WHEN I TURNED AGE 24, a friend and I took a road trip from San Francisco to Vancouver. It was 1975. I was excited—it would be my first visit to Canada.
I didn’t know what to expect when we got to the Canadian border. All I knew was we didn’t need passports. The border officer gave us a suspicious look. After being on the road for a spell, we didn’t look our best. I was unshaven and wearing my usual T-shirt and jeans.
THE CLOSER IT GETS, the more attention I pay.
“It,” in this case, is retirement. In January, I’ll celebrate my 60th birthday. I have no intention of fully retiring, but I am thinking about how to work less, travel more and prep my finances for the years ahead. As I sketch out my plans, I’m drawing not only on a lifetime of writing and thinking about personal finance, but also on an even more valuable resource: you.
THE FINANCIAL WORLD generates a lot of noise. As a financial planner, I see that every day. Being in my 20s, it’s fun to learn about new alternative investments or imagine getting rich quick thanks to one stock or following the advice of one social media post.
But I know that’s all it is—fun. Instead of imagining my way to wealth, I take control of my finances by creating rules to live by. Rules are driven by values.
WHEN I WORKED at The Wall Street Journal, editors used to quip that, “There are no new stories, just new reporters.” I don’t know whether that’s the case with politics, sports and technology articles, but it sure rings true for personal finance and investing stories. All too often, the latest hot topic just seems like a rehash of something I’ve witnessed—and often written about—before.
That brings me to three financial arguments that never seem to end.
JAMES J. CHOI is a finance professor at Yale University. But in a recent paper titled “Popular Personal Financial Advice versus the Professors,” Choi played the role of (somewhat) neutral arbiter. The question he sought to answer: Do popular—that is, non-academic—personal finance books offer advice consistent with the academic literature? And if not, is that a problem?
To conduct his study, Choi looked at 50 personal finance titles including The Millionaire Next Door,
I MOVED FROM LONDON to New York in 1986. For the next three-plus years, I worked as a lowly reporter (read: fact checker) and then staff writer at Forbes magazine, before I was hired away by The Wall Street Journal. During those three years, I set out to educate myself on U.S.-style personal finance.
Forbes was a great place to do that. The magazine’s Greenwich Village offices had a well-stocked library of financial books and company reports,
I CONTINUE TO LOOK for ways to simplify my life. At age 71, I want fewer things to deal with and to worry about. To that end, here are five steps that my wife and I are taking:
1. Consolidating finances. I mentioned in an article last year that my wife and I have consolidated our investments at Vanguard Group, while our savings and checking accounts are at a local credit union.
I CAN’T CALL THE BOOKS I buy “beach reads” because, honestly, they can get dense. Still, if—like me—you enjoy learning about investing, economics or even the religious overtones of capitalism, here are five books that might make for insightful summer reading or, perhaps, induce napping in the hammock.
The Physics of Wall Street by James Owen Weatherall. This book begins with the assertion that “Warren Buffett isn’t the best money manager in the world” and then spends the next 224 pages introducing us to genius PhDs who’ve whipped the S&P 500 by anticipating the prices of securities.
AT THE MUTUAL FUND company where I once worked, the stock and bond teams liked to poke fun at one another. Bond managers viewed the stock-pickers as overpaid storytellers. Meanwhile, the stock-pickers saw the world of bonds as stultifying. “Playing for nickels and dimes” is how one of them put it.
For better or worse, bonds do indeed represent the slow lane. But this year, with bond prices depressed by rising interest rates, investors are wanting to learn more.
I RECENTLY VISITED Eastern Europe, where I volunteered to teach English in Poland through an organization called Angloville. I received free room and board at a resort in exchange for conversing from breakfast through dinner with Polish adults who wanted to improve their English.
In addition to meeting Poles and being immersed in Polish culture, I used my free time to explore nearby countries. Planning a vacation abroad? Based on my recent trips to Poland,
WHEN HE DIED IN 1877, Cornelius “Commodore” Vanderbilt was by far the wealthiest American, with a fortune of $100 million. In the 10 years after his death, his son William succeeded in further doubling those assets. It was an astonishing level of wealth. But that’s precisely when things began to turn.
One of Cornelius’s grandsons built the 125,000-square-foot Breakers mansion in Newport. Another commissioned Biltmore in North Carolina, which is still the largest home in America.
INDEXING IS A GREAT strategy—and yet there’s also a constant temptation to stray.
When stocks soar, so does our self-confidence, as we attribute our investment gains to our own brilliance. At such times, there’s a risk that even hardcore indexers will start dabbling in individual stocks, actively managed funds, cryptocurrencies and goodness knows what else. Meanwhile, amid market slumps, index funds suffer just as much as the market averages, and some indexers may look to sidestep the pain—by “temporarily”
I RECEIVED A CALL last week from a college student who’d started a successful business. His school, he said, didn’t offer any practical courses in personal finance, so he asked my advice on investing.
We walked through nine key questions. I would offer the same advice to investors of any age.
1. Why should I expect stocks to go up? One way to answer this question would be to invoke the oft-quoted phrase that “history doesn’t repeat itself but it often rhymes.” Stocks have delivered roughly 10% returns per year since reliable recordkeeping began in the 1920s.
THE MOST POWERFUL financial ideas are those that help us make better money decisions—by providing a lens through which to understand ourselves and the world around us. Examples? Think about notions like loss aversion, diversification and market efficiency, all ideas frequently mentioned in HumbleDollar articles. Every investor, I believe, should understand such concepts.
To that list of key ideas, I’d favor adding five others—all underappreciated, I’d argue, but all central to how I think about the financial world.
U.S. STOCKS ARE DOWN almost 19% so far this year. The broad bond market, surprisingly, has also lost money, sliding almost 11%.
At times like this—when the headlines are almost all negative—the standard advice is to avoid panicking and stay focused on the long term. I agree with that, and indeed the data are clear: Investors who attempt to time the market with “tactical” trades often suffer whipsaw. But that doesn’t mean we should bury our heads in the sand.