Jonathan Clements's Blog, page 24
August 23, 2025
The Main Thing … and the scourge of complexity
Like many HD readers, I really enjoy the writing of Morgan Housel. He recently wrote
“You should obsess over risks that do permanent damage and care little about risks that do temporary harm, but the opposite is more common.”
This tapped into a train of thought that I’ve been on recently – focussing on the important stuff. Or, as on old boss of mine use to say, “The main thing, is that the main thing, is the main thing”.
We live in a messy, complex world.
When I use my web browser, it lists a multitude of news stories that are all jostling to be seen as the most urgent, critical, vital. When I check on my favourite finance blogs, there is lots of expert analysis and advice. The links from these blogs also have lots more analysis and advice. Often this is consistent, sometimes it isn’t.
Most importantly, this torrent of news and advice is so often focused on minutia.
• Choosing one particular type of account rather than another because of a tax advantage.
• How to find “optimisation” in your asset allocation – how often should I rebalance, how should asset allocations change with age etc.
• How to maximise your credit score.
• What will happen to various investment options in the next day, week, month or year.
It seems to me that pursuing these many and various personal finance quests probably does two things – leads to mental exhaustion, and has little impact on reaching a comfortable financial life.
I have come to the view that as human beings we are likely better off keeping a very short list of important things that we devote our time and effort to.
With absolutely no claim for these to be correct, I’ll offer some of mine.
In business:
- Keep our staff happy and safe
- Focus on our customers and their satisfaction
- Focus on the big items of revenue and expense, rather than “nickel and dime” items.
For our personal finances:
- Be sufficiently frugal so there is always something left over
- Put every single dollar to work – either paying down debt or invested into simple, low cost funds
- Stay committed to the long term, ignoring any short term oscillations
This approach has served us well. Our priorities won’t be for everyone, and I’m certainly not smart enough or qualified enough to offer them as advice to anyone else.
But I am firmly convinced that simple is better than complex.
The post The Main Thing … and the scourge of complexity appeared first on HumbleDollar.
Online Banks
The post Online Banks appeared first on HumbleDollar.
Love, Money, and a 44-Year Compromise
A strong partnership where both people work can also supercharge wealth generation through the decades, especially if you both think in lockstep on humble lifestyle choices and the importance of saving for the future.
But it has to be said that everyone has different risk tolerance, even within a close relationship and that can translate into the financially optimal" choice not always being the right choice when you're part of a partnership.
I think it's refreshing to openly discuss how relationship dynamics factor into major financial decisions, rather than pretending it's all just about the numbers. So much financial advice is presented in a cold, analytical way that ignores the emotional and interpersonal factors that are often the most difficult to navigate.
I can think of many examples of disagreement about financial risk issues between Suzie and myself. One recent road bump was Suzie wishing to pay off a low rate mortgage and my wish to keep the debt and earn higher returns in the market. The compromise was easy…Suzie's need for security was much stronger than my desire for possible higher returns.
Suzie has more of a tendency to hold cash in high-interest savings accounts, whereas I prefer to hold less cash and more in stocks. The simple solution was to run two separate portfolios. Maybe it's just joint mental accounting, but it satisfies both our needs without jeopardizing our lifestyle, and it strengthens our emotional relationship.
This optimization for emotional and relationship return over financial return can be difficult at times and requires emotional maturity and a clear understanding of your financial situation. It's maybe a strange paradox but a suboptimal financial choice is sometimes an overall correct choice within a strong relationship and should be considered within any overall financial plan.
For couples navigating these waters, I'd suggest starting with honest conversations about your individual relationships with money and risk. What keeps you up at night? What gives you peace of mind? Then look for creative solutions that honor both perspectives rather than forcing one person to simply give in.
After 44 years together, I've learned that the most important financial asset isn't in any portfolio—it's the partnership itself. A relationship strong enough to weather market crashes, job losses, and life's inevitable curveballs is worth more than any optimization strategy. Sometimes the best financial plan isn't the one that maximizes returns—it's the one both partners can live with comfortably for decades.
When financial advisors talk about diversification, maybe they should include relationship harmony as an asset class worth protecting.
The post Love, Money, and a 44-Year Compromise appeared first on HumbleDollar.
On the Downslope of Life?
