Jonathan Clements's Blog, page 227

Yields Rising

EVERYBODY SEEMS to hate bonds right now. Can you blame them? Inflation is at a four-decade high, the Federal Reserve is sure to hike short-term interest rates two weeks from Wednesday, and geopolitical jitters make owning high-yield bonds all the riskier. On top of that, returns have been awful since the start of 2021.

But maybe we should take a contrarian approach. Almost everybody should own at least some bonds. Yields have improved significantly. The benchmark 10-year Treasury yield, which fell to 0.52% in August 2020, is now at 1.99%. For those who want bond exposure, there���s plenty of inexpensive exchange-traded funds (ETFs) on offer from firms like BlackRock, manager of the iShares funds, and Vanguard Group.

For instance, if you want a proxy for the entire U.S. Treasury market, there���s iShares U.S. Treasury ETF (symbol: GOVT) with its yield to maturity of 1.88%. Treasurys are usually a great diversifier for stocks, though that hasn���t been the case this year. Vanguard Total Stock Market ETF (VTI) is down 8.3% in 2022, while the iShares fund is off 4.1%.

The broad U.S. bond market, as measured by iShares Core U.S. Aggregate Bond ETF (AGG), has an average yield to maturity of 2.43%. While far less than today���s inflation rate, that yield is comparable to the 2.54% inflation rate expected by investors over the next 10 years. The iShares fund is the largest bond ETF in the world, with nearly $90 billion of assets. Second is another U.S. broad bond market fund���Vanguard Total Bond Market ETF (BND), with a bit over $80 billion of investor assets.

Where else might you seek income? Some individuals, particularly those in high tax brackets and who live in high tax areas, look to the municipal bond market. You don���t need a broker to go out and find you individual muni bonds. Instead, you might take a do-it-yourself approach, which is cheaper and easier, and buy a fund like iShares National Muni Bond ETF (MUB), which yields 1.65%. That relatively low rate is effectively higher since you shouldn���t owe federal income taxes on the interest received.

Continuing down the bond boulevard, let���s check out corporate bonds. Today, iShares Broad USD Investment Grade Corporate Bond ETF (USIG) offers a 3.21% yield. That beats the five-year expected inflation rate of 3.02%. But be warned: Corporates, even the high-quality segment, can decline when stocks fall.

What about high-yield debt, otherwise known as junk bonds? A fund like iShares iBoxx High Yield Corporate Bond ETF (HYG) contains low-rated bonds that might default during bad economic times. Will investors be compensated for taking that risk? The yield to maturity on the iShares fund is 5.59%, which should help offset the money inevitably lost to bond defaults. Still, stock investors don���t get much of a diversification benefit from junk bonds, which almost always decline when the S&P 500 drops.

Meanwhile, if we want to head overseas, we might check out a fund like iShares International Treasury Bond ETF (IGOV), which tracks an index composed of non-U.S. developed market government bonds. Don���t get too excited���the yield is just 0.76% and 2021���s total return was a dreadful -9.24%. Many foreign developed countries, such as Japan and Germany, had negative interest rates on their debt over the past few years, plus the dollar strengthened in the currency market, depressing the return of foreign investments for U.S. holders.

What if I told you that a 6% yield was there for the taking? I���m not talking about super-safe Series I savings bonds, but rather emerging market debt, which is a growing piece of the $130 trillion global bond��market. Currently, iShares J.P. Morgan USD Emerging Markets Bond ETF (EMB) sports a yield to maturity of 6.06%. There���s significant risk, though. The fund was down 13.3% peak to trough in the past year, dividends included. If you own an international bond fund, you may already have an allocation to emerging market debt.

Investing in bonds is easier than ever, thanks to so many low-cost ETFs. In fact, the amount of choice can seem overwhelming. Perhaps the simplest approach is to own U.S. and international broad bond market index funds. That way, you have exposure to all areas of the global bond market, from government bonds to high-quality corporates to junk bonds and even emerging market debt.

