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Face Plant

Adam M. Grossman  |  Mar 29, 2018

UNIVERSITY OF California finance professors Brad Barber and Terrance Odean published a research paper on investor behavior in early 2000. The results weren’t pretty. By their reckoning, individual investors lagged the overall market by an average of almost four percentage points a year. The culprit: the costs involved in trading individual stocks.
It isn’t just individuals who struggle with stock-picking. Professional money managers, on average, also trail behind the overall market. Over the past five years,

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Pouring Cold Water

Adam M. Grossman  |  Mar 20, 2018

SOMETIMES WE DON’T give kids enough credit. Last week, my first-grader reminded me of this fact. On a trip to CVS, he was looking through the drink cooler, when he asked, “What’s Smartwater?” Before I could answer, he started with his own commentary. Seeing the price tag—which was more than double that of the regular water next to it—he wondered, “Why’s it smart? It’s just water. Is it really going to make me smart?”
This made me realize something: As consumers,

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One Small Step

Jonathan Clements  |  Mar 9, 2018

IN NOVEMBER 2006, I wrote an article for The Wall Street Journal about how to get started as an investor, even if you didn’t have much money to spare. The article was read by Charlie Cutelli, a high school teacher and coach in St. Louis, Missouri.
“At the end of the article, there was a nugget about T. Rowe Price waiving the $2,500 minimum ‘if you commit to socking away at least $50 a month through an automatic investment plan’,”

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Making a Difference

Jonathan Clements  |  Mar 3, 2018

TRYING TO BEAT THE market isn’t just a risky endeavor that will almost certainly end in failure. It’s also unnecessary and, arguably, an astonishing waste of money and time.
As I grow older, the clock ticks ever more loudly in my head. I hate to be kept waiting. I keep chores to a minimum. I try to eliminate activities from my day that bring little pleasure and have no purpose. I think hard before acquiring new possessions,

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Bogleheads.org

Kristine Hayes  |  Feb 22, 2018

MY INTEREST IN personal finance began during a road trip five years ago. Driving alone, in a desolate part of the state, my choice of radio stations was limited. Desperate to find something other than static to listen to, I punched the “seek” button and came across Dave Ramsey’s radio show.
As someone who has always tried to live within or below my means, I appreciated his “beans and rice, rice and beans” philosophy.

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Simple but Not Easy

Anika Hedstrom  |  Feb 20, 2018

WHEN I FIRST BEGAN investing 16 years ago, I threw a bunch of investments at a wall to see what would stick. Someone I respected encouraged me to invest in master limited partnerships, so I purchased a few companies. I had no real idea what an MLP was or did. Sure, I spent some time surfing the net. But that was about it.
Fast forward one year to tax time. I had lost money and had no idea I had to file with the IRS for an extension,

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Diversify Five Ways

Adam M. Grossman  |  Jan 30, 2018

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.

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You Lose, They Gain

Adam M. Grossman  |  Jan 24, 2018

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.

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The Price Is Slight

Jonathan Clements  |  Jan 20, 2018

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.

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Worse Than Marxism?

Jonathan Clements  |  Dec 16, 2017

IF YOU’RE WORRIED that indexing threatens the smooth functioning of the stock market, it’s helpful to spend an hour chatting over coffee with Charles Ellis—which is what I did last week when I was in New Haven, Connecticut. Ellis is one of indexing’s most eloquent advocates, including in his bestselling book Winning the Loser’s Game and in his latest tome, The Index Revolution.
Charley dismisses the idea that index funds are distorting the market—and scoffs at the idea that active management is headed for extinction.

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All the Right Reasons

Jonathan Clements  |  Nov 18, 2017

WHAT’S A GOOD REASON to dial down your stock market exposure? A year after Donald Trump was elected president, many folks are still smarting from their decision to bail out of stocks. Clearly, we shouldn’t lighten up on shares just because we don’t like the guy in the White House.
We also shouldn’t bail out just because stocks sport high price-earnings ratios and skimpy dividend yields. No doubt about it, stocks today are expensive.

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Bought and Paid For

Jonathan Clements  |  Oct 21, 2017

STOCK BUYBACKS ARE here to stay. The Securities and Exchange Commission opened the door in 1982, when it ruled that companies could repurchase their own stock without triggering accusations of share price manipulation. Ever since, more and more companies have taken advantage. Indeed, in recent years, U.S. corporations have spent more money buying back their own shares than paying out dividends.
Good news? I see both plusses and minuses. Here are the plusses:

Once you figure in buybacks,

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We Know Jack

Jonathan Clements  |  Oct 20, 2017

THE BOGLEHEADS HAD their annual conference this week in the Philadelphia area, where Vanguard Group’s headquarters is located. Devotees of Vanguard’s 88-year-old founder John C. Bogle, the Bogleheads usually meet online at what’s probably the world’s best investment forum.
The star of their annual meeting was, of course, Jack himself. His latest book, an extensive revision of The Little Book of Common Sense Investing, just came out. What was on Jack’s mind?

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Right but Wrong

Adam M. Grossman  |  Sep 22, 2017

I’M A BIG BELIEVER in transparency, so I’d like to tell you a little about my personal investments. As you might guess, the overwhelming majority of my money is allocated to simple, low-cost index funds—the same things I recommend in my writing and for my clients. That is true almost without exception. But today, I would like to describe one of those exceptions.
Many years ago, before I entered the investment industry, I purchased shares in a small mutual fund called the Mairs &

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Invest: 10 Questions

Jonathan Clements  |  Aug 31, 2017

REVIEWING YOUR investment strategy? To get you started, here are 10 questions to wrestle with:

How much cash you will need from your portfolio over the next five years? That money should be out of stocks and riskier bonds—and invested in nothing more adventurous than short-term bonds.
What’s the total sum you expect to save between now and retirement? If you look at that future savings as a cash holding and count it as part of your portfolio’s conservative investments,

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