I’VE ALWAYS BEEN a saver. From my first job singing in the church choir, I stashed earnings in a snap-top Band-Aid box. I added to my savings by sweeping the patio of a family friend.
Sometimes, I’d shake my savings onto my bedspread and count it. It gave me a great feeling to find that I had $10.50 or $15.65. The stacks of silver quarters gave me a sense of security as a child.
That’s why it’s been a bit of a letdown to start withdrawals from my 401(k). No, they’re not required. Required distributions don’t kick in for me for four more years. No, the reason to automate monthly withdrawals is simple. Five years into retirement, I can see the bottom of my liquid savings.
I'm lucky, however. With the U.S. stock market at new heights, my assets have grown slightly in retirement, not shrunk. If I don’t spend money, some of it might evaporate in a correction.
But subtracting from my 401(k) feels like I’m entering the downslope of life. Franco Modigliani won the Nobel Prize for his life cycle hypothesis of human consumption. When we are vigorous and young, we save money for old age. When we are retired—and presumably tired—we withdraw the money to live without labor.
This transition to withdrawals is not easy for lifelong savers like me. You may have experienced it, too. Spending money can feel irresponsible. I’ve worked hard to postpone consumption, unless the money was for someone else.
This summer, for example, I tried to coax one more year out of an old Electrolux, which only started intermittently. I’ve got old sheets, old books, an old house, and an old boat that requires daily bailing.
Being a thrifty Yankee is a time-honored role here in Maine. If I’m honest with myself, however, I realize that maintaining all these geriatric possessions is getting in my way. I don’t work as hard at everyday chores as I have, and some jobs are beyond my skills. Thoughts of deferred maintenance keeps me up at night.
I’m going to change. I started with a small step today. I threw away the old Electrolux. I could have taken it to the repairman again, but honestly, it’s a relief to be rid of the old contraption. I want to spend more time on the water, not in the shop.
The post On the Downslope of Life? appeared first on HumbleDollar.
Dividends Part II – At least
https://www.whitecoatinvestor.com/div...
Today, I’m going to channel my inner “RDQ” and raise some peoples ire:
About one month ago, there was a post about dividends. It contained quite a bit of what I will politely call, “magical thinking”. Despite my linking two excellent articles which debunk the dividend myth, clearly subsequent posters did not bother to read either of them and persisted in posting the dividend dogma that commonly persists. I even resorted to asking Jonathan to chime in (which he kindly did) as too many folks seemed to still not be “getting it”, to my dismay.
In an effort to never give up the good fight (LOL), a new post dropped this morning elsewhere, and I have attached the link above, in an effort once again at dispelling the false ideas people have about dividends.
Please feel free to use your down arrow votes aggressively and make my day !
The post Dividends Part II – At least appeared first on HumbleDollar.
August 22, 2025
How to Beat the Market
Hedge fund manager Seth Klarman is a modern-day Carnegie. Klarman founded the Boston-based Baupost Group in 1982, and while performance numbers aren’t publicly available, the firm’s track record is believed to be among the best in the industry. By some accounts, returns have averaged 20% per year, roughly double the overall market’s returns.
Like Carnegie, Klarman’s approach is so specialized and so unique that he’s happy to tell people how he does it. He regularly gives interviews and even wrote a book detailing the different ways Baupost makes money.
While this approach isn’t appropriate for everyday investors, these strategies—known as deep-value—are so different from what’s popular on Wall Street that they’re worth understanding.
Klarman’s philosophy rests on several key pillars, the first of which is that he avoids making forecasts. He jokes that he’d “predict ten of the next two recessions,” and as a result, doesn’t find that a useful basis for making investments. This is a particularly important point because active management often involves forecasting. Klarman’s view, though, is that it’s too unreliable and thus the wrong approach.
Other successful investors share this view. Peter Lynch, the retired manager of Fidelity’s Magellan Fund, called forecasting “futile” and argued that “crystal ball stuff doesn't work.” Lynch was especially wary of economic forecasts. “If you spend 13 minutes a year on economics, you've wasted 10 minutes,” he once commented. Instead, Lynch would go company by company, looking for stocks that, in his estimation, were selling for less than they were worth.
Warren Buffett has expressed largely the same view. “What you really want to do in investments is figure out what is important and knowable,” he’s said. And while the future direction of the economy is important, it isn’t knowable. For that reason, Buffett says, investors should avoid making forecasts and should avoid listening to others’ predictions.