Unsure how to proceed? You might take your cues from the allocation of Vanguard Target Retirement 2030 Fund (VTHRX). It has a 35% allocation to bonds and cash, with some 24% invested in the Vanguard Total Bond Market Index Fund and almost 11% allocated to Vanguard Total International Bond Fund. Investors with a high risk tolerance might put less into bonds, while more conservative individuals could go higher than the Vanguard fund���s 35% exposure.

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On Guard Online

IN AN ARTICLE last year, I wrote about the importance of strong online account security wherever you keep your savings and investments. I shared habits that should help you avoid the potentially huge financial losses caused by a cybercrime. I also urged readers to weigh a company���s commitment to security when choosing a home for their money.

I���d like to give kudos to Bank of America for providing a good example of this commitment. It recently added proactive, structured guidance to its security center. It���s a combination of education and guided ���nudging��� to take steps like creating strong passwords, enabling two-factor authentication, using the company���s mobile app with push notifications, and agreeing to receive alerts if the bank notices unusual activity. Below is an example of the feedback that Bank of America���s site offers.

The bank recently added support on its website for two-factor authentication using industry standard hardware security keys, such as YubiKey, which I use on my computers. The bank���s mobile app, an early adopter of biometrics such as Apple���s Touch ID or Face ID, now supports relatively simple two-factor authentication, too. Even if hackers manage to crack your password, it would be incredibly hard for them to access your account if you���ve enabled two-factor authentication.

While I���d love to get a higher yield on my savings, it���s more important to me that my cash remains in my accounts and I don���t face the hassle of a security incident. Reaching for yield? Think about risk���including the risk that a financial firm���s security isn���t up to snuff.

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Look Down���and Up

I WROTE ABOUT the perils of timing��the market last Sunday. This week, I���ll address its close cousin: stock-picking.

These days, many people accept that stock-picking isn���t a great idea. Evidence shows that both��professional��and��individual��investors fare poorly, on average, when they choose individual stocks. But why exactly is that? How is it that indexes���which are simply lists of stocks���so frequently outpace the results of professional portfolio managers?

There���s more than one answer to this question. But recent data has highlighted a key explanation. In a��2021 study��of professional portfolio managers, researchers found that fund managers are actually pretty successful at picking stocks. On average, in fact, they outperform with the stocks that they buy. Those stocks went on to outperform by more than a percentage point over the next year.

Instead, the problem is on the other side of the trade. When deciding which stocks to��sell, portfolio managers often fare poorly���meaning they would have done more for their portfolio���s performance by simply selling a random selection of the stocks they own. That, on average, is what causes actively managed funds to underperform. Fund managers��� poor selling decisions more than offset their good buying decisions.

The study explored possible explanations for this phenomenon. Among them: Fund managers get scared when bad news impacts stocks in their portfolio. Every company, almost without exception, will go through difficult periods that weigh on its share price. In many���if not most���cases, companies recover from these rough periods and so, too, do their share price. The stocks may even��outperform��as the dark cloud passes. But in the middle of a crisis, when the news is bad, it can be hard to see the light at the end of the tunnel. That's when portfolio managers tend to react poorly.

Consider this year���s most prominent example: Facebook parent Meta Platforms has seen its stock drop by nearly 40%, wiping out nearly $400 billion of market value. The problem: Apple recently implemented a set of privacy controls that limits Facebook���s ability to target advertising on iPhones. Google has announced it���ll follow suit with its Android platform. The impact has been noticeable. In its most recent quarter, Meta���s revenue and profits rose, but at a dampened rate. Compounding investors��� worries, Facebook also��reported��a decline in user engagement.

Imagine you were a mutual fund manager and owned Meta stock. What would you do? The easy option would be to sell it, take your lumps and reinvest the proceeds in a stock that looks like less of an uphill battle. That may or may not end up being the best decision, but it would be the��easy��one.

The alternative, of course, would be to hold onto the stock. But that would require having faith that it���ll recover within some reasonable period of time. I spoke with one investor last week who worried that it might take Facebook five years to rebuild its ad business. That strikes me as a long time, but right now, it���s anyone���s guess. That, in a nutshell, is why fund managers have such a hard time making good decisions when it comes to selling stocks.



