Jonathan Clements's Blog, page 263
September 21, 2021
Warren’s Relative
AT 40 YEARS OLD, I missed out on the phenomenal early years that allowed Berkshire Hathaway��to return nearly 3,000,000% since 1964, versus a ���mere��� 23,500% for the S&P 500. Yet my investment time horizon is still long���and that���s a huge advantage as an investor.
How should I use that advantage? As I write this, Berkshire���s total stock market value is roughly $650 billion. By contrast, one of the stocks my wife and I bought���Boston Omaha���is worth less than $1 billion. Our hope: Guided by its two thoughtful co-CEOs, Boston Omaha (symbol: BOMN) will generate impressive long-run compound growth. But before I describe the company, I want to offer three caveats.
First, nothing replaces the wisdom of owning index funds, as Berkshire���s Chairman Warren Buffett has frequently noted. Second, Boston Omaha is a growing company that raised money by issuing shares earlier this year. Our shares will get diluted if they raise additional capital to grow, which is a possible drawback. Third, the issue price of its new shares was at a price much lower than the company���s current stock price.
Please don���t take the following discussion as an investment recommendation. Rather, my goal here is to describe what I look for when we don���t invest in index funds���which is where we keep the vast majority of our money.
Why do I like Boston Omaha, which is named for the hometowns of its co-CEOs? First, if you read my article yesterday discussing my investment criteria, I like dirty jobs that are tough to disrupt but easy to scale. Surety bonds, billboards and fixed broadband cable in rural areas may sound boring, but they���re music to my ears. Each has excellent profit margins and a protective business moat that���s difficult to cross.
On top of that, Boston Omaha is willing to innovate to grow its business. Last year, for instance, the company sponsored a special purpose acquisition company (SPAC). While SPACs have drawn well-deserved criticism, Boston Omaha used its SPAC capital to buy a significant stake in a company that builds private jets hangars at large airports���a business that generates boring, dirty, residual income that���s difficult to disrupt.
But that isn���t all. Boston Omaha also has allocated capital exceptionally well through minority private investments in residential and commercial real estate, and even a bank. Because its co-CEOs began as portfolio managers, they also maintain a large percentage of the corporation���s assets in the stocks of other publicly traded companies.
In short, its leadership is unrestrained in looking for the best place to allocate capital. Sometimes, that investment will be internal, such as acquiring more billboards or laying more broadband cable. At other times, it may mean investing in private or publicly traded companies. This business model of building out several core businesses strikes me as an even better way to allocate capital than the one that Berkshire Hathaway began with���depressed New England textile mills that slowly withered away.
That brings me to my favorite thing about Boston Omaha: the two co-CEOs. I want to invest with people who have more skin in the game than anyone else. Together, Boston Omaha���s co-CEOs own a significant portion of the company. Neither one drew a salary for many years, allowing more capital to be reinvested into the business.
The co-CEOs are Adam Peterson and Alex B. Rozek, and I hesitate to mention that the ���B��� is short for Buffett. Alex Rozek is the grandson of Warren Buffett���s sister, Doris, and grand-nephew to Warren. Rather than publicize this association, Boston Omaha���s leadership humbly goes about building their own business. Yet, when I read their��letters��to shareholders, I can���t help but be reminded of the insights and humility of Rozek���s famous relative.
Am I hoping for the next Berkshire Hathaway? No. I���m clear-eyed about the exceptional talent and circumstances that powered Berkshire Hathaway���s success. Candidly, I���d consider this investment a resounding success if my wife and I enjoyed a long, profitable, silent partnership with two shrewd capital allocators. From our point of view, it would be great if the destination proves lucrative���but I think the journey will be the truly fun part.
John Goodell is general counsel for the Texas Veterans Commission. He has spent much of his career advocating for military and veterans on tax, estate planning and retirement issues. His biggest passion is spending time with his wife and kids. Follow John��on Twitter @HighGroundPlan��and check out his earlier articles.
How should I use that advantage? As I write this, Berkshire���s total stock market value is roughly $650 billion. By contrast, one of the stocks my wife and I bought���Boston Omaha���is worth less than $1 billion. Our hope: Guided by its two thoughtful co-CEOs, Boston Omaha (symbol: BOMN) will generate impressive long-run compound growth. But before I describe the company, I want to offer three caveats.
First, nothing replaces the wisdom of owning index funds, as Berkshire���s Chairman Warren Buffett has frequently noted. Second, Boston Omaha is a growing company that raised money by issuing shares earlier this year. Our shares will get diluted if they raise additional capital to grow, which is a possible drawback. Third, the issue price of its new shares was at a price much lower than the company���s current stock price.
Please don���t take the following discussion as an investment recommendation. Rather, my goal here is to describe what I look for when we don���t invest in index funds���which is where we keep the vast majority of our money.
Why do I like Boston Omaha, which is named for the hometowns of its co-CEOs? First, if you read my article yesterday discussing my investment criteria, I like dirty jobs that are tough to disrupt but easy to scale. Surety bonds, billboards and fixed broadband cable in rural areas may sound boring, but they���re music to my ears. Each has excellent profit margins and a protective business moat that���s difficult to cross.
On top of that, Boston Omaha is willing to innovate to grow its business. Last year, for instance, the company sponsored a special purpose acquisition company (SPAC). While SPACs have drawn well-deserved criticism, Boston Omaha used its SPAC capital to buy a significant stake in a company that builds private jets hangars at large airports���a business that generates boring, dirty, residual income that���s difficult to disrupt.
But that isn���t all. Boston Omaha also has allocated capital exceptionally well through minority private investments in residential and commercial real estate, and even a bank. Because its co-CEOs began as portfolio managers, they also maintain a large percentage of the corporation���s assets in the stocks of other publicly traded companies.
In short, its leadership is unrestrained in looking for the best place to allocate capital. Sometimes, that investment will be internal, such as acquiring more billboards or laying more broadband cable. At other times, it may mean investing in private or publicly traded companies. This business model of building out several core businesses strikes me as an even better way to allocate capital than the one that Berkshire Hathaway began with���depressed New England textile mills that slowly withered away.
That brings me to my favorite thing about Boston Omaha: the two co-CEOs. I want to invest with people who have more skin in the game than anyone else. Together, Boston Omaha���s co-CEOs own a significant portion of the company. Neither one drew a salary for many years, allowing more capital to be reinvested into the business.
