elephant and two donkeys to a fundraiser.
U.S. STOCKS have been at nosebleed valuations for much of the past three decades—or so say the yardsticks used to measure stock market value. But what if the problem isn’t the lofty price of stocks, but rather the yardsticks we’re comparing them against?
When we try to gauge whether shares are pricey or cheap, we typically look at the dividends that companies pay, the profits they generate and the assets they own. Yet these three crucial numbers have all undergone fundamental changes in recent decades—and the result is that stocks appear more expensive than they should.
LET’S SAY YOU come into some extra money. Do you take the family on a great vacation or do you remodel that room you try to stop guests from seeing? To come to a decision, you might weigh the fun of the vacation against the pride of the redone room.
It’s at this point that some intrepid economist, risking his or her life-of-the-party reputation, would pop up and say, “You’re not doing it right.”
Economics is the study of choice—and the big engine for choosing is cost-benefit analysis.
SAVE FIRST for the kids’ college or for your own retirement? Pundits generally recommend that parents put themselves first. But I’d argue the question demands a more nuanced answer. The tax code offers numerous tax-savings opportunities for families with dependent children—and those tax breaks shouldn’t be overlooked.
To be sure, for cash-strapped parents, the top two financial priorities should be building up an emergency fund and putting at least enough in their 401(k) or 403(b) to capture the full employer match.
“FINANCIAL independence” has become a catchphrase over the past decade—in part because it’s the FI in FIRE, short for financial independence/retire early, a movement that’s captured the imagination of some and earned scorn from others.
The strategies touted by the financial independence movement are simple enough: Earn a large salary. Live frugally. Invest a substantial percentage of your income in low-cost mutual funds. The objective: Accumulate savings equal to at least 25 times your total annual spending.
MANY BELIEVE we’ve raised a bunch of financial illiterates. If people were better educated about personal finance, the argument goes, they’d make smarter money decisions.
North Carolina this year became the 20th state to require high schoolers to take a financial literacy class. Its Lieutenant Governor, Dan Forest, said the new law would “ensure future students, prior to graduating high school, will be more financially literate and economically sound in their decision making as adults.”
But many aren’t sold on the idea that a personal finance class in high school is going to make much of a difference.
WHAT WERE FOLKS reading last month? Here are the seven most popular articles that we published in October:
Better than Timing. Tempted to guess the stock market’s direction and invest accordingly? Robin Powell suggests five alternatives—none of which requires a crystal ball.
Happiness Formula. There’s a connection between money and happiness—but it’s a complicated one, says Adam Grossman. He offers three insights from the research.
It’ll Cost You.
IN WINTER 2012, I experienced what every traveler dreads: a lost bag. Stranded without so much as a toothbrush, I had to replace everything—and fast. At first, this seemed like a pain. But in the end, I came to see it as a blessing. Why? Replacing everything—from head to toe, including the toothbrush—became an unexpected opportunity for a fresh start.
To be sure, all I’m talking about here are clothes and toiletries. Still, the experience made me realize that,