Further complicating matters: Share prices don���t rise and fall in response to just one issue. Investor sentiment, of course, plays a part in moving stock prices. But that���s not all. Corporate boards, management and shareholders all have levers they can, and do, employ to help move prices. These include:

Developing new products or acquiring product lines from other companies.
Spinning off less profitable products or business units.
Cutting costs, including layoffs and other types of corporate realignments.
Initiating a dividend or increasing it.
Initiating or adding to a share buyback program.
Selling real estate���sometimes accompanied by leasing the property back.
Settling a lawsuit or government inquiry.
At the extreme, replacing the CEO or putting the company up for sale.

Sometimes, it takes just one of these actions to spark a share price rally. Corporate managers are highly incentivized, via stock options, to do what they can to move their company���s share price higher.

Other times, this requires outside pressure from shareholders. Activist hedge funds often play this role. I���m not a fan of hedge funds. But they can play an important role in encouraging companies to take action they previously may have resisted. Carl Icahn, for example, was��instrumental��in Apple���s decision to initiate large-scale stock buybacks���a move the company initially fought. Icahn was also behind the 2014��push��to separate PayPal from its former parent, eBay.

The upshot: The outlook for a company���and even the entire market���can look grim, especially if we focus on a single, worrisome issue. But current worries can quickly be forgotten if good news emerges.

There's an expression common among investors, that ���things are never as good or as bad as they seem.��� Right now, of course, things look bad. Vladimir Putin's actions are appalling, and it's hard not to feel uneasy. But who knows? This crisis could end sooner rather than later, and with less loss of life than observers currently fear.

In the meantime, I think it's important, when it comes to your finances, to keep your eye on the long term. Try hard to avoid being spooked by bad news. Just as the fate of any company���s share price never hinges on just one factor, the same is true of the overall market.

Adam M. Grossman��is the founder of Mayport, a fixed-fee wealth management firm. Sign up for Adam's Daily Ideas email, follow him on Twitter @AdamMGrossman��and check out his earlier articles.

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Fearing Fear Itself

SEEING YOUR IRA or 401(k) decline precipitously is bad enough. Locking in those losses is far worse. The good news: I’ve perused various Facebook retirement groups since the Russian invasion of Ukraine and have seen few signs of panic.

For instance, here’s some good advice from a prudent retiree: “Stay the course, but in the future make sure you have enough in a cash reserve for at least one year of planned withdrawals or RMDs,” meaning those pesky required minimum distributions that must be taken each year by those of us age 72 and older.

Make no mistake: Once you’re retired, your perspective changes, as the reality of risk becomes more apparent. Consider this comment from a recent retiree: “Everyone says hold and the market will bounce back. That is what I have always done, but it is a bit more scary when you are no longer earning.”

Those sentiments were echoed by another recent retiree: “The market tanked just as I was about to withdraw funds for our first couple of years. We’re using a cash cushion for now, but will eventually have to start withdrawing, despite current market conditions. I’ve never worried about market swings in the past. I’ve known time was on our side. But now the time has come and I hate starting out [retirement] in a down market.”

At some point, time does indeed run out. That’s why a more conservative investment mix goes with aging. One retiree expressed this concern: “I wasn’t worried about market dips, there is always time to recover. But now, 10 years into retirement, there isn’t that much time.”

No doubt the Facebook comments would have been more panicky if stocks hadn’t quickly recovered from Thursday’s initial sharp market decline. Still, many folks have seen their portfolio take a beating in 2022. It isn’t easy watching your investments decline, especially if they represent your life's savings and the money you’ll live on in the years ahead.

My Fidelity Investments’ account, which I foolishly look at every few hours, is down more than $200,000 since December. “Stop looking,” I tell myself.  What I won’t do is move out of stocks. In fact, in recent days, I convinced myself to buy more of a large-cap index fund. I also bought more of my former employer’s stock, which has taken quite a dip.