The co-CEOs are Adam Peterson and Alex B. Rozek, and I hesitate to mention that the ���B��� is short for Buffett. Alex Rozek is the grandson of Warren Buffett���s sister, Doris, and grand-nephew to Warren. Rather than publicize this association, Boston Omaha���s leadership humbly goes about building their own business. Yet, when I read their��letters��to shareholders, I can���t help but be reminded of the insights and humility of Rozek���s famous relative.
Am I hoping for the next Berkshire Hathaway? No. I���m clear-eyed about the exceptional talent and circumstances that powered Berkshire Hathaway���s success. Candidly, I���d consider this investment a resounding success if my wife and I enjoyed a long, profitable, silent partnership with two shrewd capital allocators. From our point of view, it would be great if the destination proves lucrative���but I think the journey will be the truly fun part.
John Goodell is general counsel for the Texas Veterans Commission. He has spent much of his career advocating for military and veterans on tax, estate planning and retirement issues. His biggest passion is spending time with his wife and kids. Follow John��on Twitter @HighGroundPlan��and check out his earlier articles.The post Warren’s Relative appeared first on HumbleDollar.
September 20, 2021
Gut Reaction
BEHAVIORAL ECONOMISTS��long ago discovered that the pain we feel from a $1,000 loss is about twice as great as the joy we feel from a $1,000 gain. Daniel Kahneman and Amos Tversky documented the phenomenon and coined the term ���loss aversion��� in 1979. That was just a few years before I began investing.
Since then, I���ve made a discovery about my own psychology: I���d rather underperform in out-of-favor stocks than risk losses in glamorous ones���because my gut tells me that the more something is celebrated, the harder it���ll fall.
I feel like I was a contrarian even before 1992, when Eugene Fama and Kenneth French advanced their three-factor model. They showed that neglected value stocks, especially those of smaller companies, were the best performers going back to 1926. Their model purports to explain why that happened and why this outperformance should continue.
Maybe if I���d been Mr. Popular in high school, I���d feel more at home in a crowd, more comfortable buying stocks others are bragging about. If my Little League team hadn���t sucked, I might not gravitate so much to the underdog. If I weren���t so egotistical, I might not feel this overwhelming desire to win by betting against everyone else.
In other words, I need to admit that my preference for unloved stocks might be driven more by my gut than my brain. It���s probably as much a hunch as it is a conclusion based on historical research. If Fama and French had said in the 1990s to buy popular shares like Microsoft, Walmart and Home Depot, I might have ignored them.
Today, the Fama-French model has more doubters than ever. There���s serious debate about whether the valuation metric they used���price-to-book value���is still useful. Book value doesn���t capture intangible factors that can add to a company���s worth, such as the intellectual property the corporation owns or the value of the brainpower that rides up a company���s elevators every morning.
Indeed, outrageously high price-to-book values didn���t slow the advance of today���s dominant tech stocks over the past 14 years. From late May 2007 through early September 2020, the Vanguard Growth Index ETF soared 354%. The Vanguard Small-Cap Value ETF? Just 99%. In the year since, the tables have turned modestly.
We don���t and can���t know which areas of the market will outperform. Even if the most perspicacious investors could theoretically figure it out, we all have strong behavioral biases that cloud our crystal ball, no matter how much information we have. All of this is just further evidence, in my mind, that the vast majority of our stock allocation should be in market capitalization-weighted index funds. Mine is, though I can���t completely ignore my gut, which is why I still dabble in small-cap value at home and abroad.
Since then, I���ve made a discovery about my own psychology: I���d rather underperform in out-of-favor stocks than risk losses in glamorous ones���because my gut tells me that the more something is celebrated, the harder it���ll fall.
I feel like I was a contrarian even before 1992, when Eugene Fama and Kenneth French advanced their three-factor model. They showed that neglected value stocks, especially those of smaller companies, were the best performers going back to 1926. Their model purports to explain why that happened and why this outperformance should continue.
Maybe if I���d been Mr. Popular in high school, I���d feel more at home in a crowd, more comfortable buying stocks others are bragging about. If my Little League team hadn���t sucked, I might not gravitate so much to the underdog. If I weren���t so egotistical, I might not feel this overwhelming desire to win by betting against everyone else.
In other words, I need to admit that my preference for unloved stocks might be driven more by my gut than my brain. It���s probably as much a hunch as it is a conclusion based on historical research. If Fama and French had said in the 1990s to buy popular shares like Microsoft, Walmart and Home Depot, I might have ignored them.
Today, the Fama-French model has more doubters than ever. There���s serious debate about whether the valuation metric they used���price-to-book value���is still useful. Book value doesn���t capture intangible factors that can add to a company���s worth, such as the intellectual property the corporation owns or the value of the brainpower that rides up a company���s elevators every morning.
Indeed, outrageously high price-to-book values didn���t slow the advance of today���s dominant tech stocks over the past 14 years. From late May 2007 through early September 2020, the Vanguard Growth Index ETF soared 354%. The Vanguard Small-Cap Value ETF? Just 99%. In the year since, the tables have turned modestly.
We don���t and can���t know which areas of the market will outperform. Even if the most perspicacious investors could theoretically figure it out, we all have strong behavioral biases that cloud our crystal ball, no matter how much information we have. All of this is just further evidence, in my mind, that the vast majority of our stock allocation should be in market capitalization-weighted index funds. Mine is, though I can���t completely ignore my gut, which is why I still dabble in small-cap value at home and abroad.
The post Gut Reaction appeared first on HumbleDollar.
Voting Our Dollars
THE BUREAU OF LABOR Statistics reported last week that consumer prices in August were up 5.3% from a year earlier. This means that, on average, we���re paying $105 for a basket of goods and services that cost us $100 a year ago. Investors and analysts are worried that higher inflation may be here to stay.
My contention: Inflation will prove to be temporary and the Federal Reserve won���t have to increase interest rates to slow consumer prices. In making this assessment, I���m focused on American consumerism and the fact that we���re bargain hunters at heart. We���ve accepted upticks in highly valued and necessary items over the past year. But as deal seekers, I can���t see us accepting steep price hikes over the long haul.
Let���s start with fast food. From June to August, fast food prices increased at an annualized rate of 9.7%, as restaurants passed along the higher cost of labor and ingredients to their customers. While my family loves its Chipotle, we���ll certainly dial back our visits if burrito bowl prices continue to spike. Another alternative is we���d keep up the same number of visits but buy smaller quantities���something we should already be doing for health purposes. If others make similar changes to their behavior, fast food restaurants will see that pushing up prices will ultimately lead to sales declines, and that should prompt them to slow price increases.
