Jonathan Clements's Blog, page 57
March 12, 2025
Better Angels
IN THE 1990s, Mark Cuban started one of the first internet companies, a video streaming service called Broadcast.com, and later sold it to Yahoo for several billion dollars. With some of the proceeds, he bought the Dallas Mavericks NBA franchise and sold that as well, taking home another several billion dollars.
And for 16 seasons, Cuban appeared on the reality TV show Shark Tank, in which entrepreneurs present ideas to a panel of prospective investors. Surprisingly, though, Cuban acknowledged that the net result of the dozens of investments he’d made on Shark Tank was that he’d lost money. “I’ve gotten beat,” he said.
If investing in startups—often referred to as angel investing—is so challenging, even for someone in Cuban’s position, does it have any merit as an investing strategy? To answer this question, we can first look at the reasons it’s so challenging, and then look at why it might still be worth considering.
Perhaps the most frustrating challenge is that the world of investments isn’t always logical. As an example, Cuban points to Ring, a company that makes doorbell security cameras. In 2013, the company presented on Shark Tank, but Cuban declined to invest, as did all but one of his fellow “sharks.” He thought the valuation was too high, that the company would require too much capital to expand and that competition would make it difficult to succeed. But five years later, Amazon acquired the company for $1 billion.
In Cuban’s view, though, he didn’t make a mistake, arguing that if Amazon hadn’t purchased the company, “they wouldn’t be here.” That’s because, despite its popularity, Ring was losing money. The investment world, in other words, is subject to a lot of randomness. Companies that, on paper, don’t look like they should succeed sometimes turn into successes. And companies that look like they’re doing everything right can sometimes fail. Timing often has a lot to do with it, and that can make angel investing endlessly frustrating.
Another challenge for angel investors: There’s the notion that the ideal startup founder should look like Bill Gates, Michael Dell or Mark Zuckerberg—20 years old and living in a dorm room. For that reason, older founders are sometimes dismissed. But the reality is, older founders, on average, tend to be more successful. According to one study, the ideal age for a founder is 45. But because they’re so well known, founders like Gates, Dell and Zuckerberg contribute to the myth that entrepreneurs need to be young to be successful. This misconception can lead angel investors astray, making them more inclined to invest in founders who might look the part, but who, according to the data, are not as likely to succeed.
Angel investing carries other challenges. Unlike more mature companies, startups tend to be focused on a single product, and that makes them inherently more risky. Startups also tend to be cash-constrained because they don’t have access to public markets, and banks will often lend only with personal guarantees.
In addition, investing in startups frequently requires a great degree of trust. Mark Cuban describes investing in a company that seemed promising at first, “but I’d look at [the founder’s] Instagram, and he’d be in Bora Bora, and two weeks later, he’d be in Vegas, then Necker Island…. Next thing you know, all the money’s gone.” Cuban says he lost $1 million on that investment. While larger public companies certainly aren’t immune to malfeasance, that risk is amplified with smaller companies, where there’s less oversight.
If angel investing is so difficult even for someone as successful as Cuban, what does that mean for everyday investors? In general, I’m an advocate of simple investments, and angel investments are anything but simple. That said, I do see four reasons you might not dismiss it out of hand, despite the steep odds.
1. The first, and perhaps most compelling, reason: Even investments with long odds sometimes succeed. Despite the sobering startup failure rate, there are enough successes to make angel investing attractive.
2. Sometimes an investment makes sense from a relationship perspective. If you know a founder and believe in that person, or simply want to be supportive, sometimes that’s reason enough. In addition, a personal relationship may help mitigate the Bora Bora problem Cuban described.
3. Angel investing can be fun. I remember once, early in my career, making a presentation to a group of prospective investors. They gathered each week at their country club for breakfast and invited a startup company founder to join them. The founder would answer questions while the investors enjoyed their breakfasts. Afterward, the group would spend the morning playing golf together. The reality is that visiting startup companies, hearing their pitches and meeting their founders can be an enjoyable activity. If investment returns are secondary, this may be a valid reason to pursue angel investing.
4. A startup might carry appeal because it’s on a mission to make the world a better place.
If you do choose to make some startup investments, what steps could you take to manage risk? I have two suggestions.
First, diversify. To the extent that diversification is important with standard investments, it’s even more important, in my view, when it comes to private investments. Among professional venture capitalists, there’s a rule of thumb that only one or two out of every 10 investments will turn into a home run. And as Mark Cuban’s experience with Ring illustrates, winners aren’t always easy to predict. So, if you want to make some angel investments, I suggest building a portfolio. Importantly, the idea isn’t to mitigate losses. Rather, when it comes to angel investing, diversification is important so you cast a net wide enough to capture some winners.
Second, to manage the overall risk of making these kinds of investments, I suggest setting a cap on the total you invest. For example, you might allocate up to 10% of your portfolio to non-public investments.
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.
And for 16 seasons, Cuban appeared on the reality TV show Shark Tank, in which entrepreneurs present ideas to a panel of prospective investors. Surprisingly, though, Cuban acknowledged that the net result of the dozens of investments he’d made on Shark Tank was that he’d lost money. “I’ve gotten beat,” he said.