Back in 2008, when I was working in employee benefits, I tried to encourage the company’s workers to leave their 401(k) alone and keep investing in stock index funds. In most cases, my pleas fell on deaf ears. I hope you won’t be among those who, in 2035, talk about losing their retirement funds in the market crash of 2022.

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Lessons Unlearned

MY PARENTS WERE profoundly influenced by the Great Depression and—as their only child—I was, too. My father had seen my grandfather, who was a successful small grocer, lose everything when banks failed in the 1930s. My father never trusted banks or the stock market again. He fully expected another depression somewhere just over the horizon.

My mother grew up in Appalachia without electricity or indoor plumbing. She had a tremendous work ethic, making it clear to me that work always came before fun. She readily deferred spending in favor of saving. Her greatest fear was to experience once again the cold she felt in winters during her childhood.

My father imparted wisdom through a series of pithy phrases. These included exhortations such as “initiative is doing the right thing at the right time without being told” and “what’s worth doing is worth doing well.” He promoted and practiced the Golden Rule: “Do unto others as you would have them do unto you.” These positive influences shaped my character.

But when it came to business and personal finance, I was taught “it’s not what you know, but who you know,” implying a rigged game. “You need to have money to make money” suggested the little guy wasn’t welcome in the financial world. He preached that, when it came to money, “you can’t trust anyone, not even your grandmother.” And he’d say—in a derogatory tone—that an acquaintance “has more money than he knows what to do with.” Money to him was ephemeral and not worth devoting time to. These negative images colored my early thoughts about money.

Neither parent was extravagant. Neither spent to maintain social status. My mother scrimped. My father spent somewhat more freely.

My father was a self-employed general practice physician with no pension, little savings and no ownership of stocks or bonds. He had a wide variety of interests and readily contributed time to community projects and boards. But he was unwilling to put effort into understanding the business or financial world. This lack of interest led him to make “investments” without doing basic due diligence, leaving him at risk of being scammed.

From three to two. My father’s retirement was forced by a cancer diagnosis. He came home ill from work one day and never returned to the office. His retirement lasted nine months, most of it consumed by the illness. When he died, I was age 17. He had life insurance that provided my mother with a small nest egg. The house was paid for, and she had a job with solid benefits, so our immediate needs were met. I qualified for both Social Security and veteran’s dependent benefits, which went a long way toward covering future college expenses.

My mother was left with 15 years to prepare for retirement. She and I had zero investment experience, and our family had no investment advisor to turn to. My father’s words about trusting no one rang in our ears, making us fearful about whom we could approach.

It was the late 1970s, and interest rates were much higher than today. Our initial investment of the insurance proceeds consisted of certificates of deposit at a savings and loan. In the regulated environment of the time, the Federal Reserve’s Regulation Q allowed S&Ls to pay a quarter-percentage point more than banks, and they often handed out a household appliance as an inducement to open new accounts. This could be considered our first strategic investment: a quarter point and a toaster.

With the spike in interest rates in the early 1980s, there was a lot of press about a relatively new concept: money market mutual funds. They were discussed in my college finance classes. We took the plunge and moved some maturing CD money into Fidelity Investments’ money market fund, which was paying double-digit rates.

I came to realize that we needed to prepare for my mother’s retirement. She had the beginnings of a retirement fund. If we managed it well, it could support her. If not, I would be supporting her. From my reading, it was clear that we needed to think about investing in the stock market. My mother had a small amount of stock in her name from her employer and had, at some point, put money into a stock fund from Investors Diversified Services (IDS), a forerunner of Ameriprise. We contacted IDS to identify a representative, who came to the house to talk with us. I remember jotting down his profound statement “buy low, sell high” on my notepad. To invest with him, my mother wrote a check for $20,000 from a maturing CD.

As I continued to learn, I started to understand the amount of commission and fees built into our IDS investments. I couldn’t get comfortable with the representative profiting off our transactions. We eventually liquidated those investments and moved the money to Fidelity, where we had previously opened the money market fund. During the severe recession of 1981-82, as a result of research plus a bit of luck, we put money into Fidelity Magellan Fund, run at that time by legendary mutual fund manager Peter Lynch. Later, we invested in Fidelity Equity-Income Fund. When individual retirement accounts first became available to all workers, we immediately opened a Fidelity IRA for my mother and bought stock funds.

