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Future Shock

Jonathan Clements  |  November 7, 2020

WHY DO WE MAKE spending decisions that we later regret? Yes, we tend to live for today and give scant thought to tomorrow. But it’s more complicated than that—which brings me to four insights from psychology.
I find the insights below fascinating, in part because they describe how I behave with uncanny accuracy. Many readers, I suspect, will also catch a glimpse of their own behavior:
Moral licensing. If we do something good—exercise,

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Try Not to Slip

Dennis Friedman  |  November 6, 2020

THE FLU SEASON was approaching, so I decided to schedule an appointment with my medical provider for a flu shot. The next morning, I received an email from my prescription drug plan informing me that it was processing a payment for $30.80.
My immediate thought: “How could my medical provider charge me for a flu shot that I haven’t yet received? And why aren’t they billing Medicare?” Medicare provides a free flu shot to every enrollee.

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Factored In?

William Ehart  |  November 5, 2020

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.

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Saving Happiness

Jiab Wasserman  |  November 4, 2020

RESEARCHERS HAVE spent decades probing the connection between money and happiness. For instance, a much-cited 2010 study by academics Daniel Kahneman and Angus Deaton found that folks tend to feel happier the more money they make—but only up to a point, which they estimated to be about $75,000 a year.
But using only income to measure the link between money and happiness is incomplete. Another study, entitled “How Your Bank Balance Buys Happiness,” analyzed the connection to people’s “cash on hand.” The researchers found that having more money in checking and savings accounts was associated with higher levels of life satisfaction.

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For Your Benefit

Richard Quinn  |  November 3, 2020

ONE OF MY SONS has to choose health insurance for the year ahead—and his employer provided a 95-page pamphlet. Let’s face it: If you need that amount of information to make a choice, something is wrong.
The pamphlet describes three medical options, plus dental options and vision coverage. Two options get you an employer health savings account contribution—or it is a health reimbursement account? There are three levels of deductibles and coinsurance and, of course,

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Emerging Concerns

Adam M. Grossman  |  November 1, 2020

AT 82 YEARS OLD, investment manager Jeremy Grantham has seen his fair share of market cycles. And as a U.K. native living in the U.S., he has the interesting perspective of an outsider. In a recent interview, Grantham shared his unvarnished view of the U.S. market. “American capitalism has become fat and happy,” he said. The U.S. stock market is in a bubble that will likely burst within “weeks or months.”
I don’t believe anything should be judged over the span of a single week.

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Scary Stuff

Jonathan Clements  |  October 31, 2020

IT’S HALLOWEEN, but not much frightens me—at least financially. My portfolio is broadly diversified, I have the insurance I need, and I have enough set aside for retirement. The highly improbable could happen, but I’m not going to lose sleep over that.
Still, even for those of us in decent financial shape, I see two key reasons for concern. We have no control over either—which is why they might seem scary—but we can take steps to limit the potential fallout.

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Yesterday Once More

Robin Powell  |  October 30, 2020

YOU’RE SITTING in your favorite restaurant, feeling famished. The waiter arrives and reads a long list of mouth-watering specials. Yet the moment he walks away, all you can recall is the last item on the list.
Welcome to the recency effect.
In psychology, the recency effect refers to the human tendency, when asked to remember a long list of things, to have sharper recall of the final items. No doubt you’ve experienced this at a party.

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Still Here

Kristine Hayes  |  October 29, 2020

I WAS AGE 31 when I started my job as a department manager at a small college in Portland, Oregon. Back then, it wasn’t unusual for people to mistake me for one of the students.
Now I’m 53 and people assume I’m the mother of one of the students. I’ve been working at the college for more than 22 years, which means I’ve been there longer than most of the current students have been alive.

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Margin of Safety

Richard Connor  |  October 28, 2020

MANY FINANCIAL planners say they “stress test” portfolios. That sounds like a good idea, but it isn’t well defined. I decided to do some research to see how I could apply the notion to the investments owned by my wife and me.
I came across a number of useful articles. Investopedia, one of my go-to resources for all things financial, provides this definition: “Stress testing is a computer simulation technique used to test the resilience of institutions and investment portfolios against possible future financial situations.” Forbes,

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Doing Good

Joe Kesler  |  October 27, 2020

DANIEL SUELO is one of the most interesting characters I’ve ever met. At dinner with him and some friends almost a decade ago, I spent the evening trying to understand his view of money—or, to be more accurate, his refusal to believe in money at all.
Suelo was in Montana to talk about a book that had been written about him, The Man Who Quit Money. As the title implies, Suelo—a well-educated and articulate man—made a decision in 2000 to stop using money.

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Money for Later

David Powell  |  October 26, 2020

IF A SALESPERSON had tried to get me to sink my hard-earned money into an investment that’s illiquid or issued by an insurance company, I would have shut down in a New York minute—until now.
My spouse and I recently became owners of a deferred income annuity (DIA), with plans to put perhaps 15% of our savings into these products. Also known as longevity insurance, a DIA involves plunking down money today in return for regular monthly income starting at a future date.

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Look Under the Hood

Adam M. Grossman  |  October 25, 2020

TESLA JUST REPORTED financial results for its most recent quarter. For the fifth time in a row, it announced a profit. This was notable for a few reasons. Among them: Tesla’s increasingly strong performance again raises the question of why it’s been excluded from the S&P 500-stock index.
By way of background, the S&P 500 includes almost all of the 500 most valuable publicly traded companies in the U.S. But Tesla’s stock isn’t included,

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Irksome Adversaries

Jonathan Clements  |  October 24, 2020

WE FIGHT ABOUT money all the time. Politicians argue over how to spend the stuff and who should pay. Couples argue about why there isn’t enough and who’s to blame. And nerdy folks—that would include me—bicker over which investments to buy, when to claim Social Security, the virtues of homeownership and countless other topics.
These debates may amuse others, but I often find them frustrating—because they’re never just about facts and logic. Instead, far too many people come to these arguments with baggage that borders on cargo.

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The Taxman Cometh

James McGlynn  |  October 23, 2020

LATE LAST YEAR, Congress voted to kill off the so-called stretch IRA, which had allowed those who inherited retirement accounts to draw them down slowly over their lifetime. Many folks were surprised by the stretch IRA’s demise, but they shouldn’t have been.
When a tax break or some other government provision benefits only a few folks, Congress often changes the law. Think back to 2015. That year, Congress eliminated the ability to “file and suspend” Social Security—another strategy that tended to be exploited only by a privileged few.

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