If investing in startups—often referred to as angel investing—is so challenging, even for someone in Cuban’s position, does it have any merit as an investing strategy? To answer this question, we can first look at the reasons it’s so challenging, and then look at why it might still be worth considering.
Perhaps the most frustrating challenge is that the world of investments isn’t always logical. As an example, Cuban points to Ring, a company that makes doorbell security cameras. In 2013, the company presented on Shark Tank, but Cuban declined to invest, as did all but one of his fellow “sharks.” He thought the valuation was too high, that the company would require too much capital to expand and that competition would make it difficult to succeed. But five years later, Amazon acquired the company for $1 billion.
In Cuban’s view, though, he didn’t make a mistake, arguing that if Amazon hadn’t purchased the company, “they wouldn’t be here.” That’s because, despite its popularity, Ring was losing money. The investment world, in other words, is subject to a lot of randomness. Companies that, on paper, don’t look like they should succeed sometimes turn into successes. And companies that look like they’re doing everything right can sometimes fail. Timing often has a lot to do with it, and that can make angel investing endlessly frustrating.
Another challenge for angel investors: There’s the notion that the ideal startup founder should look like Bill Gates, Michael Dell or Mark Zuckerberg—20 years old and living in a dorm room. For that reason, older founders are sometimes dismissed. But the reality is, older founders, on average, tend to be more successful. According to one study, the ideal age for a founder is 45. But because they’re so well known, founders like Gates, Dell and Zuckerberg contribute to the myth that entrepreneurs need to be young to be successful. This misconception can lead angel investors astray, making them more inclined to invest in founders who might look the part, but who, according to the data, are not as likely to succeed.
Angel investing carries other challenges. Unlike more mature companies, startups tend to be focused on a single product, and that makes them inherently more risky. Startups also tend to be cash-constrained because they don’t have access to public markets, and banks will often lend only with personal guarantees.
In addition, investing in startups frequently requires a great degree of trust. Mark Cuban describes investing in a company that seemed promising at first, “but I’d look at [the founder’s] Instagram, and he’d be in Bora Bora, and two weeks later, he’d be in Vegas, then Necker Island…. Next thing you know, all the money’s gone.” Cuban says he lost $1 million on that investment. While larger public companies certainly aren’t immune to malfeasance, that risk is amplified with smaller companies, where there’s less oversight.
If angel investing is so difficult even for someone as successful as Cuban, what does that mean for everyday investors? In general, I’m an advocate of simple investments, and angel investments are anything but simple. That said, I do see four reasons you might not dismiss it out of hand, despite the steep odds.
1. The first, and perhaps most compelling, reason: Even investments with long odds sometimes succeed. Despite the sobering startup failure rate, there are enough successes to make angel investing attractive.
2. Sometimes an investment makes sense from a relationship perspective. If you know a founder and believe in that person, or simply want to be supportive, sometimes that’s reason enough. In addition, a personal relationship may help mitigate the Bora Bora problem Cuban described.
3. Angel investing can be fun. I remember once, early in my career, making a presentation to a group of prospective investors. They gathered each week at their country club for breakfast and invited a startup company founder to join them. The founder would answer questions while the investors enjoyed their breakfasts. Afterward, the group would spend the morning playing golf together. The reality is that visiting startup companies, hearing their pitches and meeting their founders can be an enjoyable activity. If investment returns are secondary, this may be a valid reason to pursue angel investing.
4. A startup might carry appeal because it’s on a mission to make the world a better place.
If you do choose to make some startup investments, what steps could you take to manage risk? I have two suggestions.
First, diversify. To the extent that diversification is important with standard investments, it’s even more important, in my view, when it comes to private investments. Among professional venture capitalists, there’s a rule of thumb that only one or two out of every 10 investments will turn into a home run. And as Mark Cuban’s experience with Ring illustrates, winners aren’t always easy to predict. So, if you want to make some angel investments, I suggest building a portfolio. Importantly, the idea isn’t to mitigate losses. Rather, when it comes to angel investing, diversification is important so you cast a net wide enough to capture some winners.
Second, to manage the overall risk of making these kinds of investments, I suggest setting a cap on the total you invest. For example, you might allocate up to 10% of your portfolio to non-public investments.
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 Better Angels appeared first on HumbleDollar.
March 11, 2025
Assumptions matter most
Some people are enamored with the word tariffs. My new favorite word is assumptions.
I was listening to a podcast today and they told a story of a person who went to two financial planners seeking to determine if his retirement plan was sufficient. The first planner told him he had a 95% chance of success. The second said 75%. Naturally, he went with the first planner, but failed to ask the key question. What assumptions were used in the calculation?
There are so many assumptions to consider - spending levels and patterns, life expectancy, inflation over 30 years or so, risk tolerance, a legacy goal and then there is the biggy, investment returns and the variables within that investment mix and more.
I never had to deal with this, but it sounds scary while extremely important. As the podcast noted, even a 1% difference in investment return assumptions can make a significant difference in the projection - and the income reality in the future.