With this foundation, my mother had the makings of a sound retirement. Her work would provide a modest pension and excellent health insurance to supplement Medicare. Ultimately, her company offered a buyout, and she was able to retire early with sufficient assets for the rest of her life.

My turn to invest. Learning to manage money for my mother at an early age had the benefit of setting the stage for my own investing. After college, I married into a family where stock ownership was the norm. This was a novelty to me: a middle-class family that had faith in the markets and invested for their future. My father-in­-law was a conservative investor, and he was preparing thoughtfully for retirement. I learned from his example. He was also frugal, a trait he passed on to my wife.

He had given my wife five shares of AT&T and five shares of General Electric as a college graduation present. For many years, these were our only individual stock holdings, but we added to them with reinvested dividends and zero commission purchases through each company’s dividend reinvestment plan. GE, in particular, soared during this period, with the stock splitting multiple times.

While my mother had a nest egg from the life insurance proceeds, my wife and I had to come up with capital to start investing. From my mother, I learned frugality. Over the decades, I’ve enjoyed some investment success. But what I do better than most is save. My wife and I lived below our means and spent only what we could afford.

In my mid-20s, I realized that—with even a modest salary—30 to 40 years of earnings would represent $1 million to $2 million flowing through my checking account. Siphoning off some of those earnings along the way, and then investing them, would allow me to build our savings for retirement and other goals. Early on, my wife and I scraped together $1,100 and opened an account at Twentieth Century Investors, now American Century, a no-load mutual fund family. James Stowers ran the company then and had an impressive track record from investing in growth stocks.



Through the 1980s, our investments worked out well for my mother and for us. Still, I had a big fear of losing money and no perspective on market gyrations. At various times, I was scared into selling some of our winning positions by what turned out to be normal market fluctuations. I’m certain that, in every case, I would have done better to hold or even buy more. Over time, I learned that dollar-cost averaging and rebalancing help take the emotion out of investing.

Looking back, I see that this was all part of the normal learning curve. As a new investor, you can gain perspective by talking to mentors, listening to experts and reading up on market history. But there’s no substitute for living through multiple up and down markets, and learning from your successes and failures.

I also recognized that, when it came to my mother’s account, I was not investing for myself but for her retirement. We were at different life stages. I had a much longer time horizon. Losing money for her would be much more painful. I drew a distinction between how I invested for myself and how I invested for her, taking more risk in my account. I saw investments go to zero, but I never saw anything close to that in her account.

Replaying the messages. Like many children, I got mixed messages about money from my parents. Those early lessons have proven hard to shake. When it came time to invest for my mother and me, I had to examine my father’s lessons about money and decide what to keep and what to discard. This took time.

The one lesson from my father that I took to heart—and still struggle with today—is not trusting money advice from others. On the positive side, this drove me to educate myself. I prepared tax returns for my mother and myself, which required that I understand the tax implications of financial decisions. If my investing decisions turned out poorly, I had no one to blame but myself. We had to trust Fidelity, but no individual broker was profiting from our buys and sells.

Through my college and graduate school years, I found opportunities to learn more about investing. Andrew Tobias’s The Only Investment Guide You’ll Ever Need was the first comprehensive book I read about financial planning. I took a tax accounting class as an undergraduate and an evening adult education class in personal financial planning while in graduate school. And I continued to read everything I could about saving, investing and financial planning.

As a result of this do-it-yourself approach, I saved on professional fees and commissions. I’m sure there were times when, from lack of expertise, I made decisions that were less than optimal. Whether these offset the savings in fees, I’ll never know.

My father didn’t just distrust the financial advice of others. He also didn’t trust the entire financial system and felt the little guy wasn’t welcome. But while my father thought the game was rigged, I decided that there were rules to the game, and it was incumbent on me to learn those rules in order to win. I accepted that the markets were far better regulated in the late 20th century than during the boom that led up to the 1929 market crash and which shook my father and grandfather.

