THERE ARE MANY who claim to speak with authority on Social Security. I am not one of them. But I’m nothing if not curious. I recently set about testing some notions I have heard with regard to Social Security retirement benefits. A family member had asked for help understanding her Social Security statement, so I had some real numbers to work with. The statement predicted that her monthly benefits would be as follows, depending on when she begins benefits:
$1,907 at age 62.
WHEN MARKETS GO crazy, financial writers feel compelled to dust off the keyboard and cook up profound insights. But I am writing this at 5 a.m., while still ingesting my first cup of coffee, so I’m setting the bar a little lower. Here are 13 modest observations following yesterday’s 4.1% plunge by the S&P 500:
1. I don’t know. You don’t know. Nobody knows. The market turmoil of the past six trading days feels like a sea change after 2017’s remarkable calm.
I FEAR I AM growing wealthy at my children’s expense. My investing life began in the late 1980s. Yes, there have been stock market bumps since then, notably the 2000-02 and 2007-09 market crashes, and even a minor hiccup over the past week. But if you look at the broad trend, it’s been three decades of rising stock market valuations.
From year-end 1987 to year-end 2017, the S&P 500’s price-earnings multiple climbed from 13.8 to 24.6,
I HAVE A WIFE, two children, two dogs, and the need for three bedrooms and two bathrooms. In March 2015, I purchased a four bedroom, 3½ bath, 3,000-square-foot house in a nice neighborhood with quality public schools.
The fourth bedroom was largely unnecessary but, like many people, we occasionally get visitors and feel it’s nice to have an extra bedroom for them, instead of spending money on a hotel room. This is the story of how that fourth bedroom cost me more than $121,500,
A YOUNG GRADUATE student named Harry Markowitz wrote a paper in 1952 that sought to prove, mathematically, the old maxim “don’t put all your eggs in one basket.” Through his work, Markowitz taught investors how to diversify their investments effectively, something that was not well understood at the time.
For instance, he explained that the number of stocks you hold is far less important than the number of types of stocks you own.
IN COLLEGE, I WAS the kid who swore he would never get married and never have children. A year later, I was engaged. Two years later, I was married. Three years later, I had a newborn.
And three decades later, I’m 55 years old, with a daughter who will turn 30 later this year.
I have no regrets about having children so young. Far from it. It does mean I missed out on the romancing,
I FREQUENTLY field inquiries from people who know they ought to get a will. Others have wills, but may need to revise them because they’ve moved to a new state, entered into a marriage or ended one. But either way, most folks—in my experience—never get beyond that simple first step.
And those who do often overlook an additional step that’s almost as necessary: drawing up a “letter of final instructions” that provides their heirs with an informal personal financial inventory.
A FEW YEARS BACK, a fellow named Wylie Tollette faced uncomfortable questions as he sat before the public oversight committee of the California Public Employees Retirement System (CalPERS). Tollette, the pension fund’s Chief Operating Investment Officer, was responsible for updating the committee on the status of its massive $350 billion portfolio.
But when a committee member asked about the fees CalPERS was paying to a particular group of investment managers, Tollette did not have a ready answer.
I SPENT THE FIRST three years of my college career pursuing a degree in journalism. Any time I submitted an assignment that had even a hint of my own opinion inserted into it, my advisor would sternly remind me to report “just the facts and only the facts.”
These days, it’s increasingly difficult to find a piece of journalism that doesn’t have a personal edge to it. Between fake news and political propaganda,
I LOVE THE PRICE war among index-fund providers, because it puts pressure on all money managers to lower fees. But I don’t think investors should pay much heed to differences in annual expenses that amount to just 0.01% or 0.02% a year, equal to 1 or 2 cents for every $100 invested—and they certainly shouldn’t switch funds for those potential cost savings.
To check I wasn’t missing something, I set out to do apples-to-apples comparisons among index funds in four highly competitively segments of the indexing market: large-cap U.S.
EACH SPRING, I watch a fresh crop of college graduates transition from the world of fulltime academics to the world of fulltime employment. Eager to begin “adulting,” many of them focus on the salaries offered by their employer-of-choice and give little consideration to the various benefits that supplement that salary.
That’s a mistake. As someone who’s been employed fulltime for the last 26 years, I’ve learned the importance of performing a cost-benefit analysis on the perks offered by various employers.
THE STOCK MARKET had a great 2017, gaining more than 20%. But was that kind of gain justified—or should it worry us, especially after the market had already tripled in recent years? I think it’s useful to understand the range of viewpoints, so we’re better prepared for 2018 and beyond. Here are the bull and bear cases:
Bull Case. As measured by the S&P 500 index, the U.S. market gained nearly 22% last year.
MY FIRST ENCOUNTER with Dave Ramsey was in 2010, when I stumbled across a radio broadcast featuring one of his recorded presentations. His style was funny and engaging, and I thought he might be helpful in teaching my kids about money.
I bought each of them his book The Total Money Makeover and gave them reading assignments, which were followed by group discussions in the weeks that followed. Later, I also attended his local Financial Peace University (FPU) classes with daughter Karah.
WE CAN THINK of investing as an argument between two competing opinions: What we think an investment ought to be worth—and what the market currently says. It’s an argument the market usually wins.
While we can be highly confident what, say, a certificate of deposit or a Treasury note is worth, it’s much harder to put a value on stocks, gold, high-yield junk bonds and other riskier investments (and, I’d argue, all but impossible with bitcoin).
AT SEVEN O’CLOCK this morning, as my wife and I tried in vain to wake our children for school, we heard a similar response as we went from room to room: “My head hurts.” Nobody wanted to get up.
I have to say, I don’t blame them. It’s the middle of winter here in Boston. The sky is gray and the thermometer seems stuck below zero. It can be hard for anyone to feel motivated,