Another recent driver of inflation has been the cost of automobiles. August���s vehicle prices were 32% above those seen a year earlier. For folks who really need a car, I can see the rationale in paying up. But the rest of us will be inclined to delay making car purchases until competitive pricing returns. Dealers have conditioned us to expect attractive offers. Once supply chains are back on track, I expect dealers will return to competing on price with ���manager specials��� and ���employee pricing.���
My contention: Inflation will prove to be temporary and the Federal Reserve won���t have to increase interest rates to slow consumer prices. In making this assessment, I���m focused on American consumerism and the fact that we���re bargain hunters at heart. We���ve accepted upticks in highly valued and necessary items over the past year. But as deal seekers, I can���t see us accepting steep price hikes over the long haul.
Let���s start with fast food. From June to August, fast food prices increased at an annualized rate of 9.7%, as restaurants passed along the higher cost of labor and ingredients to their customers. While my family loves its Chipotle, we���ll certainly dial back our visits if burrito bowl prices continue to spike. Another alternative is we���d keep up the same number of visits but buy smaller quantities���something we should already be doing for health purposes. If others make similar changes to their behavior, fast food restaurants will see that pushing up prices will ultimately lead to sales declines, and that should prompt them to slow price increases.
Another recent driver of inflation has been the cost of automobiles. August���s vehicle prices were 32% above those seen a year earlier. For folks who really need a car, I can see the rationale in paying up. But the rest of us will be inclined to delay making car purchases until competitive pricing returns. Dealers have conditioned us to expect attractive offers. Once supply chains are back on track, I expect dealers will return to competing on price with ���manager specials��� and ���employee pricing.���
The post Voting Our Dollars appeared first on HumbleDollar.
How I’ve Strayed
LIKE MANY READING this article, index funds constitute the lion���s share of my family���s investments. But I also own small positions in two individual stocks: Boston Omaha and Markel.
Why have I strayed from a 100% indexing approach? Both companies are conglomerates���multiple businesses that function as a single entity. Conglomerates should���in theory���be able to deliver slightly higher returns, thanks to the business efficiencies and synergies they realize. On top of that, they can offer some of the strengths of a mutual fund: diversification plus intelligent capital allocation.
The classic example of a successful conglomerate is Berkshire Hathaway. Many companies have tried to emulate Berkshire���s model. They���ve failed for reasons that nearly always have the same root cause: poor capital allocation by imprudent management. Admittedly, these competitors have a high bar to surpass. Over the past 56 years, Berkshire Hathaway's��stock has climbed 20% a year, on average, versus 10.2% for the S&P 500.
I sleep soundly knowing we���ll obtain the market���s returns with our index funds. I hope they���ll allow my wife and me to retire in comfort. With the small portion of our investment portfolio not dedicated to index funds, I���ve tried to identify opportunities where we can participate as ���high-quality��� shareholders���those who invest for the long run. Our hope: To see these investments grow handsomely and then leave the money to charity.
How do we identify such stocks? I have a few rules and rationales.
First, because my wife and I are both age 40, our longer time horizon plays a critical role in how we allocate our capital. We have the potential to earn compound returns for 40 or 50 years. Time horizon is a tremendously underappreciated aspect of investing.
What���s good for a retired investor���who typically needs income to sustain his or her lifestyle���is very different from what we want with decades still in front of us. For instance, the dividends favored by many retirees aren���t a particularly tax-efficient way of realizing returns. I���m looking for businesses that retain and grow earnings by intelligently reinvesting their capital.
Second, having recently worked as the U.S. Army���s supervisory attorney for artificial intelligence adoption, I���ve become keenly aware of the speed of technological disruption. It���s fast and furious. One classic example from the recent past: How Research in Motion���s Blackberry was disrupted by Apple���s iPhone. Such disruptions are happening faster and faster.
I���m simply not smart enough to know what technological advancements will succeed. I was certain that Google glasses were going to be a phenomenal success. Yet, here I sit, typing this sentence wearing Warby Parker���s made-for-the-masses glasses. I���m at peace with my inability to accurately forecast technological innovation. Because we own index funds, we���ll capture the gains of whatever technological marvels the world���s brightest innovators create.
This brings me to the third criteria that I look for in a conglomerate. I want a wide moat that���s hard to disrupt. I���ve always believed that dirty jobs not only pay well, but also they���re often much harder to disrupt with technology. (I've always cherished Mike Rowe���s work on this topic for Discovery Channel.) Simply put, drones aren���t going to empty septic tanks anytime soon.
What does all this mean in practice? Tomorrow, I���ll offer my rationale for buying one of our individual stocks.
John Goodell is general counsel for the Texas Veterans Commission. He has spent much of his career advocating for members of the military and veterans on tax, estate planning and retirement issues. His biggest passion is spending time with his wife and kids. Follow John��on Twitter @HighGroundPlan��and check out his earlier articles.
Why have I strayed from a 100% indexing approach? Both companies are conglomerates���multiple businesses that function as a single entity. Conglomerates should���in theory���be able to deliver slightly higher returns, thanks to the business efficiencies and synergies they realize. On top of that, they can offer some of the strengths of a mutual fund: diversification plus intelligent capital allocation.
The classic example of a successful conglomerate is Berkshire Hathaway. Many companies have tried to emulate Berkshire���s model. They���ve failed for reasons that nearly always have the same root cause: poor capital allocation by imprudent management. Admittedly, these competitors have a high bar to surpass. Over the past 56 years, Berkshire Hathaway's��stock has climbed 20% a year, on average, versus 10.2% for the S&P 500.
I sleep soundly knowing we���ll obtain the market���s returns with our index funds. I hope they���ll allow my wife and me to retire in comfort. With the small portion of our investment portfolio not dedicated to index funds, I���ve tried to identify opportunities where we can participate as ���high-quality��� shareholders���those who invest for the long run. Our hope: To see these investments grow handsomely and then leave the money to charity.
How do we identify such stocks? I have a few rules and rationales.
First, because my wife and I are both age 40, our longer time horizon plays a critical role in how we allocate our capital. We have the potential to earn compound returns for 40 or 50 years. Time horizon is a tremendously underappreciated aspect of investing.
What���s good for a retired investor���who typically needs income to sustain his or her lifestyle���is very different from what we want with decades still in front of us. For instance, the dividends favored by many retirees aren���t a particularly tax-efficient way of realizing returns. I���m looking for businesses that retain and grow earnings by intelligently reinvesting their capital.