If forecasting isn’t part of the value investors’ toolkit, then how do they choose investments? In short, they search for things selling at such steep discounts that a crystal ball isn’t necessary. But because these sorts of opportunities are rare, they’re often looking far off the beaten path. Obvious investments—even if they look like good investments—don’t appeal to value investors. Baupost doesn’t own Apple, Amazon or Microsoft. This approach, in other words, is the opposite of what Wall Street tends to promote.
To illustrate how Baupost operates, Klarman describes an early investment. When he was a teenager, he worked out an arrangement with a local bus driver to secure rare coins. At the end of each day, the driver would go through the bus’s coin box, and when he found an out-of-circulation coin like a Mercury dime, the driver would give it to Klarman in exchange for a regular coin. In other words, Klarman would pay 10 cents for something worth far more than 10 cents somewhere else. In finance, this is known as arbitrage, and it’s among the strategies that hedge funds like Baupost use.
In his book, Margin of Safety , Klarman describes some of the other unusual investments favored by value managers. These include corporate spinoffs, bankruptcies, thrift bank conversions, rights offerings and other complex securities.
If these sound complicated, that’s the idea. These investments tend to be profitable because they’re so arcane. Consider spinoffs. Why do they present opportunity? Margin of Safety explains that individual shareholders receiving spun-off shares will often sell reflexively because “they may know little or nothing about the business,” and institutional investors “may deem the newly created entity too small to bother with.” For these reasons, newly spun off shares tend to trade at depressed prices, providing opportunity for value investors willing to go against the grain.
In one sense, the types of investments Klarman pursues are straightforward. Value investors like to say that they’re simply looking to buy a dollar for 50 cents. It’s really no more complicated than that.
Hedge fund manager Joel Greenblatt ran a firm called Gotham Capital that pursued many of the same strategies as Baupost, and with similar results. Over one 10-year period, Gotham averaged 50% annual returns, a remarkable feat. And just like Klarman, Greenblatt wrote a book detailing exactly how he did it. It’s called You Can Be a Stock Market Genius. What’s telling, however, is how few people choose to follow their lead. That’s because deep-value investing like this requires more than just a playbook; it requires a commitment of time and patience, it involves significant legwork, and perhaps most important, it requires the mental fortitude to intentionally go against the crowd.
What can individual investors learn from these strategies? Just as with Carnegie’s steel mill, funds like Baupost and Gotham are a marvel. Their complexity, though, tells us something important: It illustrates just how difficult it is to beat the market. This type of investing entails significant effort and enormous cost. To run his fund, Klarman employs 250 analysts. To reliably beat the market, that’s what’s required. And even then, it doesn’t always work. According to the data, the majority of actively-managed funds underperform each year. Recent reports indicate that even Baupost has been struggling of late.
That’s why, at the risk of sounding like a broken record, I always recommend index funds. To be sure, they aren’t designed to beat the market. But by avoiding counterproductive strategies like forecasting and tactical trading, index funds are designed to do something else critically important: They’re designed to help investors avoid underperforming.
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 X @AdamMGrossman and check out his earlier articles.The post How to Beat the Market appeared first on HumbleDollar.
Trump Accounts: A Deep Dive into Kids’ Savings
There’s been a lot of confusion about how it works, who qualifies, and whether they’re actually useful. I’ll walk through the rules, highlight key opportunities, and give my take on when (if ever) this account makes sense.
First and foremost, I want to point out that no contributions are allowed before 12 months after the date of the enactment of the OBBBA, meaning that you can't really use or invest in such an account before July 5, 2026.
General Treatment
A Trump Account is treated similarly to a traditional IRA under Section 408(a) (which is not Roth), with certain modifications.
This account is created or organized for the exclusive benefit of an eligible individual who hasn't reached age 18 before the end of the calendar year. When such an account is created, it must be designated as the "Trump account."
So, who is an eligible individual?
A person who has not attained the age of 18 before the close of the calendar year
For whom a Social Security number is issued
For whom an election is made by the Secretary (if they determine such an individual meets the requirements of #1 and #2) OR an election is made by a person other than the Secretary for the establishment of a Trump account. "Secretary" essentially means the IRS.
