Lists

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.

THE LONGER WE LIVE, the more perspective we have—and the more foolish many of our earlier beliefs seem. We start our adult journey confident that we’ll make our mark on the world and that the financial rewards we collect will greatly enhance our life. By the time we reach retirement, things look quite different. Here are five things I’ve learned along the way:
1. Fame is fleeting. How many entertainers, sports stars and politicians have each of us forgotten?

A FEW WEEKS BACK, I mentioned Robert Shiller’s book Narrative Economics. His contention: Stories—to a surprising degree—often drive markets.
Similarly, the investment world is driven by a good number of sayings and aphorisms. Many of these are entertaining. Some are even useful. But they can also be tricky. Any time advice is delivered in a pithy phrase, it seems to carry extra credibility—as if it were a truth handed down from above.

WHAT SEEMS TRUE about money often turns out to be false. That brings me to the financial paradoxes I’ve come across during my investing journey. Here are my top 12:

The more we try to trade our way to profits, the less likely we are to profit.
The more boring an investment—think index funds—the more exciting the long-run performance will probably be.
The more exciting an investment—name your latest Wall Street concoction, SPAC or anything crypto—the less exciting the long-term results typically are.

WHEN I WAS IN COLLEGE, late in the evening and usually after a few drinks, someone would often play Edith Piaf’s Non, Je Ne Regrette Rien, her stirring and defiant 1960 song about regretting nothing.
It’s a sentiment worth recalling as we look back on our financial life. Here are four things we shouldn’t regret:
Saving too much. Is that really something to regret? It’s undoubtedly better than the alternative: saving too little.

ROBERT SHILLER, in his book Narrative Economics, argues that stories can be a powerful force in moving markets—more so even than facts or data. Recently, I gained a better understanding of why that’s the case.

I was speaking with a fellow and, it seemed, we disagreed on nearly every topic. But the way he presented his arguments made them sound surprisingly persuasive. What I realized is that, in the world of finance,

A FEW WEEKS BACK, I discussed the notion of “the four horsemen of the investor apocalypse.” A concept proposed by Morningstar Managing Director Don Phillips, these are the factors that—in his experience—tend to lead investors off course. But what about success? What are the factors that contribute to success for investors?
“Investing,” says legendary investor Warren Buffett, “is not a game where the guy with the 160 IQ beats the guy with a 130 IQ… You need to be smart,

DON PHILLIPS is a former CEO of the research firm Morningstar. In a recent commentary, Phillips discussed what he called the “four horsemen of the investor apocalypse.” I hasten to add that Phillips isn’t predicting any kind of apocalypse. Rather, he wanted to highlight factors that can cause problems for investors. Phillips’s four horsemen are complexity, concentration, leverage and illiquidity. It’s worth taking a closer look at each, especially amid today’s rocky financial markets.

WHEN I STUDIED FOR the Chartered Financial Analyst (CFA) exams, I snagged extra prep time by listening to textbooks while commuting. As boring as that sounds, it helped me absorb the dry curriculum—and it made listening to financial information part of my daily routine.
While I no longer commute—or even own a car—I continue to plug in my earphones to catch up on the latest investment insights, often during my afternoon walks. Here are my eight favorite podcasts:

The Long View.

A FRUSTRATING reality: Uncertainty is always a factor in personal finance. Still, some aspects are somewhat predictable. Among them is the connection between interest rates and other parts of the economy. Consider four key relationships:

1. Interest rates and inflation. Inflation has been the financial topic of the year. The Federal Reserve has hiked interest rates twice so far in 2022, including a larger-than-average increase last week, as it tries to rein in rising prices.

ROUGHLY 20 YEARS AGO, I left the world of corporate finance. I saw some of the ugly, high-fee undiversified products many of my friends owned—and how those differed from the ultra-low cost, disciplined investing at the companies where I had been a financial officer. I wanted to change things.
But after two decades, I’d say I’ve struck out. Still, there are lessons to be learned from my failures, as well as some encouraging changes occurring within the financial industry.

I WROTE AN ARTICLE last month about five financial lessons I learned at Ringling Bros. and Barnum & Bailey’s Clown College. But Clown College didn’t just offer financial lessons—it also offered valuable life lessons.
It was a topic I used to discuss with my students. For the last 16 years of my career, I taught college accounting courses. I encouraged the students to lead lives of reflection and learn from their experiences. I would share a short PowerPoint presentation,

MANY FINANCIAL questions have clear answers. Does it make sense to engage in day trading? Probably not. Should you invest everything in bitcoin? I wouldn’t recommend it. Is it smart to carry a big credit card balance? It’s hard to think of a good reason.

Many other financial questions, though, might seem to have clear answers. But upon closer examination, they actually fall into the “it depends” category. Below are six such questions:

1.