When I started working, I immediately opened an IRA. With babies and a mortgage, it was six years before I could max out my annual contributions, at which point I also opened a 403(b) account at work. I increased those contributions each year until I reached the maximum allowed. Dollar-cost averaging, with money flowing into investments every payday, required a faith in the system that my father never had. I had to accept that, even when I was “buying high,” the market’s long-term upward trend would overcome the inevitable dips.

What about my father’s notion that you could “have more money than you know what to do with”? I catalogued my responsibilities: assuring my mother’s retirement, supporting my family, educating my children, and planning for my retirement. It struck me as irresponsible to myself, my family and society if I didn’t prepare to meet these financial obligations.

The flipside lesson of “having more money than you know what to do with” is the notion that, at some point, enough is enough. Continuing to aggressively accumulate after you have “enough” risks making money the end goal, not the tool to achieve financial security. With financial security, to paraphrase the recent book The Psychology of Money by Morgan Housel, you can do what you want, where you want, when you want, with whom you want, for as long as you want. In short, you have choices. If you fail to properly manage money, your choices will be limited or made for you.

In the end, my mother lived out her life with financial security, and my wife and I are set to do the same. Goals achieved—and perhaps that’s all that matters.

Howard Rohleder, a former chief executive of a community hospital, retired early after more than 30 years in hospital administration. In retirement, he enjoys serving on several nonprofit boards, exploring walking paths with his wife Susan, and visiting their six grandchildren. A little-known fact: In May 1994, Howard was featured—along with five others—on the cover of Kiplinger’s Personal Finance for an article titled “Secrets of My Investment Success.” Check out his previous articles.

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Time to Invest

A FRIEND TEXTED ME yesterday. He wanted my thoughts on putting cash to work given the big stock market decline over the past few weeks. I took my usual approach, saying it’s always a good time to make retirement contributions, and that he should go ahead and swoop in. That was when the S&P 500 was down roughly 2% in the morning. We texted again in the afternoon before the closing bell—and after the market had rallied big. He was suddenly hesitant to keep his buy orders in place.

I sent him a graph of the past five days of market performance. While stocks had indeed bounced off Thursday morning’s lows, short-term returns were still awful. Look at the year-to-date and it looks like a good old-fashioned correction.

Investors should always take a long-term view. U.S. stocks are up tremendously over the past three years. Foreign shares, however, are up a modest 25% in that time, dividends included.

This month’s volatility should serve not as a signal to exit markets, but as a reminder to put money to work. Maybe you, like my friend, should go ahead and make your annual IRA or health savings account (HSA) contributions. Perhaps you can front-load your 401(k) plan deferrals. It’s not about timing the market—it's about prioritizing your long-term financial goals.

What’s more, if you haven’t yet made last year’s IRA contribution, you still have time. April 18 is the deadline to make prior-year IRA and HSA contributions. For small business owners like me, you can even make solo 401(k) contributions for 2021 up until the tax deadline.

Skittish about investing right now? Consider that wars are not the worst thing for stocks, as callous as that sounds. On the other hand, if inflation continues to run at 7% a year, that could pose a problem—but that’s not what the market expects.

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Set Up to Succeed

LOOKING TO IMPROVE your physical and financial health? You might have heard similar sounding advice: All you have to do is burn more calories than you consume���and to spend less than you make.


While there's an element of truth to both platitudes, I don't find either helpful. There's a psychological canyon between such abstract ideas and putting them into practice.

One thing experience has taught me: If I���m authentically stirred to want to do something, I'll go miles further than if obligation is my only motivation. I also need to come to terms with my own weakness. Willpower and determination can only take me so far. I need help to get where I want to go.

After years of floundering, I���ve now been working out five times a week for more than a year. What changed? I finally got honest about my own limitations.

My wife Sarah and I found a virtual fitness group with daily video workouts. We don't have to pack a gym bag or drive to a class. There's no need to arrange childcare. The workout routine is prepared for us. We just watch and imitate. We keep each other accountable, and we find encouragement in talking with friends in the group. It's become a therapeutic way to start our day together before the kids get up.