I believe #3 likely means that you can file some statement with the IRS that establishes such an account (perhaps as part of your tax return filing, or otherwise).
Contributions
First, no deduction is allowed for any contributions made before the first day of the calendar year in which the beneficiary turns 18.
Contributions made before the calendar year in which the beneficiary turns 18 should not be more than $5,000, with inflation adjustments starting in 2027 (using the cost-of-living formula).
It is important to note that this is called a "regular" (non-exempt) contribution. That will become important later on.
There are other ways that contributions could be made. The following three options are called "exempt" contributions:
1. IRC Section 129 - Employer Contributions
Employers can contribute up to $2,500 per employee (or dependent) annually to a Trump Account, excluded from the employee's gross income. $2,500 is increased with cost-of-living adjustment after 2027.
The program must meet requirements similar to dependent care assistance (Section 129(d)), such as non-discrimination and notification.
2. IRC Section 6434 - Pilot Program
Parents/guardians elect for an "eligible child" (U.S. citizen born Jan. 1, 2025, through Dec. 31, 2028, qualifying dependent under Section 152(c), no prior election was made) to receive $1,000 as a tax payment, refunded directly to the child's Trump account. The election requires the child's Social Security number. Payments are exempt from offsets/levies.
3. Qualified General Contributions
Contributions from governments or 501(c)(3) nonprofits are excluded from the beneficiary's gross income.
These must target a "qualified class" of beneficiaries, such as all under 18s, those in specific states/geographic areas, or birth-year cohorts. Essentially, this means philanthropic funding (e.g., a charity or governments donating to minors in some geographic area).
So, why is there a difference between exempt vs. non-exempt?
Distributions
For purposes of distributions, we have to discuss the "investment in the contract," or basis.
The investment in the contract does not include the exempt types of contributions.
This likely means we need to be aware of or track two things:
Basis of regular contributions (by parents, etc.)
Basis of exempt contributions (pilot program, etc) which will become part of earnings
Note that trustees must report contributions (> $25 from non-Secretary sources), distributions, fair market value, and basis to the IRS and beneficiary until age 17.
Generally, no distributions are allowed before age 18 unless it’s an exception (rollover, qualified ABLE rollover, distribution of excess contributions.
If a beneficiary passes away, the account ceases to be a Trump Account. The fair market value (minus the basis, as described above) is includible in the acquirer's or estate's income.
Also, while the account beneficiary is under age 18, contributions to a Trump account do not count against the normal IRA contribution limits (like the $7,000 cap in 2025).
Investments
The account also must be invested in an "eligible investment" which is defined as a mutual fund or ETF that:
Tracks a qualified index (like the S&P 500 or another broad U.S. equity index with regulated futures trading)
Does not use leverage
Has an expense ratio of 0.10% or less
Meets any additional criteria set by the Secretary
So, What Do We Do After Age 18?
That's the question most people want to know, and one I’ve thought a lot about.
Distributions after 18 are taxed under IRC Section 72.
This means that distributions are typically treated as ordinary income to the extent they exceed the "investment in the contract" (basis).
Generally, a distribution (or a conversion to a Roth IRA) will likely be applied pro-rata between the basis and earnings. This is because some of the amounts are contributed after-tax (regular contributions) and some are pre-tax (like earnings)
Example: Let’s say you contributed $5,000 to a Trump account. Your child also received $1,000 of pilot program contribution. Your child is now 18. The amount grew to $22,000.
Basis = $5,000
Earnings = $17,000
If we distribute the entire amount before age 59½, a 10% early withdrawal penalty will apply. Of course, there are some exceptions like:
Qualified higher education expenses
First-time homebuyer (up to $10,000)
Series of substantially equal periodic payments (72t)
Let’s say we distribute the entire amount ($22,000) and pay for higher education. The $17,000 will be taxed at ordinary income rates.
If we distribute a portion of the account, say $10,000, the distribution will contain a pro-rata share of both, or around ~$2,272 of basis and $7,727 of earnings.
Interestingly, Section 408(d)(2) will be applied "separately with respect to Trump Accounts and other individual retirement plans." This means the Trump account's basis and value are not aggregated with any other traditional IRAs you might have for pro-rata calculations.
