Share Your Wisdom

HERE’S YOUR CHANCE to help others with your financial insights. To comment, log on using your username and password from Disqus, Facebook, Google (Gmail), Twitter or WordPress. For more on how to comment, click here. And please come back often. We’ll be regularly updating the list of questions.

What should investors do about the possibility of higher interest rates?

"The intrinsic value of a bond (or bond fund) is a simple proposition, and the interim impact of rate increases can obscure that fact at times. Take, as an example, the Vanguard Intermediate Term Corpororate Bond Index Fund (VICSX). It's Average Coupon is 3.4%, and its Average Effective Maturity is 7.6 years. So, the fund will receive an average of $34 of annual income per bond held for an average of 7.6 years, and then receive its $1,000 of principal per bond. That's the intrinsic value of the fund. The market pricing effects, however, can be seen in the Average Yield to Maturity (4.3%), and the Duration (6.4 years, suggesting a 6.4% price movement on a 1% move in interest rates). The share price has also dropped from about $26 to $22 since the bottoming of rates in 2021. These are the pricing impacts of the current, rising rate environment. However, assuming that the bond manager doesn't torpedo a fund with bad trading (presumably, less likely to happen in an index fund), the investor should receive the intrinsic value of the investment over time, regardless of market pricing movements. The inverse relationship between interest rates and bond prices is relevant with regard the current pricing of the bonds, and the Capital Gains or Losses that would result for sales before their maturity dates, but the intrinsic returns are essentially assured, if the bonds are held to maturity, and presuming no major credit defaults. All of which is to say that I'm not locking in losses by selling my existing bond fund holdings that may have lost money on paper at the moment (and I hope the bond fun managers aren't as well)."
- John Wood
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What are your top financial worries?

"My top financial worry is for the future of someone I love very much -- my young adult son who has autism, who will probably be unable to live independently and has no siblings, close friends or others who will likely step up to take him in or care for him when I'm incapacitated or gone one day. It's a huge life favor to ask someone to be your back-up and agree to forever be responsible for loving and caring for your child if something should happen to you, especially when your child isn't likely to ever leave home or create a life of his own separate from theirs. I suppose this is first a life worry (about the right someone), but it's also a financial worry since my son who's healthy, in his 20's, could easily live 80 years plus with life spans increasing as they are. Either way, this is what I think about as he and I continue to live now and prepare for the future."
- Ronnie Rawls
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What’s the best financial book you’ve ever read?

"How To Make Your Money Last, Jane Bryant Quinn and The All-Weather Retirement Portfolio, Randy L. Thurman, CFP, CPA/PFS. Oh and John C. Bogle's books (your choice). The Bogleheads' Guide to the Three-Fund Portfolio: How a Simple Portfolio of Three Total Market Index Funds Outperforms Most Investors with Less Risk"
- Randy Starks
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If you couldn’t buy index funds, how would you invest?

"I'd still look for a diversified fund, but would focus on companies with long records of steady growth, a desirable stable of products or services, and in the best case, a dividend with its own positive history."
- Martin McCue
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Should children be paid for doing chores?

"My family’s guideline was that routine household chores are part of family life, so no pay for making beds, dusting, doing laundry, or washing dishes. One of our routine chores as children was to pick up sticks, while Dad pushed the lawnmower on our 3/4 acre property. As my brother and I neared our teens and were physically capable of doing the heavier yard work, Dad made us an offer. We could take turns on the lawn mowing, and Dad would drive the family 30 miles to for a hamburger and movie weekly during the summer. Or, Dad could hire someone to mow the lawn, relieving all three of us of that chore, but also using the money that could have been spent on a weekly outing. Fast food and movies were a rare treat for us, so we leaped at the chance to do the yard work ourselves. Years later, while arranging to share the costs of a yard service for our parents, my brother brought up that annual offer from Dad. Looking at his own young children, my brother was trying to figure out how he could teach them about working for what you want as effectively as Dad taught us. My brother could easily afford European vacations for his family, so he had to adapt Dad’s strategy, but his three seem to have learned the lesson."
- Ginger Williams
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Which banks, brokerage firms and other financial companies would you recommend to friends?