Second, having recently worked as the U.S. Army���s supervisory attorney for artificial intelligence adoption, I���ve become keenly aware of the speed of technological disruption. It���s fast and furious. One classic example from the recent past: How Research in Motion���s Blackberry was disrupted by Apple���s iPhone. Such disruptions are happening faster and faster.
I���m simply not smart enough to know what technological advancements will succeed. I was certain that Google glasses were going to be a phenomenal success. Yet, here I sit, typing this sentence wearing Warby Parker���s made-for-the-masses glasses. I���m at peace with my inability to accurately forecast technological innovation. Because we own index funds, we���ll capture the gains of whatever technological marvels the world���s brightest innovators create.
This brings me to the third criteria that I look for in a conglomerate. I want a wide moat that���s hard to disrupt. I���ve always believed that dirty jobs not only pay well, but also they���re often much harder to disrupt with technology. (I've always cherished Mike Rowe���s work on this topic for Discovery Channel.) Simply put, drones aren���t going to empty septic tanks anytime soon.
What does all this mean in practice? Tomorrow, I���ll offer my rationale for buying one of our individual stocks.
John Goodell is general counsel for the Texas Veterans Commission. He has spent much of his career advocating for members of the military and veterans on tax, estate planning and retirement issues. His biggest passion is spending time with his wife and kids. Follow John��on Twitter @HighGroundPlan��and check out his earlier articles.The post How I’ve Strayed appeared first on HumbleDollar.
September 19, 2021
Yielding to Buybacks
DIVIDEND YIELDS MAY be tiny, but they sure they get talked about a lot. As Rick Connor pointed out on Friday, the S&P 500 stocks collectively yield just 1.3%���near 20-year lows. Yields have fallen as share prices have climbed and as companies have put more emphasis on stock buybacks. In fact, today, companies spend more on buying back their own shares than paying dividends.
Companies continuously manage their capital structure���how much of the enterprise is funded by issuing stock and how much with debt. Financing a company with stock is usually more expensive. Why? Delivering the earnings that shareholders expect typically costs more than meeting a company���s obligations to its bondholders, especially at today���s rock-bottom interest rates. It can make sense for a chief financial officer to buy back the company���s shares while taking on more debt, thereby lowering the firm���s weighted average ���cost of capital.��� The risk is that the firm ends up with too much debt, but the reward is a lower hurdle rate for profitable projects.
When a firm repurchases shares to reduce the relative importance of its ���equity��� financing, its ���buyback yield������the amount of money returned to shareholders through share repurchases���goes up. These share repurchases, coupled with stock dividends, make up a company���s ���total shareholder yield.��� There���s a great chart that occasionally appears in J.P. Morgan Asset Management���s Guide to the Markets . It shows total shareholder yield by sector.
What I find surprising: The lowest-yielding sector is utilities. Income-oriented investors know that utility stocks almost always have juicy dividend yields. These companies usually have reliable cash flows, so they can safely carry debt while paying out a high proportion of profits to shareholders. What these firms haven���t been doing recently is buying back their own shares.
Utilities and real estate are the only two industry sectors, out of 11, with a negative buyback yield. These two sectors are issuing stock, while the other nine industries are net share repurchasers. As of the end of the first quarter, the energy sector featured the highest total shareholder yield (5.2%), followed by financials (3.8%). Meanwhile, real estate (1.9%) and consumer discretionary (0.7%) have the lowest total yields.
The S&P 500���s dividend and buyback yields sum to 2.9%, which is the lowest since 2003. For perspective, total shareholder yield peaked above 7% in 2008 and was near 6% in late 2018 and early 2020. Contrarians see today���s paltry yield as a sign of stock market exuberance. But it could also reflect the composition of today���s market, which is dominated by low-yielding tech companies, coupled with low interest rates that have driven valuations higher.
Companies continuously manage their capital structure���how much of the enterprise is funded by issuing stock and how much with debt. Financing a company with stock is usually more expensive. Why? Delivering the earnings that shareholders expect typically costs more than meeting a company���s obligations to its bondholders, especially at today���s rock-bottom interest rates. It can make sense for a chief financial officer to buy back the company���s shares while taking on more debt, thereby lowering the firm���s weighted average ���cost of capital.��� The risk is that the firm ends up with too much debt, but the reward is a lower hurdle rate for profitable projects.
When a firm repurchases shares to reduce the relative importance of its ���equity��� financing, its ���buyback yield������the amount of money returned to shareholders through share repurchases���goes up. These share repurchases, coupled with stock dividends, make up a company���s ���total shareholder yield.��� There���s a great chart that occasionally appears in J.P. Morgan Asset Management���s Guide to the Markets . It shows total shareholder yield by sector.
What I find surprising: The lowest-yielding sector is utilities. Income-oriented investors know that utility stocks almost always have juicy dividend yields. These companies usually have reliable cash flows, so they can safely carry debt while paying out a high proportion of profits to shareholders. What these firms haven���t been doing recently is buying back their own shares.
Utilities and real estate are the only two industry sectors, out of 11, with a negative buyback yield. These two sectors are issuing stock, while the other nine industries are net share repurchasers. As of the end of the first quarter, the energy sector featured the highest total shareholder yield (5.2%), followed by financials (3.8%). Meanwhile, real estate (1.9%) and consumer discretionary (0.7%) have the lowest total yields.
The S&P 500���s dividend and buyback yields sum to 2.9%, which is the lowest since 2003. For perspective, total shareholder yield peaked above 7% in 2008 and was near 6% in late 2018 and early 2020. Contrarians see today���s paltry yield as a sign of stock market exuberance. But it could also reflect the composition of today���s market, which is dominated by low-yielding tech companies, coupled with low interest rates that have driven valuations higher.
The post Yielding to Buybacks appeared first on HumbleDollar.
Matters of Degree
AS SOMEONE WHO���S been employed in academia for more than two decades, I often wonder about the future of higher��education. One trend seems clear: At a time when more companies are doing away with degree��requirements��for new hires, more colleges are doing away with studying. The so-called college��experience appears to be more important than academics. Indeed, grade��inflation has been running rampant since the 1960s.
Meanwhile, student debt loads are the highest they���ve ever been. The pandemic has also created financial hardship for many colleges and universities, and it may take years for some to rebound.
Twenty-somethings have access to a variety of college alternatives these days. Coding��boot camps promise high-paying jobs after just six months of schooling. An infrastructure bill could create��hundreds of thousands of jobs for those interested in working in construction and building technology. Military enlistment, starting a business and paid apprenticeship��programs are all viable options for young adults looking to avoid accumulating large amounts of college debt.
