Time Will Tell

Jonathan Clements  |  December 24, 2016

IF WE COULD VIEW today from 10 years hence, our behavior—financial and otherwise—would be entirely different. We wouldn’t flail around so much in the muck of everyday life, fretting and fighting about nonsense. Instead, we’d focus more on issues that matter to our long-term wellbeing.
Problem is, it seems this sense of perspective can’t be taught by schools and colleges. Instead, it’s learned only through experience. It would be wonderful if we could be wise at age 20,

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Sitting in the Bleachers

Jonathan Clements  |  December 21, 2016

I RARELY MAKE significant changes to my portfolio, but I still love to watch the financial markets. They’re great theater—and, if you can resist the urge to trade, free entertainment. Here are five random observations from the cheap seats:
First, don’t let your political views guide your investment strategy. The stock market has rallied modestly since Trump’s election, horrifying Clinton supporters who fear for the country’s future. But remember, any time you swap stocks for bonds,

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Worldly Possessions

Jonathan Clements  |  December 17, 2016

HOW MUCH ARE WE ALL WORTH? The Credit Suisse Research Institute recently published its 2016 Global Wealth Report, as well as the accompanying Global Wealth Databook. It’s a tricky undertaking, given the difficulty of getting accurate data, even for developed countries. Still, the results are intriguing:

U.S. families own 33.2% of the world’s $256 trillion net worth. This figure combines financial assets (think stocks and bonds) and real assets (principally housing), with household debts then subtracted.

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Really Useful Engine

Jonathan Clements  |  December 14, 2016

MY DAYS ARE consumed with a hodgepodge of activities—writing books, speeches, radio interviews, my newsletter, blogging and more. What ties all these activities together? More than anything, I want to be part of the conversation.
When I first entered the work world more than three decades ago, I imagined that—once my finances allowed—I would happily retire to a rural area and retreat from worldly hassles. But now that I can afford to retire, I’ve come to realize it’s the last thing I want: The quiet.

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Your Risk-Free Rate

Jonathan Clements  |  December 10, 2016

WHEN DECIDING whether it’s worth taking an investment risk, your starting point should be the so-called risk-free rate. That’s the return you can earn by taking little or no risk. Got your eye on an investment that might perform better? You need to decide whether the potential extra return, relative to the risk-free rate, is worth the added danger involved.
When experts talk about the risk-free rate, they usually point to some sort of Treasury security.

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Fast Or Slow?

Jonathan Clements  |  December 7, 2016

I HAD AN EMAIL from a reader today, asking whether—”with the markets a bit overvalued lately”—he should invest his cash in the stock market as a lump sum or average in over time. It’s a question that almost compels you to start guessing the market’s direction—something none of us can do. What’s the alternative? Think about risk.
My response: “It depends on how much you currently have saved vs. how much more you expect to save between now and retirement.

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Selling Shovels

Jonathan Clements  |  December 3, 2016

REAL ESTATE seminars. Initial public stock offerings. International lotteries. Hedge funds. Franchising opportunities. Penny stocks. Multi-level marketing companies.
This is the American lexicon of easy wealth—and yet the only people who seem to end up rich are those who peddle this nonsense. It’s the story of the California gold rush: Riches accrued not to the miners, but to those who sold them shovels, picks, pans and other supplies.
To be sure, hollow promises and empty hype are rife in other areas of our life.

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Stuck In The Middle With You

Jonathan Clements  |  November 28, 2016

SINCE EARLY OCTOBER, I’ve been selling signed copies of my new book. As the orders have rolled into my P.O. box, I have noticed an interesting pattern: While there’s some representation from the two Coasts and the South, probably a majority of the orders have come from the middle of the country.
I don’t believe this is happenstance. I hew to a no-nonsense financial philosophy–spend thoughtfully, save diligently, diversify broadly, hold down investment costs,

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Roughly Speaking

Jonathan Clements  |  November 26, 2016

PORTFOLIO MANAGERS and financial advisors are apt to depict money management as rigorously analytical, and sometimes even as a science. Maybe that’s inevitable in an endeavor where almost every decision ends up with a number, whether it’s the amount of life insurance to buy, the percentage allocation to emerging markets or the age at which you should claim Social Security.
But just because the answer has precision doesn’t mean this is a precise business.

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Don’t Read This

Jonathan Clements  |  November 18, 2016

THE MARKET for intelligent financial writing is, alas, surprisingly small. Why? I believe there are three culprits.
First, many of us don’t care enough about our future selves. Sure, we care somewhat—but not so much that we’ll spend less today, let alone educate ourselves about how to prepare for retirement and other distant goals. Just check out the most popular personal-finance blogs. They focus on topics like coupons, credit cards and juggling debt. Most of us,

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Lemons Into Lemonade

Jonathan Clements  |  November 16, 2016

AROUND THIS TIME OF YEAR, financial advisors and the media start talking about taking tax losses. The notion: You sell underwater investments in your taxable account, and then use those realized capital losses to offset realized capital gains and up to $3,000 in ordinary income.
There’s nothing wrong with taking tax losses, though I think the notion is oversold. Unless you’re an active trader or a really bad investor, you probably won’t have any losses to take.

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Two Numbers

Jonathan Clements  |  November 12, 2016

WHAT’S THE STATE of your financial health? Forget your credit score, the past year’s handsome increase in your home’s value or how your salary compares to your brother-in-law’s. In the end, financial fitness comes down to two key numbers.
First, there’s your net worth, which is the value of your assets minus your debts. There’s some debate about what should be included. The easy answer: Don’t delude yourself by counting the value of your car,

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Cloudy With a Chance of More Clouds

Jonathan Clements  |  November 9, 2016

FOR THOSE INCLINED to move in or out of the stock market based on Trump’s victory, consider this: Forecasting elections should be relatively easy. All you have to do is identify a representative sample of the U.S. population and then ask them how they’ll vote.
By contrast, forecasting the stock market is infinitely more complicated, involving a two-step process: First, you have to predict the economic and political news–and then you have to forecast how investors will react to this news.

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This Is a Test, This Is Only a Test

Jonathan Clements  |  November 9, 2016

The article below appeared in my Oct. 28 newsletter. But after the overnight global market volatility and today’s expected steep drop in U.S. share prices, I figured it was worth reposting.
THE CURRENT GRUDGING ECONOMIC RECOVERY is in its seventh year and the stock market rally is in its eighth year. Here I earn nobody’s admiration by stating the obvious: These things don’t go on forever—but nobody knows when the music will stop.

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Keep the Faith

Jonathan Clements  |  November 5, 2016

FOREIGN STOCKS have become the investment that folks love to hate—and it’s easy to understand why. In the current decade’s first six full calendar years, foreign shares trailed the S&P 500 by almost nine percentage points a year—and they’re on track to lag behind the U.S. again in 2016.
But is this recent performance a good guide to the future? Almost certainly not. Foreign stocks are far less expensive than U.S. shares, as you’ll discover at

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