MANY FOLKS CAN’T WAIT to retire. I hope to avoid it—at least in the traditional sense. I can’t imagine having endless days with no clear purpose, other than to “relax” and “have fun.” I much prefer devoting at least part of every day to work, whether it’s banging out my next column or writing my next book.
If you’re retired, this daily sense of purpose doesn’t have to generate income, but it’s sure helpful if it does.
WALL STREET HAS CHANGED remarkably during my three decades of writing and thinking about money—mostly for the better. For instance, financial advisors now earn an estimated 64% of their compensation from asset-based fees, rather than from commissions. That eliminates many of the worst conflicts-of-interest, including the incentive to churn a client’s account and sell products that pay the highest commission. Today, you also see many advisors making heavy use of index funds, a topic I discuss in my column this week.
REAL-ESTATE BROKERS COMPLAIN when I write about housing, and proclaim that there’s no better investment than a home. Insurance agents whine when I discuss insurance issues, and trumpet cash-value life insurance and tax-deferred annuities as the best things since slice bread. Financial advisors fire off fiery emails when I write about the advice business, and insist that the building blocks of financial success are stocks, bonds and an advisor’s wise counsel.
Maybe one of these groups is correct—but they can’t all be.
AS I TRY TO DRUM UP interest in the Jonathan Clements Money Guide 2015, I spoke today to theStreet.com’s Gregg Greenberg for a video interview and talked to a writer for the AARP blog.
WHAT COUNTS AS GOOD financial advice doesn’t change much from one year to the next. In 2014, you should have owned a globally diversified portfolio, kept investment costs low, avoided credit-card debt, maxed your 401(k) and avoided annuity salesmen. Ditto for 2015.
So why do folks read the business section every day, buy personal-finance books and subscribe to business magazines? There’s an entertainment aspect: We like feeling engaged with the wider world.
But there’s also a practical reason: Even if good financial advice doesn’t change much from one year to the next,
THE FUN PART–writing the book–is over. Now, it’s time to generate sales. This is the part that authors hate, which is hardly a surprise: Why would folks who spends their days staring at a screen and tapping at a keyboard be any good at standing in the middle of the road, pounding their chests and declaring their own virtue?
Fortunately, a bunch of longtime friends have saved the Jonathan Clements Money Guide 2015 from obscurity.
HERE’S ANOTHER REASON TO LOVE retirement: You get the chance to save big money by managing your annual tax bill. I recently discussed this notion with the folks at Bottom Line/Personal. For more, check out the full article.
NEAR THE PEAK of the real-estate bubble, I wrote a column about how I had fared financially with the house I then owned in New Jersey. It wasn’t the first time I argued that a home shouldn’t be considered an investment. But that 2005 column triggered the biggest reaction by far.
In addition to a deluge of scornful emails, I came across an online forum where the article was discussed. The first person who posted had read my column.
WE MIGHT OVERINDUGLE this holiday season—but we probably won’t be honest about it. For my Money Guide, I took a look at how America spends. There are two key sources: the Commerce Department and the Labor Department. The Commerce Department relies on top-down economic data, while the Labor Department surveys consumers.
It turns out that consumers aren’t entirely honest. The Commerce Department found that, in 2013, U.S. households spent an average $900 on tobacco,
IN OCTOBER, LUCINDA and I spent a week in Venice. We rented an apartment with no Wi-Fi, so every day for 30 minutes we’d settle into a café with Internet access. While my wife dealt with work issues, I’d catch up on the news, check email, see how the markets were performing and look at the Amazon rankings for my various books.
There was nothing extraordinary about this—except that I was doing it just once a day.
PAST PERFORMANCE IS NO GUARANTEE of future results—and that’s especially true once an investment goes from backwater to broad acceptance. Take real-estate investment trusts. Over the past 15 years, they have been embraced by investors, leading to great returns as folks loaded up on REITs. But that widespread acceptance was a onetime event—and returns from here will likely be more modest, especially with equity REITs yielding just 3.4%, versus almost 9% at year-end 1999.
MY STANDARD ADVICE has always been to keep roughly two-thirds of a stock portfolio in U.S. shares and a third in foreign stocks. As I see it, we invest now so we can spend later. Come retirement, most of us will spend our savings on U.S. goods and services, so it makes sense to have the bulk of our assets in dollar-denominated investments.
But I’m having second thoughts. U.S. and foreign stocks each account for roughly half of global stock-market capitalization,
U.S. STOCKS are expensive. What about foreign shares? They’ve been lackluster performers, not only in 2014, but also over longer holding periods. While the S&P 500 clocked an 8% annualized total return over the past 10 years, Morgan Stanley’s Europe, Australasia and Far East index gained just over 5%.
Foreign stocks also appear to be cheaper. Consider the stocks in Vanguard Group’s developed markets index fund and those in its S&P 500 fund. The foreign stocks are trading at 1.6 times book value (or assets minus liabilities),
GOLD HAS NEVER been an investment I’ve been comfortable with. The problem: It has no intrinsic value. Unlike a bond, it doesn’t pay interest and, unlike a stock, it doesn’t have earnings or pay a dividend. Instead, gold has value mostly because the supply is limited and because owners have faith that others will also view it as valuable.
And yet, today, I consider myself a fan — though I favor owning gold-mining stocks, rather than the metal itself. I still have no firm sense for what gold is worth.
YESTERDAY MORNING, I spoke at career day at the Philadelphia school where my daughter teaches. My two fellow panelists were a city planner and a fundraiser for a local ballet company. What did we tell the 11th grade kids? Interestingly, all three of us focused on the same themes:
You’re unlikely to have a single career. Instead, you’ll switch direction as you discover what you’re good at, the world changes around you and you grow weary of your current job. Those born in 2000 can expect to live until age 86,