What fascinated me about my workout experience: When I humbled myself and accepted help���when I bowled with the gutter guards up and gave myself a chance���it began to change me from the inside out. I began to want to work out, and I began to want to eat better, too. I���ve gone further than I ever thought I would.


I've found that the same principle applies to my financial health. When I get truly excited about achieving a financial goal���like funding an investment account, giving to a cause or starting a business���I'm a million times more likely to spend responsibly than if I'm motivated solely by the duty of sticking to a budget.

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Making a Difference

OUR FOUR CHILDREN are adopted.

After we���d been married several years, we were dismayed that my wife hadn���t conceived. Through testing, we found that we were both essentially infertile. As one doctor put it, ���It���s good you are married to each other.��� We decided not to pursue surrogacy, in vitro fertilization or similar options.

I thought our life was on an even keel until one day my wife asked, ���When you get to be 65, do you want to say that your life amounted only to working for your current employer and making money?���

My employer was ethical and produced products that helped society. I was happy with my job. I told my wife that I was okay with that.

This was not the right answer.

After more discussion, we decided to take in foster children. We began the process to be approved as foster parents.��We both had master���s degrees and good jobs. But we decided that, if we took in foster children, my wife would quit her job to focus on the children.

On July 5, 1988, a California social worker brought us two cute, lively sisters, four-and-a-half and six years old. Each was carrying a plastic trash bag containing all her earthly possessions.

Foster parents are paid, and it can provide significant supplemental tax-free income. These two girls had been living with an older single woman. In subsequent weeks, the girls said that at times their previous caregiver locked them in the backyard so they wouldn���t bother her. She would open the door long enough to hand them a sandwich for lunch.

These two girls had two brothers, one younger and one older. The two boys were each in separate foster homes. In most cases, the goal of foster care is the reunification of families. Every week, someone from the foster care system collected the four children and took them for a visit with their birth parents. Frequently, these visits did not happen because the birth parents weren���t available. Then the children came back dejected.

At that time, the foster care system was very clear that they wanted to place foster children with foster parents who were of the same racial and ethnic identity. My wife and I, and the four children, are non-Hispanic whites. Their younger brother was with a Hispanic family.

Several months after getting the two girls, the social worker told us the foster mom of our girls��� 18-month-old brother was having surgery. She asked if we could keep him temporarily. He moved in on Valentine���s Day 1989. A month later, my wife called the social worker and asked when he was going back. Her response was, ���Oh, you can keep him as long as you want.���

Eventually, the court ruled that, for many reasons, the children would not be able to go back to their birth parents. We told the social worker that if the court severed parental rights and put the children up for adoption, we would be willing to adopt all four. The short version of the story is the court severed parental rights and we adopted the three children we already had, plus their nine-year-old brother.



Our kids knew their birth grandparents and birth cousins. During the time of foster care, we had gotten to know them as well. After adoption, the social worker said that, as their legal parents, we could do what we wanted. We decided to allow our kids to continue visiting them, and we also invited them to our house at times.

We also maintained a distant relationship with their birth parents. They moved to New York, and he got a job as an over-the-road trucker. We moved to southern Illinois. Every year or two, the kids saw their birth parents, either when the birth parents were traveling near our town or when we were on the East Coast visiting our relatives.

We didn���t adopt all the children in this family. After we adopted our four children, the parents had two more children. Child No. 5 was taken away immediately after birth and put up for adoption in New York. Child No. 6 was raised by the birth parents.

For several reasons, child No. 6 spent the summer with us when he was 10 years old. The birth parents and child No. 6 attended the weddings of our kids. Through the wonders of the internet, two of our children were able to find and contact child No. 5. We have now all met him.

I am reminded of the grandfather who was walking along the beach with his young granddaughter. She kept picking up starfish stranded by the receding tide and tossing them back in the ocean. Her grandfather pointed out that there were so many starfish in the ocean, and the ocean was so large, that her actions did not make a difference. As she picked up the next starfish, she said, ���Well, it makes a difference to this one.���

Thanks to my wife���s question nearly 40 years ago, I can say that I haven't just worked for the same employer and made money. We know we haven���t made a major contribution to the world, but we hope we've made a difference to these four people. Even though it has cost us hundreds of thousands of dollars, it���s one of the best decisions of our lives.