Conversion to Roth IRA
First, more guidance will be needed to clarify how Trump accounts will interact Roth IRAs, and whether a conversion is possible, but the big benefit I personally see with something like this is being likely able to convert to a Roth IRA and have a substantial amount without the need for earned income (assuming it's allowed)
This way, a child could have 40+ years of growth all tax-free assuming such a conversion will be allowed.
The main question is how it would be taxed. We cannot move only the after-tax dollars from a Trump account to a Roth IRA and keep the rest in a Traditional IRA, since partial distributions must be allocated pro-rata.
If we convert the entire $22,000 to a Roth IRA, $17,000 will be taxed. If we convert $10,000, a pro-rata share will be taxed, similarly to the example above.
This means that if you have a dependent child, and convert some amounts, the kiddie tax will likely apply if you convert above certain thresholds (i.e., standard deduction for a dependent child).
Of course, the IRS has a lot of work to do on clarifying all these details, and this is just my interpretation based on the text and by no means should be construed as financial or tax advice.
Benefits and Prioritization
Is this worth it?
I believe the only usefulness of such an account is the Roth IRA play, and I expect wealthier taxpayers will likely take advantage of it if allowed. I would certainly at least get the $1,000 pilot credit if qualified.
For someone who can allocate $300 a month to build a child's wealth, I think a 529 plan will likely come out ahead. Especially with the $35,000 Roth IRA rollover option in case a child doesn't attend a higher education institution.
This is because the withdrawals are tax-free for qualified higher education expenses, and you can get a state tax deduction (+ opportunity cost there). Also, OBBBA extended the definition of many expenses for 529 plans, like paying for SAT/AP exams or postsecondary credentials.
One thing I think is important to keep in mind with Trump accounts is liquidity. If distributions from a Trump account are taxable, and the 10% penalty can be avoided in a limited set of circumstances, how likely is the usefulness of such an account for a 22-to-30 year old?
This means that if you wanted to support your child with a down payment for a car or a house (beyond the $10,000 amount exception to the 10% penalty), I believe a better savings vehicle might be more appropriate.
Trump Account vs. UTMA
Taking aside the 529 plan, as I believe it's superior for most families, let’s look at UTMA vs Trump account. Both UTMA and Trump accounts are after-tax.
UTMA could have some dividends taxed, but due to the standard deduction, and likely qualified nature of them, ~$2,700 of such income can be excluded (standard deduction of $1,350, the next $1,350 is taxed at the child's rate) per year.
So UTMA (taxable) vs Trump account (tax-deferred) will likely have similar tax drag in reality, unless your child has substantial assets in the UTMA.
Liquidity
Let’s say your child needs to buy a car at age 25, which they could use either UTMA vs Trump account for the down payment.
Let’s assume we invested $5,000 into each at their birth. By the time they are 25, let’s say they have $34,000.
For simplicity, assume no state taxes. With a UTMA account, parents could actually strategically do tax gain harvesting every single year to harvest long-term capital gains. They've increased the basis to ~$15,000.
Once withdrawals are allowed at 18, Trump accounts could also start getting converted into Roth. To stay below the kiddie tax, we can only harvest $1,350 (plus COL adjustment). The conversion could start a 5-year clock for withdrawing the taxable portion of the conversion.
At 25, we would only have very little to use with the Trump account that is accessible penalty-free.
Something to think about, though, is that UTMA money counts toward a child's assets, whereas IRAs don't for FAFSA.
A good approach, in my opinion, could be to have a small allocation to such an account solely for the purposes of Roth funding, while the majority of assets are prioritized in 529 and UTMA/brokerage in parents' names if possible.
Summary
A Trump account is an after-tax account (no tax deduction applies to contributions).
Parents or relatives can contribute up to $5,000 to the account
No withdrawals are allowed before the beneficiary turns 18.
Investment earnings grow tax-deferred (e.g dividends aren’t taxed)
At 18, the account becomes a traditional IRA, with ordinary income tax rates applied to withdrawals to the extent they exceed the basis in the account (contributions). The 10% penalty will also apply to withdrawals before age 59½ unless an exception applies ($10,000 for a down payment, education, 72(t) SoSEPP, etc.).
A $1,000 tax credit could be applied to a Trump account if your qualifying child is born between Jan 1, 2025, and Dec 31, 2028.
Is it really worth the hassle? Personally, I would at least get the $1,000 credit if your child qualifies, as it shouldn’t be too much effort to get it. It's still unclear who will administer the accounts, and likely all major “players” will be involved to some extent.