From my own perspective, I don���t know whether to be worried or encouraged by the trends I see in higher education in my own state. Last year, Oregon���s largest private college announced it would be closing forever. But this year, several institutions in the state are also seeing record��enrollments.
Meanwhile, student debt loads are the highest they���ve ever been. The pandemic has also created financial hardship for many colleges and universities, and it may take years for some to rebound.
Twenty-somethings have access to a variety of college alternatives these days. Coding��boot camps promise high-paying jobs after just six months of schooling. An infrastructure bill could create��hundreds of thousands of jobs for those interested in working in construction and building technology. Military enlistment, starting a business and paid apprenticeship��programs are all viable options for young adults looking to avoid accumulating large amounts of college debt.
From my own perspective, I don���t know whether to be worried or encouraged by the trends I see in higher education in my own state. Last year, Oregon���s largest private college announced it would be closing forever. But this year, several institutions in the state are also seeing record��enrollments.
The post Matters of Degree appeared first on HumbleDollar.
Often Overlooked
PERSONAL FINANCE pundits love to debate safe withdrawal rates���the amount a retiree can withdraw each year from a portfolio without depleting it too quickly. I agree this is an important topic. In fact, I���ve addressed it a few times myself in recent months.
In July, I discussed the well-known 4% rule. A few weeks ago, I described an alternative called the��bucket��strategy. But as you build your retirement plan, withdrawal rates shouldn���t be the only consideration. Below are six additional, often-overlooked topics to consider.
1. Time allocation. How will you spend your time after you retire? This might not seem like a financial question. But the way you allocate your time will have implications for both your income and your expenses.
On the income side, do you envision a traditional retirement���that is, stopping work entirely���or would you like to taper down to part-time, perhaps taking on a new job or starting a small business? I once knew a fellow who worked part-time at a marina pumping gas. It seemed like an odd choice for a high-net-worth retiree. But he loved the water, it was an opportunity to socialize, and it brought in extra income.
This might seem like an idiosyncratic example, but it illustrates a more general reality: that retirement doesn���t need to be a binary decision. Sure, some people shift overnight from the office to the hammock. But it isn���t always that way. I���ve seen just as many people downshift for a period of five to seven years before fully retiring. There���s no one-size-fits-all.
On the expense side, housing is usually the biggest variable. Do you think you���ll remain in your current home, downsize, or maybe buy or rent a vacation home? How do you see this changing over time? Over the summer, I ran into a neighbor who described ���outliving��� Florida. It turned out that he had bought a place in Florida when he retired in his 60s. For 20 years, he enjoyed spending winters there and summers up north. But over time, his preferences shifted. He grew tired of traveling back and forth, and he also wanted to lower his expenses, so he consolidated back to a single home.
Strategies like the 4% rule assume that a retiree���s portfolio withdrawals will be the same every year, increasing only with inflation. But that���s probably not true for most people, as these examples illustrate. That���s why time allocation is such a key pillar of any financial plan. Everyone���s retirement income and expenses go through different phases. Can you predict in your 50s where you���ll be in your 80s? No. As you build your plan, it���s worth considering a range of possibilities.
2. Income taxes. In retirement, you���ll generally have much more control over your tax bill than during your working years. In the past, I���ve discussed Roth conversions��and other��strategies��to engineer your retirement tax bill. These strategies might or might not work for you.
But something every retiree should consider is the manner in which withdrawals are taken to fund living expenses. Suppose you have some money in a taxable account, some in a tax-deferred account and some in a Roth IRA. In what order should you tap these accounts each year? This should be an important part of your planning process, so your tax bill isn���t left to chance.
3. Debt. Do you have a mortgage or other loans? If at all possible, I recommend arriving in retirement without any significant debt���for two reasons. There's the peace-of-mind benefit. In addition, the cash flow flexibility gained from being debt-free will make it easier to manage your taxes in the ways noted above. One exception: If you have a home equity line of credit you use for rainy-day purposes, you might want to renew it while you���re still working. It'll be infinitely easier to get approved while you still have a regular income.
4. Family. If you find yourself in the ���sandwich generation,��� with both children and parents requiring help, that may impact where you���re able to live. It likely will also impact your time allocation. Making predictions in this area can be difficult. But again, it's worth thinking through the range of possibilities and how each might affect your finances.
5. Estate planning. When it comes to planning for the next generation, I���ve found that every family is different. Some want to leave every dollar possible to their children, while others don���t mind if their estate ends up writing a check to the government. Other families have more specific considerations, such as a child who���ll require long-term care. Probably because it isn���t such an uplifting topic, many people procrastinate when it comes to estate planning. But it���s worth being intentional about this, for the same reason you want to be intentional about income taxes���to avoid a result that isn���t what you would���ve wanted.
6. Mechanics and mindset.��I���ve heard more than one person say that the prospect of retirement makes them uneasy. Even when new retirees know there���s enough money in the bank, it can trigger anxiety to think about drawing down those assets. That���s why it���s worth pondering not just the math of portfolio withdrawals but also the mechanics.
I usually recommend setting up automated transfers from retirees��� investment accounts to their bank accounts. That helps recreate the feeling of a paycheck, making it easier to budget. Maybe more important, it can alleviate some of the anxiety associated with making withdrawals. To be sure, you���ll want to revisit the amount of your retirement withdrawals periodically. Still, I think it���s best to automate as much as possible. That can help you avoid deliberating and equivocating each time you need to make a withdrawal.
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.
In July, I discussed the well-known 4% rule. A few weeks ago, I described an alternative called the��bucket��strategy. But as you build your retirement plan, withdrawal rates shouldn���t be the only consideration. Below are six additional, often-overlooked topics to consider.
1. Time allocation. How will you spend your time after you retire? This might not seem like a financial question. But the way you allocate your time will have implications for both your income and your expenses.
On the income side, do you envision a traditional retirement���that is, stopping work entirely���or would you like to taper down to part-time, perhaps taking on a new job or starting a small business? I once knew a fellow who worked part-time at a marina pumping gas. It seemed like an odd choice for a high-net-worth retiree. But he loved the water, it was an opportunity to socialize, and it brought in extra income.
This might seem like an idiosyncratic example, but it illustrates a more general reality: that retirement doesn���t need to be a binary decision. Sure, some people shift overnight from the office to the hammock. But it isn���t always that way. I���ve seen just as many people downshift for a period of five to seven years before fully retiring. There���s no one-size-fits-all.
