Investing

YOU MAY BE familiar with a concept known as Pascal’s wager. Named for Blaise Pascal, a devout seventeenth-century French mathematician, it was a thought experiment in which he tried to weigh, in logical terms, the costs and benefits of believing in God. His conclusion: The cost of not believing—a potential eternity of damnation—was so extreme that it far outweighed any other consideration.
I mention Pascal’s wager because a common question is whether similar logic might apply to financial decision-making.

Here at HumbleDollar, we spend most of our time on growing wealth. That focus leaves a blind spot: we’ve neglected readers who want to shrink their wealth through their investment choices. In the interest of balance, I’d like to address that gap systematically.
Let’s start with the easiest set-it-and-forget-it approach, a classic one-two combo. First, find a high-fee advisor who champions high-fee funds. Give it a few years and, if all goes to plan, you should see a healthy dent in your potential net worth.

Does it matter? Probably not if we are happy and reasonably financially secure. Benchmarks can be informative, if not helpful, though. For one thing they remind us when discussing money, affordability, frugality and such how relative, how different things can be and how normal at the same time.
An interesting (?) information exercise follows without conclusions or recommendations to move to Mississippi😎
Through extensive research (four AI apps) I have learned that “rich” is determined by income and “wealthy” by value of assets,

RECENTLY, A READER—let’s call him Tom—posed this question: If stocks historically have delivered far better returns than bonds, then why should an investor own any bonds at all? Even with the stock market’s unpredictable ups and downs, wouldn’t you end up way ahead by betting only on stocks over the long term?
It’s a fair question. Over the past 100 years, stocks have delivered returns of roughly 10% per year, while bonds have returned just 5%.

WHAT’S THE MOST important idea in personal finance? It’s hard to single out just one, but over the years, I’ve found the following dozen ideas to be among the most useful.

Whether it’s on TV or online, there’s never any shortage of market prognosticators. Especially during a bull market, everyone seems to have an opinion on where things are headed. The reality, though, is that people can only guess about how the economy, the market or any individual investment will perform.

Earlier this year, I had two attempts to withdraw funds from different financial institutions within a couple of days of each other. The first was an annuity. The hacker submitted a withdrawal form either by fax or US mail. I discovered it when I got an email asking me to resubmit the request with the correct SS#. I informed the company that I did not submit the request and they immediately locked my account.
This may have been an inside job because I submitted a request to change beneficiaries a few days earlier which was the first time I had contacted the company since the annuities were setup 2 years ago.

IT’S BEEN AN UNUSUAL week in the bond market, and not necessarily in a good way. This has many investors questioning the value of bonds, which is understandable. Bonds are supposed to be the “safe” side of a portfolio, but they’ve struggled in recent years.
Arguably, the drama we’re seeing in the bond market today began more than 50 years ago. To put today’s situation in perspective, I’ll briefly summarize that long history. Then we can look at what steps you might take to better protect your portfolio from here.

I’ve never cared much for bond funds. They never mature. Their NAV is at the mercy of Federal Reserve policy. 
I like how individual bonds mature and return my investment, but I don’t want the risk of owning individual issues. 
I nearly brought this question up in Mark Corothers ‘Flipin’ post, but didn’t want to send his discussion about real bond returns down the wrong rabbit hole.
So here goes. I have a CD ladder to protect me from a lost decade.

With the current fixed income environment, have you given any thought to your portfolio asset allocation?
For most of the last 15 years bonds paid next to nothing, a big fat zero actual return. For a stretch in 2021 they actually paid less than nothing: 10-year TIPS traded at negative real yields, meaning you were paying the government for the privilege of protecting your own purchasing power. In that world, equities weren’t one part of the growth engine.

EVERY THREE MONTHS, a small committee meets in Manhattan to make decisions that dictate where billions of retirement dollars flow. You won’t see them on financial television. They belong to the Index Committee at S&P Dow Jones Indices.
Nearly all readers here likely know the S&P 500 isn’t a mindless tally of America’s 500 largest businesses. Yet in an era dominated by mega-cap hype, it is worth remembering just how ruthlessly disciplined that curated roster really is.

I have been reading in some of the comments on the Forum recently that some of you use a total portfolio approach for your investments.  I tried to look it up in Jonathan’s guide but couldn’t find it. I don’t know what this is and was hoping some of you might be able to explain it in a way I could understand. I am not sure if this is something I need to research more?  I tried to look it up on Mother Google but didn’t understand what the AI said it was.  

An e-mail I received from Retirement Researchers by Wade Pfau contains this:
“If a retiree owns 1,000 shares before receiving a dividend and still owns 1,000 shares afterward, it can seem as though nothing has been spent. Selling 20 shares feels different because the account now holds fewer shares. That visual difference can reinforce the idea that dividends allow you to spend income while preserving principal.
For example, suppose a company is trading at $100 per share,

BY NOW, YOU’VE probably heard the story of the 25-year-old wunderkind Leopold Aschenbrenner. After graduating as valedictorian from Columbia University at age 19, he worked for FTX, the crypto trading firm, then found his way to OpenAI, where he worked as a researcher for about a year, until mid-2024.
In the months after he left OpenAI, Aschenbrenner wrote a 165-page paper titled “Situational Awareness,” in which he detailed his views on the future of artificial intelligence.

Be careful out there. Index composition is a key to getting consistency in your investment outcomes. Vanguard vs iShares vs State Street vs etc. As Jason Zweig writes in the Wall Street Journal, it all depends on the composition of the index.
 
https://www.wsj.com/finance/investing/how-a-few-hot-stocks-can-make-twin-funds-act-like-strangers-0ef7c52b?st=6mxLt3&reflink=desktopwebshare_permalink
 

AFTER YEARS OF heady gains in the stock market, many investors are facing the same question: To manage risk, they’d like to cut back on one or more of their holdings. But because of the potentially costly tax bill that might result, they aren’t sure exactly how to do that.
How can you square this circle?
One easy option would be to donate appreciated assets to charity. But that would make sense only if it aligns with your charitable goals and,