THE 19TH CENTURY feud between the Hatfields and the McCoys doesn’t hold a candle to the debate between supporters of index funds and supporters of active management.
Those in the index fund camp cite decades of data—going back to the 1930s—to support their view that active management is a fool’s errand. In fact, Standard & Poor’s regularly publishes a study it calls SPIVA, short for S&P Index Versus Active. Each time, analysts there reach the same conclusion—that it’s exceedingly difficult for an actively managed fund to beat its benchmark.

I SUGGESTED a thought experiment in my last blog post—one in which the stock market shut down for six months at the start of the pandemic. I believe it helps explain why financial markets recovered with such a vengeance.
Today, I take a different tack, one based on financial theory. It’s easy to forget that stocks are not pieces of paper (remember stock certificates?) or ticker symbols on a computer screen. Rather, they represent a claim on company profits,

I’VE BEEN READING UP on stock buybacks because I want to know how they’ll impact my investments. As best I can gather, there are two schools of thought: Those who love them—and those who hate them.
Those who love them point to the reduction in the number of shares, which means the value of those that remain should increase. Earnings per share (EPS) is net income divided by the number of shares, and EPS increases when shares decrease.

IN A FEW YEARS, my wife and I will have additional income, thanks to both Social Security benefits and required minimum distributions from our IRAs. Our thought: Any money we don’t spend from these two income streams we’ll invest for the long term. We wanted to keep this money separate from our other investments, so we opened a new joint brokerage account at Vanguard Group.
We decided to invest our extra cash in the Vanguard Total World Stock ETF (symbol: VT).

IN MID-MARCH 2020, a friend and I were anxiously discussing the financial ramifications of the evolving pandemic. I posited the following question to him: Suppose the stock exchanges announced that they’d be shutting down for six months, starting the day after tomorrow. What do you think would happen to the stock market on its final trading day before closing?
Answering my own rhetorical question, I said it wouldn’t surprise me if markets paradoxically staged a huge rally—upward of 20%—the day before shutting down.

YOU CAN ADD ANOTHER item to the list of things in short supply: Up here in Maine, used boats are hard to find.
“You can’t buy a house, a car or a boat this summer,” said Sean, manager of the local lobster dock in Bremen, Maine. Luckily, you can still buy lobsters from Sean, though they’re mighty pricey.
Every afternoon, scuffed-up boats with names like Chomper and Sandollar glide up to the dock to winch their catch up to Sean’s lobster tanks.

SERIES I SAVINGS bonds have lately garnered a lot of investor interest because—if you buy during the current six-month purchase period—your initial annualized interest rate will be 3.54%. You’ll only earn that for the first six months. Thereafter, your yield will match the inflation rate. For bonds purchased between May and October, there’s no additional interest paid, over and above the inflation rate.
Still, the higher inflation climbs, the more interest your I bonds will earn.

FOUR OF CANADA’S five biggest banks recently announced they’re going to raise service charges, even though they continue to rake in billions in profits. Taking advantage of people, when they’re struggling to make ends meet during the pandemic, is beyond comprehension—and it’s in direct conflict with my values.
In their defense, the banks stated that the increases were made after careful consideration and that other options were available to customers. This is classic bank-speak.

MY EMPLOYER’S 401(K) plan is great, with a generous matching contribution and lots of investment options. Those looking for even more choice can open a brokerage subaccount within the 401(k), allowing them to buy thousands of securities.
I’ve stayed away from the brokerage option, in part because I feared the extra choice might affect my investment discipline. But my growing anxiety about inflation forced me to reconsider.
I want a predictable cash reserve to cover my expenses for the next 10 years,

OFTEN WRONG, never in doubt. That describes many economic prognosticators. A rational response: Treat their predictions like hazardous waste—handle with caution, or better yet, don’t handle at all.
Among the countless examples, consider newsletter writer Harry Dent. Armed with a Harvard MBA, Dent makes market predictions that are fantastic and frequently wrong. In late April and more recently in June, he predicted that the market would crash, adding that if he’s wrong, he would quit his job.

THOSE WHO FOLLOW financial news know that mid-to-late July is the middle of earnings season. While I enjoy learning how companies are performing, I also get agitated by the way the media reports earnings information.
Having spent more than 20 years in corporate finance, I know the rigor involved in preparing earnings reports. Company accountants usually take one-to-two weeks to compile financial results, which then are reviewed by external auditors. In addition, investor relations,

LAST MONTH, the Federal Reserve released the results of its latest stress tests of major financial institutions. As an investor in Wells Fargo, I took special interest in the Fed’s findings. Why? If Wells Fargo passed the Fed’s stress test, it would be allowed to raise its dividend, which currently stands at a paltry 10 cents a share, amounting to a dividend yield of just 0.9%.
I’m fully aware that my obsession with stock dividends is less than rational.

IF YOU THINK BITCOIN or any other cryptocurrency will one day be used as readily as dollars and cents, give some thought to this year’s volatility. Suppose you were using your bitcoin stash to pay your $2,000 monthly mortgage payment. Between April and today, the effective cost of your mortgage would have doubled—because bitcoin’s value has been pretty much cut in half.
Now, if you were paid in bitcoin and your mortgage payment was fixed at some value specified in bitcoin,

MY HUSBAND AND I have been selecting investments together for years—and we’re still married. How have we gotten along for decades without killing each other?
Our investment discussions revolve mostly around individual stocks and bonds. They constitute the bulk of our investments and take up the bulk of our time. We own everything from small amounts of risky stocks like Immutep (symbol: IMMP) to blue chips like Johnson & Johnson (JNJ) and 3M (MMM).

YOU MIGHT RECALL Malcolm in the Middle, a turn-of-the-century TV sitcom in which the middle child often feels ignored. That’s kind of what goes on with midsized stocks.
Large-capitalization growth shares and small-cap value stocks seem to get all the attention these days. The former feature the FAAMG companies (Facebook, Apple, Amazon, Microsoft and Google) and other 2020 winners, while the latter are the darling of investors who embrace academic research showing strong long-term outperformance by small-cap value shares.