On the expense side, housing is usually the biggest variable. Do you think you���ll remain in your current home, downsize, or maybe buy or rent a vacation home? How do you see this changing over time? Over the summer, I ran into a neighbor who described ���outliving��� Florida. It turned out that he had bought a place in Florida when he retired in his 60s. For 20 years, he enjoyed spending winters there and summers up north. But over time, his preferences shifted. He grew tired of traveling back and forth, and he also wanted to lower his expenses, so he consolidated back to a single home.
Strategies like the 4% rule assume that a retiree���s portfolio withdrawals will be the same every year, increasing only with inflation. But that���s probably not true for most people, as these examples illustrate. That���s why time allocation is such a key pillar of any financial plan. Everyone���s retirement income and expenses go through different phases. Can you predict in your 50s where you���ll be in your 80s? No. As you build your plan, it���s worth considering a range of possibilities.
2. Income taxes. In retirement, you���ll generally have much more control over your tax bill than during your working years. In the past, I���ve discussed Roth conversions��and other��strategies��to engineer your retirement tax bill. These strategies might or might not work for you.
But something every retiree should consider is the manner in which withdrawals are taken to fund living expenses. Suppose you have some money in a taxable account, some in a tax-deferred account and some in a Roth IRA. In what order should you tap these accounts each year? This should be an important part of your planning process, so your tax bill isn���t left to chance.
3. Debt. Do you have a mortgage or other loans? If at all possible, I recommend arriving in retirement without any significant debt���for two reasons. There's the peace-of-mind benefit. In addition, the cash flow flexibility gained from being debt-free will make it easier to manage your taxes in the ways noted above. One exception: If you have a home equity line of credit you use for rainy-day purposes, you might want to renew it while you���re still working. It'll be infinitely easier to get approved while you still have a regular income.
4. Family. If you find yourself in the ���sandwich generation,��� with both children and parents requiring help, that may impact where you���re able to live. It likely will also impact your time allocation. Making predictions in this area can be difficult. But again, it's worth thinking through the range of possibilities and how each might affect your finances.
5. Estate planning. When it comes to planning for the next generation, I���ve found that every family is different. Some want to leave every dollar possible to their children, while others don���t mind if their estate ends up writing a check to the government. Other families have more specific considerations, such as a child who���ll require long-term care. Probably because it isn���t such an uplifting topic, many people procrastinate when it comes to estate planning. But it���s worth being intentional about this, for the same reason you want to be intentional about income taxes���to avoid a result that isn���t what you would���ve wanted.
6. Mechanics and mindset.��I���ve heard more than one person say that the prospect of retirement makes them uneasy. Even when new retirees know there���s enough money in the bank, it can trigger anxiety to think about drawing down those assets. That���s why it���s worth pondering not just the math of portfolio withdrawals but also the mechanics.
I usually recommend setting up automated transfers from retirees��� investment accounts to their bank accounts. That helps recreate the feeling of a paycheck, making it easier to budget. Maybe more important, it can alleviate some of the anxiety associated with making withdrawals. To be sure, you���ll want to revisit the amount of your retirement withdrawals periodically. Still, I think it���s best to automate as much as possible. That can help you avoid deliberating and equivocating each time you need to make a withdrawal.
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.The post Often Overlooked appeared first on HumbleDollar.
September 18, 2021
Diminished Value
A CRUCIAL STEP WHEN buying a preowned car is to scrutinize its Carfax report. A single-owner car with a regular maintenance history and which was driven solely for personal use should be a safe bet, while an accident record gives most people pause. All things being equal, a car that was in an accident, however minor, ought to cost less than a similar one with a clean history.
Some bargain hunters don���t mind taking a chance on a car with an accident history as long as it drives well. After all, the discount can be quite attractive. This might seem unfair for a seller who wasn���t at fault for the accident. Even if the car was repaired to perfection and the tab was picked by the other party���s insurance, how does the owner recover the value lost? A recent accident forced us to find out the answer.
We flew across the country to spend the Labor Day week with my brother-in-law. While driving us around in his almost-new car, he was rear-ended by a pickup truck. Thankfully, no one was hurt, and the car was still drivable. The pickup���s apologetic driver accepted fault and assured us that his insurance would cover all repairs. Still, we worried about the car���s market value.
It turns out that my brother-in-law can recoup some of the loss through a diminished��value claim. First, he needs to get a fair estimate of the loss of market value due to the accident. This might involve researching prices of similar used cars with and without an accident history, or even getting a free estimate.
Next, he must contact the other driver���s insurance company and specifically request diminished value compensation. This amount would be on top of the repair and rental costs. The claim should be made in a timely manner and backed by the necessary documentation.
The insurance company will likely reduce the compensation amount. For example, if the pre-accident value of a low-mileage car that suffered severe damage was $25,000, the insurance company might cough up $2,500 at most. It���d likely be far less if the damage is moderate or the car has higher mileage. Paying a few hundred dollars for a written estimate from a licensed appraiser may increase the odds of fair compensation.
Some bargain hunters don���t mind taking a chance on a car with an accident history as long as it drives well. After all, the discount can be quite attractive. This might seem unfair for a seller who wasn���t at fault for the accident. Even if the car was repaired to perfection and the tab was picked by the other party���s insurance, how does the owner recover the value lost? A recent accident forced us to find out the answer.
We flew across the country to spend the Labor Day week with my brother-in-law. While driving us around in his almost-new car, he was rear-ended by a pickup truck. Thankfully, no one was hurt, and the car was still drivable. The pickup���s apologetic driver accepted fault and assured us that his insurance would cover all repairs. Still, we worried about the car���s market value.
It turns out that my brother-in-law can recoup some of the loss through a diminished��value claim. First, he needs to get a fair estimate of the loss of market value due to the accident. This might involve researching prices of similar used cars with and without an accident history, or even getting a free estimate.
Next, he must contact the other driver���s insurance company and specifically request diminished value compensation. This amount would be on top of the repair and rental costs. The claim should be made in a timely manner and backed by the necessary documentation.
The insurance company will likely reduce the compensation amount. For example, if the pre-accident value of a low-mileage car that suffered severe damage was $25,000, the insurance company might cough up $2,500 at most. It���d likely be far less if the damage is moderate or the car has higher mileage. Paying a few hundred dollars for a written estimate from a licensed appraiser may increase the odds of fair compensation.
The post Diminished Value appeared first on HumbleDollar.
401(k)s Aren���t Free
DO YOU KNOW WHAT you pay for your 401(k)? Over time, even seemingly small charges can take a big bite out of your retirement savings.