"At one time I would have said Vanguard was the best place for you investments. Sadly I can’t recommend them anymore, I still have an account with them but I am most likely going to move my investments to Fidelity where I already have an HSA account. John Bogle’s Vanguard has changed and not for the better in my opinion. They use to offer a cash mangement account that was taken away, they use to give you free Turbo Tax filing that was taken away, they use to give you a dedicated advisor if you reached a certain account balance that was also taken away. But you can pay for one if you desire otherwise it’s an average hold time of 1 hour to speak to a representative. They have lost their way maybe they are a victim of there own low cost philosophy Schwab and Fidelity have cut their cost on funds and ETFs in some cases lower than Vanguard but the customer service is much better than Vanguard. So my solution is to keep my Vanguard ETFs but let another company hold my accounts. This I feel I am forced to do regrettable after 30 years as a Vanguard client. On the bright side though if you need a great bank or should I say credit union look no further than Alliant."
- Mark Caspary
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What everyday purchase do you consider a bargain?

"Gift cards that sell less than face value. Retailers are betting the entire balance will not be used and forgotten or expired. I like Lowes and Home Depot and look for bargains from people who are selling them less than face value…some received as gifts and others need the cash more than the merchandise. The higher denomination, the more savings. Always buy from reputable sites though….ones that offer a full guarantee. I like eBay and Card Bear. Some of my favorite restaurants offer a free $10 gift card if you buy a gift card from them for $50 or more. These are popular around the holidays, and I use some for myself or gift them to others."
- Debbie Clay
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Should investors own alternative investments—and, if so, which ones?

"No. A small allocation to an alternative investment is unlikely to make much difference overall. Why complicate things?"
- Carl Book
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Is rental real estate a good investment?

"at least for me, no. I honestly see no advantage to rentals, it is so expensive and time consuming to buy and sell and rent out real estate. The lack of liquidity is something I do not want to deal with. I am currently selling a house of which I am the trustee, the house is in a trust for the benefit of a family member, and, between hiring a realtor, asbestos removal, a survey needs to be done, and more, I cannot get this done quickly. I strongly feel a globally diversified portfolio of equities and investment grade bonds and cash, has so many advantages over rental properties, better returns, tremendous liquidity, diversification, and much less time devoted to the investments. Here in very liberal Massachusetts, a friend owned a three family, one tenant accused him of stealing from a common area in the basement, long story short, the landlord was barred from the entire property via a restraining order, then was constantly in trouble, for not maintaining the property! Even if he tried to send someone else to fix problems, the troublesome tenant would not allow access. The final straw was when the tenant sued my friend, and won, after he tripped on a loose step, and claimed he was injured, and he won a substantial judgement. ( my buddy sold the property afterwards) I concede that this an extreme case, but, if real estate is desired, why not be satisfied with the many REITS in index funds, or, for dedicated exposure, the Vanguard REIT, VNQ, which charges a mere .12%, annually? I consider real estate an extremely expensive mutual fund of sorts, sky high front and back end loads, you know, lawyers fees, appraisals, realtor fees, etc., and very high annual fees, mortgage interest, taxes and so forth. I needed to sell some funds to finance the above referenced house, the laptop was off when I started, but it still took less than five minutes to complete, and the only cost was the electricity for the device. Meanwhile, its been 7 weeks and counting for the home I need to sell, the tax bills, utility bills and hazard insurance bills keep on coming, even though the house is empty and producing zero income.....!"
- Michael l Berard
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What are the smartest financial moves you’ve ever made?

"I would offer two thoughts. One simple and a bit silly but I realized early in my working life that 'if you spend all your money before you earn it or when you earn it you will never have any money." It is amazing how often that telling someone that simple fact makes them stop and think and realize how true it is. Second, learning the simple formula of 1 plus the interest rate to the power of the number of years give you the value of a dollar at that inflation or interest rate. FOr example let's just use 4% and it could be interest or inflation and lets look at it for 30 years we get 1.04 to the 30th power and the answer is 3.24. THat means 30 years of 4% inflation means it will take $3.24 30 years hence to buy a today's dollar's worth of goods or if invested you will have $3.24 after 30 years for each dollar invested. It is very useful to play with this calculation to get a working understanding of time value of money It is valuable when thinking about savings and you can easily see the importance of starting early. It also can help you gain some realism about how much money you need to retire."
- Gary Hagstrom
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What popular financial advice do you ignore?

"I ignore the advice to set aside savings equal to two or three years worth of expenses. My pension covers my expenses. If an emergency occurs, I can always borrow on my margin account."
- Carl Book
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When does it make sense to buy a home?

"When you can AFFORD it!"
- hguh davis
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