For most families, I'd likely prioritize 529 plans and UTMA/brokerage accounts first, but using a small allocation to a Trump Account could give a child a potential head start on tax-free growth at 18. But like with any new provision, there are details the IRS will need to clarify, and the above is just my interpretation of the current law.
Bogdan Sheremeta is a licensed CPA based in Illinois with experience at Deloitte and a Fortune 200 multinational. He shares insights on taxes and personal finance through his newsletter, helping thousands of readers to make smarter financial decisions. He has over 140,000 followers on X and 110,000 on Instagram.
The post Trump Accounts: A Deep Dive into Kids’ Savings appeared first on HumbleDollar.
Trading 24/7?
Over the decades, technology and regulation transformed both the cost and speed of trading. The first big shift came in the 1970s, when fixed commissions were abolished. For the first time, brokers could compete on price, and discount firms began offering lower-cost services. In the 1990s, the rise of online platforms allowed everyday investors to place their own orders with just a click, driving prices down further. By the 2000s, trades could be made for less than ten dollars and executed within seconds.
The final plunge in cost came in the 2010s, when new platforms introduced zero-commission trading. Established firms followed suit, and today buying or selling a stock can be done instantly and without any direct fee. What once cost the equivalent of thousands of dollars now costs nothing at all.
And yet, one part of the old system remains: settlement. While an order today executes in milliseconds, the official transfer of ownership and cash still takes time. The United States recently shortened the process from two business days to just one. The next step being discussed is “T+0,” or same-day settlement, and eventually real-time settlement, where the trade, cash, and ownership all exchange hands immediately.
The Journey in Perspective
Era
Typical Cost of a Trade
Time for Execution / Settlement
Context
1900
~1% of trade value (≈ $100 per $10k; $10k then ≈ $380k today; $100 then ≈ $3.8k today)
2–3 days
Manual tickets, phone calls, mailed confirms
1975
$30–$100 per trade
Hours to next day
Fixed commissions abolished; price competition begins
1995
$15–$20 per trade
Minutes to an hour
Online trading for retail investors
2005
$5–$10 per trade
Seconds to minutes
Electronic exchanges and direct access
2015
$0–$5 per trade
Seconds
Zero-commission models proliferate
Today
$0 per trade
Milliseconds (execution), 1 day (settlement)
Instant fills; ownership transfer still lags
Why Settlement Still Takes Time
Liquidity buffers: Firms need time to marshal the cash or shares.
Error correction: Short delays catch mismatches and mistakes.
Global coordination: Different time zones and rules complicate instant transfers.
Legacy systems: The financial “plumbing” that handles trillions wasn’t built for real-time.
History suggests these barriers will fall. Experiments with new technology, including distributed ledgers and tokenized assets, are testing ways to move securities and cash instantly. Regulators are encouraging shorter cycles to reduce risk. It may take years, but just as commissions collapsed from $100 to zero, settlement time is on a path from days to seconds. And if trades can settle instantly, markets could even move toward 24/7 access, much like digital assets already do.
Do you think 24/7 stock trading would be a good idea, or would it create more problems than it solves?
*Research and editing was assisted by AI
The post Trading 24/7? appeared first on HumbleDollar.
Paper Certificates to Real-Time
Over the decades, technology and regulation transformed both the cost and speed of trading. The first big shift came in the 1970s, when fixed commissions were abolished. For the first time, brokers could compete on price, and discount firms began offering lower-cost services. In the 1990s, the rise of online platforms allowed everyday investors to place their own orders with just a click, driving prices down further. By the 2000s, trades could be made for less than ten dollars and executed within seconds.
The final plunge in cost came in the 2010s, when new platforms introduced zero-commission trading. Established firms followed suit, and today buying or selling a stock can be done instantly and without any direct fee. What once cost the equivalent of thousands of dollars now costs nothing at all.
And yet, one part of the old system remains: settlement. While an order today executes in milliseconds, the official transfer of ownership and cash still takes time. The United States recently shortened the process from two business days to just one. The next step being discussed is “T+0,” or same-day settlement, and eventually real-time settlement, where the trade, cash, and ownership all exchange hands immediately.