That���s why a new Government Accountability Office (GAO) report is so surprising. Fully 41% of people surveyed think their 401(k) is free. And I���ve got a unicorn tethered in my backyard. Not only are they incorrect, but also it suggests that those required fee disclosure documents from plan providers are written in ways investors just don���t understand.
Why might so many people think their 401(k) is free? Unlike diners in a restaurant, 401(k) investors are never presented with a bill. Instead, 401(k) fees are silently subtracted from their account balance. That���s why the government insists that plan providers tell investors, ahead of time, all the fees they may pay. Yet, when shown real-life examples of fee disclosures, 45% of investors couldn���t fully understand them, according to the new report.
One failing, says the GAO, is that plan fees are often expressed mathematically, such as ���0.16% per $1,000 invested.��� I guess a lot of people skipped math class the day they explained these brainteasers. But 88% understood when the cost was stated in plain English: ���You are charged $1.60 for every $1,000 in your account.���
Why would plan providers use hard-to-understand language? A cynic might say it���s better for business if customers don���t know how much they pay. But Harvard Law Professor Cass Sunstein offers a more benign explanation���the ���curse of knowledge.��� People who write fee disclosures are experts. They know the subject like the back of their hand. They assume���wrongly���that everyday investors can navigate their oddball topic as easily as they can.
And, yes, 401(k) fees are complex. There are investment fees for money managers, and administrative fees to pay for legal, accounting, communications and other costs. Then there are service charges, like $125 to originate a loan. They add up like those mystery items on your Verizon bill.
All of this suggests you review your plan���s fees. No, it won���t be as entertaining as Netflix or Reddit. But remember, you���re paying for this party, so you might want to know how much you���re getting charged.
That���s why a new Government Accountability Office (GAO) report is so surprising. Fully 41% of people surveyed think their 401(k) is free. And I���ve got a unicorn tethered in my backyard. Not only are they incorrect, but also it suggests that those required fee disclosure documents from plan providers are written in ways investors just don���t understand.
Why might so many people think their 401(k) is free? Unlike diners in a restaurant, 401(k) investors are never presented with a bill. Instead, 401(k) fees are silently subtracted from their account balance. That���s why the government insists that plan providers tell investors, ahead of time, all the fees they may pay. Yet, when shown real-life examples of fee disclosures, 45% of investors couldn���t fully understand them, according to the new report.
One failing, says the GAO, is that plan fees are often expressed mathematically, such as ���0.16% per $1,000 invested.��� I guess a lot of people skipped math class the day they explained these brainteasers. But 88% understood when the cost was stated in plain English: ���You are charged $1.60 for every $1,000 in your account.���
Why would plan providers use hard-to-understand language? A cynic might say it���s better for business if customers don���t know how much they pay. But Harvard Law Professor Cass Sunstein offers a more benign explanation���the ���curse of knowledge.��� People who write fee disclosures are experts. They know the subject like the back of their hand. They assume���wrongly���that everyday investors can navigate their oddball topic as easily as they can.
And, yes, 401(k) fees are complex. There are investment fees for money managers, and administrative fees to pay for legal, accounting, communications and other costs. Then there are service charges, like $125 to originate a loan. They add up like those mystery items on your Verizon bill.
All of this suggests you review your plan���s fees. No, it won���t be as entertaining as Netflix or Reddit. But remember, you���re paying for this party, so you might want to know how much you���re getting charged.
The post 401(k)s Aren���t Free appeared first on HumbleDollar.
Behaving Badly
OTHERS MIGHT BE hoping to add to their wealth by picking the next hot stock. But here at HumbleDollar, we���re much more concerned about subtraction.
The goal: Keep more of whatever the financial markets deliver by minimizing investment costs and avoiding unnecessarily large tax bills. This is a reason to favor index funds. But even if we index, we need to be alert to another threat���that posed by the person in the mirror.
Two recent studies highlight the risk of self-inflicted investment wounds. ���When do investors freak out?��� asks the title of a new academic study. The paper looks at instances where a household���s stock holdings drop 90% or more in a month, of which at least 50% is due to trading.
Such ���freak outs��� tend to occur during sharp market declines, and they���re more common among those who are male, over age 45, married or have dependents. Freak outs are also more common among those who say they have excellent investment experience or knowledge.
For these investors, the big shift out of stocks tends to protect them in the short term. But they���re often too slow getting back into the stock market, so they miss out on significant gains. It���s become a clich��, but it���s worth repeating: What matters isn���t timing the market, but time in the market. The stock market���s big gains usually go to those who sit quietly with diversified stock portfolios for decades and decades.
That lesson was reinforced by a recent study from Morningstar. The Chicago investment research firm found that fund investors earned 7.7% a year on the average dollar they invested in mutual funds and exchange-traded funds over the 10 years through year-end 2020. That was 1.7 percentage points less than the total return of the funds themselves.
What explains this shortfall? It all comes down to bad timing, with investors tending to invest more heavily in a fund before it suffers a period of relatively weak returns. But some funds triggered worse behavior than others. The biggest performance gaps occurred among more specialized funds, namely those that focus on single industry sectors and on alternative investments. For such funds, the shortfall was around four percentage points a year.
By contrast, the annual performance gap with general taxable bond funds and U.S. stock funds was 1.1 and 1.2 percentage points, respectively, while the gap with asset allocation funds���think target-date retirement funds���was just 0.7 percentage point.
How do we avoid buying and selling at the wrong time? Morningstar offers some sensible advice, such as sticking with broadly diversified funds, avoiding funds that are more specialized or more volatile, and putting our saving and investment programs on autopilot. To that list, I���d add three other pointers:
Play dumb. One of the smartest things we can do is regularly remind ourselves of our ignorance. If we find ourselves making risky investment bets or unloading a huge chunk of our stock portfolio, we���re doing so because we think we know something about future returns. Such ���knowledge��� is often poisonous to performance.
Play money. Many investors simply can���t resist meddling with their portfolio. To limit the potential damage, consider dividing your portfolio into ���play money��� and ���long-term growth money.��� Allow yourself to buy riskier investments and make market bets with perhaps 5% or 10% of your portfolio. Meanwhile, dedicate the rest of your investment dollars to a collection of index funds, such as the classic three-fund portfolio, and declare these investments untouchable.
Play it safe. To your ���play money��� and ���growth money,��� consider adding a third bucket: ���safe money.��� With this sleeve of your portfolio, the goal is to hold enough cash and short-term bonds so you don���t freak out.
