BEATING THE STOCK market over the long term is no mean feat. Only a tiny proportion of investors—professional or otherwise—manage to do it. So why do so many people think they can?
Meir Statman, a finance professor at Santa Clara University, cites eight key reasons. In a new monograph titled Behavioral Finance: The Second Generation, he slots these reasons into two broad categories—five cognitive and emotional errors, followed by three expressive and emotional benefits:
1.

“THE INVESTOR’S CHIEF problem—even his worst enemy—is likely to be himself.” So wrote Benjamin Graham, the father of modern investment analysis.
With these words, written in 1949, Graham acknowledged the reality that investors are human. Though he had written an 800-page book on techniques to analyze stocks and bonds, Graham understood that investing is as much about human psychology as it is about numerical analysis.
In the decades since Graham’s passing, an entire field has emerged at the intersection of psychology and finance.

I USED TO THINK anybody could be taught to manage money sensibly. I no longer believe that.
When I was in my 20s and scraping by on a junior reporter’s salary, I had some sense for the financial stress suffered by everyday Americans. But after a handful of years of diligently saving, I was able to escape those daily worries. Many Americans, alas, never do.
This was hammered home when I recently took the financial well-being questionnaire offered by the Consumer Financial Protection Bureau (CFPB).

I HAVE NEVER BROKEN a New Year’s resolution—because, until this year, I’ve never made one. But now that I’m retired, with time on my hands, I figure my wife and I ought to challenge ourselves with 10 financial resolutions for 2020:

We’ll continually monitor routine spending with the goal of reducing or eliminating at least half-a-dozen expenses this year. That’s one every two months. Phone companies, internet providers and insurers, be warned: Here we come.

WHY DON’T WE SPEND our time and energy on financial issues that have the greatest impact? We’ll drive to a more distant gas station to save 10 cents a gallon, but fail to do all the maintenance needed to extend the life of our car. What lies behind this sort of behavior? The savings from getting the best price per gallon is concrete and immediate, while maintaining our car is long term and abstract.

WANT TO IMPROVE your investment results? The deadly sins below are not only among the most serious financial transgressions, but also they’re among the most common. I firmly believe that, if you eradicate these 12 sins from your financial life, you’ll have a better-performing portfolio.
1. Pride: Thinking you can beat the market by picking individual stocks, selecting actively managed funds or timing the market.
Antidote: Humility. By humbly accepting “average” returns through low-cost index funds,

IT’S THAT TIME of the year—when we should all reevaluate how much we’re saving in our employer’s 401(k). The 2020 contribution limit is $19,500, up $500 from 2019’s level. For those age 50 and older, the catchup contribution was also raised by $500, to $6,500, so these folks can invest as much as $26,000 in 2020.
In addition, it’s a good time to check we’re getting the most out of our 401(k). What are the rules on the employer match?

I TURNED 32 LAST month. My mother, clearing through clutter as she and my father look to downsize ahead of retirement, found an old savings bond of mine issued shortly after I was born. It’s a series EE bond that cost a modest $25 in December 1987. The finance professor in me reacted with “imagine if that were invested in the S&P 500.”
The $25 savings bond had grown to $104, a 4.1% nominal annual return and 1.9% after figuring in inflation.

JUST BEFORE Thanksgiving, something odd happened on Wall Street. Three of the major brokerage firms issued remarkably similar reports declaring the death of the “60/40” approach to investing. What exactly does this mean—and should you be concerned?
By way of background, 60/40 refers to a traditional and very common strategy for building portfolios: 60% stocks and 40% bonds. Historically, most university endowments, as well as many individuals, have chosen this mix of investments because it offers a reasonable balance,

BEEN A DILIGENT saver during your working years? Upon retirement, you’ll likely find it tough to transform yourself into a happy spender. This is not a problem you’ll read much about—because it isn’t exactly a widespread affliction.
The fact is, most folks struggle their entire life to control their spending, only to reach retirement with too little saved. At that point, they have no choice but to tighten their belt. Indeed, the statistics are alarming.

LIKE OTHER WRITERS for this site, I blog often about what’s happening in my own life—my financial mistakes, early retirement, health scares I’ve had, my mother’s death and more. Here are four updates:
Spending. When it comes to parting with money, I have a Dr. Jekyll and Mr. Hyde personality. I sit home at night wearing three layers of clothing, two pairs of socks and a hat because I’m too cheap to turn on the furnace—and yet I don’t hesitate to spend hundreds of dollars to be pampered at a five-star hotel.

I RECENTLY READ about a trendy way to lose weight: intermittent fasting. Supposedly there are also health benefits. That got me thinking.
I’ve been roundly criticized for bashing the financial independence/retire early movement, otherwise known as FIRE, and for arguing that average Americans spend unnecessarily on all kinds of stuff, thus hampering their long-term financial security. My point of view hasn’t changed. But I’ve found room for compromise: Think of it as periodic financial fasting.

MONEY HAS ALWAYS caused me stress. As a child, I worried my parents didn’t have enough, even though I had no idea what sum would have been considered enough for our family of six. In college, I worried about accumulating debt. I ended up living so frugally that I managed to save nearly all of the Pell grant that the government awarded me. I not only graduated debt-free, but also had a sizable emergency fund in place as I moved into adulthood.

AS A KID, MY MOST revered manmade invention was not a train or a record player, but rather the Swiss Army pocketknife. When I saw it for the first time at a friend’s home, I was fascinated that it could cut paper, open bottles, file nails and more. I marveled at the engineering beauty and wished I had one of my own.
Years later, I was in Switzerland for a short business trip and had some free time for souvenir shopping.

I’M NOT THE TYPE of person who makes New Year’s resolutions. This year, however, I foresee some major changes in my life—and that’ll require some financial adjustments.
Now that my elderly parents have passed away, Rachel and I can live like a normal couple in our own home. As I mentioned in an earlier article, we will be moving into my parents’ house.
During the last several years taking care of my mother, I was constantly traveling from one house to another and living out of a suitcase.