The Journey in Perspective
Era
Typical Cost of a Trade
Time for Execution / Settlement
Context
1900
~1% of trade value (≈ $100 per $10k; $10k then ≈ $380k today; $100 then ≈ $3.8k today)
2–3 days
Manual tickets, phone calls, mailed confirms
1975
$30–$100 per trade
Hours to next day
Fixed commissions abolished; price competition begins
1995
$15–$20 per trade
Minutes to an hour
Online trading for retail investors
2005
$5–$10 per trade
Seconds to minutes
Electronic exchanges and direct access
2015
$0–$5 per trade
Seconds
Zero-commission models proliferate
Today
$0 per trade
Milliseconds (execution), 1 day (settlement)
Instant fills; ownership transfer still lags
Why Settlement Still Takes Time
Liquidity buffers: Firms need time to marshal the cash or shares.
Error correction: Short delays catch mismatches and mistakes.
Global coordination: Different time zones and rules complicate instant transfers.
Legacy systems: The financial “plumbing” that handles trillions wasn’t built for real-time.
History suggests these barriers will fall. Experiments with new technology, including distributed ledgers and tokenized assets, are testing ways to move securities and cash instantly. Regulators are encouraging shorter cycles to reduce risk. It may take years, but just as commissions collapsed from $100 to zero, settlement time is on a path from days to seconds. And if trades can settle instantly, markets could even move toward 24/7 access, much like digital assets already do.
Do you think 24/7 stock trading would be a good idea, or would it create more problems than it solves?
*Research and editing was assisted by AI
The post Paper Certificates to Real-Time appeared first on HumbleDollar.
Legacy Decisions: What Should the Sandwich Generation Pass on?
I don't have much choice as a baby boomer. My generation has been predicted to usher in the largest intergenerational wealth transfer in the next decade. In the meantime, we carry the honor and burden of taking care of our frail, elderly parents. People call us "the sandwich generation" - and I'd like to think we've made the best sandwich ever.
My parents came from a deeply patriarchal culture in which the parents dictated nearly every aspect of their children's lives - education, marriage, even living arrangement. Being the head of the household meant carrying the heavy responsibility of ensuring family tradition, social order, and family's sustenance. Entering modern American society turned their world upside down, and calling the adjustment "difficult" hardly captures the magnitude of their struggle.
My own struggle was different. I faced the choice between finding any paying job as soon as I earned by B.S degree to support the family or following my career passion wherever it might lead. A dear friend shared my dilemma with his mother, and her perspective has stayed with me ever since: "All parents, in every culture, want the best for their children, not the best for themselves."
As my parents aged, however, their patriarchal mindset did not change much - they held on to the values they grew up with. My father at times asked me to hand over all my salaries and savings, so he could return to me as my allowance. I resisted with the reason that I need to save for his grandchildren's education. He quipped "I had no money for your college and look how you turned out!" They also refused to live with any of the children, fearing it would mean loss of control or dignity. For years, we had to travel long distance to visit them, until we eventually relocated to live nearby and make caring easier before their passing.
Having embraced the American value of self-reliance, we do not want our children to experience the same care giving challenges. With independence in mind, we've made our own retirement plans. Our children are free to pursue their careers and choose their living arrangement, whether to rent or to own their home. We've told them that our house could be theirs should they wish to move back to the expensive Bay Area. Meanwhile, my 100-year-old mother in-law is nearing the end of her life, and her house near us will soon raise the question of whether to sell or to keep for the Millennial generation.
Since more than half of our assets are tied up in home equities, we are weighing how best to transfer wealth to our children: should we prioritize liquid assets invested in the markets, real estate in the Bay Area, or some of both? Money provides the flexibility to relocate easily, allowing us to live near our children, continue at a Continuing Care Retirement Community (CCRC), or pursue more affordable international options as expatriates or repatriates, or support charitable causes with broader community impact. Spending for our own pleasure or new experiences just isn't who we are. Real estate like ours in the Bay Area is becoming out of reach for younger generations, yet holding onto these properties comes with significant maintenance costs and responsibilities - challenges that go beyond simple financial planning.
It is delicious to be sandwiched between such choices - while we still have the freedom to make them. But then again, as John Lennon beautifully sang, "Life is what happens to you while you're busy making other plans."
The post Legacy Decisions: What Should the Sandwich Generation Pass on? appeared first on HumbleDollar.