How much should you hold? It���s easy enough to calculate your necessary cash holdings based on your likely portfolio withdrawals over the next five years and the sum you want for emergencies. But that���s the rational number.
What you need to figure out is the emotional number���the sum you need to set aside to keep yourself calm, so you don���t make big changes to your long-term growth money at times of market turmoil. How do you come up with that number? You���ll need to take a long, hard look in the mirror.
Latest Posts
HERE ARE THE SIX other articles published by HumbleDollar this week:
"One of my father's favorite snacks was popcorn with milk," recounts Kenyon Sayler. "I learned from my mother that one winter that was all my father���s family had for supper every evening."
If you delay Social Security by a year and instead dip into savings to cover the missed benefits, you're effectively buying an annuity with an 8% payout. That's a deal that's hard to beat, as Rick Connor explains.
Bottles of wine. Fine art. Private real estate deals. Mike Zaccardi took a walk on the wild side���and reports back on the alternative investments he bought.
"In retirement, there���s no need to strive for the applause of others or monetary reward," writes Joe Kesler. "Instead, we can focus on the satisfaction that comes from the results of our labor."
It turns out that active managers are pretty good at picking stocks that'll outperform over the next 12 months. The problem: They mess up when selling. Adam Grossman explains.
"I felt a little guilty about spending time and money on a mere hobby," says Andrew Forsythe. "Selling off a chunk of my collection to benefit a worthy cause has done wonders for assuaging my guilt."
What about blog posts? The past week���s pieces include Kristine Hayes on struggle and hope, Dick Quinn on his estate plan, Mike Zaccardi on dinner seminars, Greg Spears on 401(k) fees and Dennis Friedman on jobs vs. careers.
Jonathan Clements is the founder and editor of HumbleDollar. Follow him on Twitter @ClementsMoney and on Facebook, and check out his earlier��articles.
The goal: Keep more of whatever the financial markets deliver by minimizing investment costs and avoiding unnecessarily large tax bills. This is a reason to favor index funds. But even if we index, we need to be alert to another threat���that posed by the person in the mirror.
Two recent studies highlight the risk of self-inflicted investment wounds. ���When do investors freak out?��� asks the title of a new academic study. The paper looks at instances where a household���s stock holdings drop 90% or more in a month, of which at least 50% is due to trading.
Such ���freak outs��� tend to occur during sharp market declines, and they���re more common among those who are male, over age 45, married or have dependents. Freak outs are also more common among those who say they have excellent investment experience or knowledge.
For these investors, the big shift out of stocks tends to protect them in the short term. But they���re often too slow getting back into the stock market, so they miss out on significant gains. It���s become a clich��, but it���s worth repeating: What matters isn���t timing the market, but time in the market. The stock market���s big gains usually go to those who sit quietly with diversified stock portfolios for decades and decades.
That lesson was reinforced by a recent study from Morningstar. The Chicago investment research firm found that fund investors earned 7.7% a year on the average dollar they invested in mutual funds and exchange-traded funds over the 10 years through year-end 2020. That was 1.7 percentage points less than the total return of the funds themselves.
What explains this shortfall? It all comes down to bad timing, with investors tending to invest more heavily in a fund before it suffers a period of relatively weak returns. But some funds triggered worse behavior than others. The biggest performance gaps occurred among more specialized funds, namely those that focus on single industry sectors and on alternative investments. For such funds, the shortfall was around four percentage points a year.
By contrast, the annual performance gap with general taxable bond funds and U.S. stock funds was 1.1 and 1.2 percentage points, respectively, while the gap with asset allocation funds���think target-date retirement funds���was just 0.7 percentage point.
How do we avoid buying and selling at the wrong time? Morningstar offers some sensible advice, such as sticking with broadly diversified funds, avoiding funds that are more specialized or more volatile, and putting our saving and investment programs on autopilot. To that list, I���d add three other pointers:
Play dumb. One of the smartest things we can do is regularly remind ourselves of our ignorance. If we find ourselves making risky investment bets or unloading a huge chunk of our stock portfolio, we���re doing so because we think we know something about future returns. Such ���knowledge��� is often poisonous to performance.
Play money. Many investors simply can���t resist meddling with their portfolio. To limit the potential damage, consider dividing your portfolio into ���play money��� and ���long-term growth money.��� Allow yourself to buy riskier investments and make market bets with perhaps 5% or 10% of your portfolio. Meanwhile, dedicate the rest of your investment dollars to a collection of index funds, such as the classic three-fund portfolio, and declare these investments untouchable.
Play it safe. To your ���play money��� and ���growth money,��� consider adding a third bucket: ���safe money.��� With this sleeve of your portfolio, the goal is to hold enough cash and short-term bonds so you don���t freak out.
How much should you hold? It���s easy enough to calculate your necessary cash holdings based on your likely portfolio withdrawals over the next five years and the sum you want for emergencies. But that���s the rational number.
What you need to figure out is the emotional number���the sum you need to set aside to keep yourself calm, so you don���t make big changes to your long-term growth money at times of market turmoil. How do you come up with that number? You���ll need to take a long, hard look in the mirror.
Latest Posts
HERE ARE THE SIX other articles published by HumbleDollar this week:
"One of my father's favorite snacks was popcorn with milk," recounts Kenyon Sayler. "I learned from my mother that one winter that was all my father���s family had for supper every evening."
If you delay Social Security by a year and instead dip into savings to cover the missed benefits, you're effectively buying an annuity with an 8% payout. That's a deal that's hard to beat, as Rick Connor explains.
Bottles of wine. Fine art. Private real estate deals. Mike Zaccardi took a walk on the wild side���and reports back on the alternative investments he bought.
"In retirement, there���s no need to strive for the applause of others or monetary reward," writes Joe Kesler. "Instead, we can focus on the satisfaction that comes from the results of our labor."
It turns out that active managers are pretty good at picking stocks that'll outperform over the next 12 months. The problem: They mess up when selling. Adam Grossman explains.
"I felt a little guilty about spending time and money on a mere hobby," says Andrew Forsythe. "Selling off a chunk of my collection to benefit a worthy cause has done wonders for assuaging my guilt."
What about blog posts? The past week���s pieces include Kristine Hayes on struggle and hope, Dick Quinn on his estate plan, Mike Zaccardi on dinner seminars, Greg Spears on 401(k) fees and Dennis Friedman on jobs vs. careers.
Jonathan Clements is the founder and editor of HumbleDollar. Follow him on Twitter @ClementsMoney and on Facebook, and check out his earlier��articles.The post Behaving Badly appeared first on HumbleDollar.