Larry Sayler is the only person with a Wharton MBA who also graduated from Ringling Bros. and Barnum & Bailey���s Clown College. Earlier in his career, he served as CFO for three manufacturing and service organizations. For 17 years before his retirement, Larry taught accounting at a small Christian college in the Midwest. His brother Kenyon also writes for HumbleDollar.

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Do What Jack Said

THIS IS A TEST. This is only a test. This is a test of our stock market resolve. Remember how you told yourself you'd stand pat during the next stock market decline, that you wouldn't get rattled like you did in 2008-09 and early 2020? That moment has arrived.

Like any person with an ounce of decency, I'm appalled by Russia's invasion of Ukraine and the unnecessary death and suffering that will result. But I'm also confident that the Russians will come to regret their actions. Can you think of a recent invasion that turned out well for the invader?

But while I worry about the Ukrainian people, I'm not much concerned about the stock market's decline. It's not because I have a crystal ball. Unlike the talking heads on the financial cable TV shows, I have no idea what will happen next in the financial markets. But I'm certainly not selling my stock funds. In fact, if the decline continues, I'll be investing more and, if the drop is steep enough, a whole lot more.��Feeling nervous? Keep these four points in mind.

The drop in share prices has brought the S&P 500 back to where it was in June 2021. Unless you purchased stocks for the first time last year, you're likely sitting on handsome profits.
Market timing is a fool's errand.��If you sell now, you'll be selling at 12% below the S&P 500's Jan. 4 all-time high. By the time you muster the nerve to buy again, there's a good chance the market will be significantly higher.
Stock prices fluctuate far more than intrinsic value. Including dividends, the S&P 500 is down 11% in 2022, with further losses on deck today. But the intrinsic value of corporations hasn't fallen nearly that much���and any decline has been driven largely by rising interest rates, not geopolitical turmoil.
In the end, what stock market investors care about is company earnings. Ask yourself: What does Russia's invasion of Ukraine mean for corporate profitability? Very little, I suspect.

Today, stock market investors are being tested.��The late Jack Bogle, founder of Vanguard Group, would constantly exhort investors to "stay the course." Sounds like great advice to me.

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Paying Them to Worry

EVERY SO OFTEN, I see comments on social media about Vanguard Group���s Personal Advisor Services (PAS). One person posted that he���d talked to a growing number of people who quit PAS. There was no particular reason given for why they left. But I don���t doubt it. I���m a PAS client. I���ve often thought about terminating my relationship.

I���ve been with PAS since 2018. When I first joined, the PAS advisors made a few changes to my investment portfolio. They increased my stock asset allocation by about 12%. In my bond portfolio, they increased my exposure to corporate bonds by about 30%. Have I benefited from these changes? Yes. They added enough value to justify the 0.3% advisory fee.

I now ask myself: What value can they provide over the next three years? Why don���t I take over the management of the portfolio they created? All I have to do is rebalance it every so often. My expenses would be just 0.06% of assets, versus a total of 0.36% today. That would be quite a savings.

But life is not always that simple. If I was in the accumulation stage, I���d be managing my own money. But I���m not. I���ll be 71 this year. This is the time when my wife and I are planning to make significant withdrawals from our portfolio.

We���re planning to do a lot of traveling in the next three years. If COVID is under control, we���ll spend most of our time on the road. We also want to buy a new vehicle, plus do some more work on the house.

What do I want from my PAS advisor over the next three years? A withdrawal plan for these large expenditures. I would also like some emotional support, such as a periodic phone conversation reassuring me that these large withdrawals won���t jeopardize our financial security. I don���t want to be worrying about money���not while I���m trying to enjoy my retirement.

Three years from now, I want to relax in my hotel room, log on to my PAS account and still see that big green round circle that reads: ���>99% likelihood of success.���

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