Turns out in the example which enticed the individual, the 95% success, used aggressive investment return percentages with little deviation. Nevertheless, the - likely unrealistic 95% - was too enticing.
I was surprised to learn from the planners on the podcast that hardly anyone asked about the assumptions used when they presented a client with a plan.
I doubt I would know all the questions to ask, but I know using conservative assumptions would lower my stress even if it meant working a little longer.
How about you? Do you know the assumptions your future is based upon?
I was listening to a podcast today and they told a story of a person who went to two financial planners seeking to determine if his retirement plan was sufficient. The first planner told him he had a 95% chance of success. The second said 75%. Naturally, he went with the first planner, but failed to ask the key question. What assumptions were used in the calculation?
There are so many assumptions to consider - spending levels and patterns, life expectancy, inflation over 30 years or so, risk tolerance, a legacy goal and then there is the biggy, investment returns and the variables within that investment mix and more.
I never had to deal with this, but it sounds scary while extremely important. As the podcast noted, even a 1% difference in investment return assumptions can make a significant difference in the projection - and the income reality in the future.
Turns out in the example which enticed the individual, the 95% success, used aggressive investment return percentages with little deviation. Nevertheless, the - likely unrealistic 95% - was too enticing.
I was surprised to learn from the planners on the podcast that hardly anyone asked about the assumptions used when they presented a client with a plan.
I doubt I would know all the questions to ask, but I know using conservative assumptions would lower my stress even if it meant working a little longer.
How about you? Do you know the assumptions your future is based upon?
The post Assumptions matter most appeared first on HumbleDollar.
All In the Numbers by Dennis Friedman
March 10 market sell-off was a good example of two kinds of investing risks: overall market and stock-specific risks.
When you invest in a single stock, you are not only subject to overall market risk, but also risks that are unique to that company.
When you invest in a broad-based index fund, you can minimize both risks by diversifying.
March 10, 2025 Stock Market sell-off:
Dow Jones -
Dow Jones Industrial Average -2.08%
S&P 500
Standard & Poor’s 500. - 2.70%
NASDAQ
NASDAQ Composite - 4.00%
VTI
Vanguard Total Stock Market - 2.72%
TSLA.
Tesla, Inc. -15.43%
When you invest in a single stock, you are not only subject to overall market risk, but also risks that are unique to that company.
When you invest in a broad-based index fund, you can minimize both risks by diversifying.
March 10, 2025 Stock Market sell-off:
Dow Jones -
Dow Jones Industrial Average -2.08%
S&P 500
Standard & Poor’s 500. - 2.70%
NASDAQ
NASDAQ Composite - 4.00%
VTI
Vanguard Total Stock Market - 2.72%
TSLA.
Tesla, Inc. -15.43%
The post All In the Numbers by Dennis Friedman appeared first on HumbleDollar.
March 10, 2025
Traveling First Class in Vanguard’s International Stock Index Fund by Steve Abramowitz
Need a vacation from our turbulent market? Go first-class with Vanguard’s Total International Stock Index Fund. Why do I need foreign stocks? After all, they’ve drastically underperformed the S&P in the last few years—and let’s face it folks—the world is in turmoil.
The whole idea of plunking some money down on foreign stocks gives many investors the heebie-jeebies. You’re not a victim of home country bias, you’re just being prudent, right? Aren’t almost all foreign economies—especially government-heavy and bureaucratic Europe—weaker than ours and so grow more slowly? And what about political upheaval? Those are valid concerns, but in fact over time and across many different periods of international unrest, foreign stocks have fared almost as well as our own.
So what would I gain? Two big advantages. You’ll have less bouncing around in your portfolio. Although international and domestic stocks are highly correlated, sometimes our market zigs when the rest of the world’s markets zag.
You also benefit from increased diversification. Don’t be a wise guy. I know many highly regarded investment advisory services maintain you can achieve the same desired result by simply investing in large-cap U.S. stocks that derive substantial revenue from overseas operations. I protest that's just not so. For one thing, exporters’ products may not be affected by local developments in quite the same way as their international counterparts. Another twist is that small companies don’t conduct as much business on foreign soil as large ones, so the stay-at-home investor steeped in small caps does not partake in as much of the benefits (and risks) of a global reach.
But if I deploy new cash or shift some money from U.S. funds into international ones, aren’t I just trading? Not necessarily, though I know many readers will disagree here. I’d call it repositioning for the long-term. Several reputable market observers advocate as much as a 40% allocation to foreign companies. To be sure, Vanguard’s popular Total World Stock Index Fund (VTWAX) holds a 40% international weighting, which accurately reflects the current relative value of U.S. and foreign markets. That level may be too high for you, but maybe you’d feel comfortable with a 20% allotment to the Vanguard Total International Stock Index Fund (VTIAX)
Let’s say you’re curious. How to proceed. Take a look at VTIAX. Besides the trademark low Vanguard fee, it gives you representation in the Far East as well as Europe and has two additional perks. Unlike many international funds it has a notable weighting in small and midcap stocks and also a reasonable stake in emerging markets.
Despite a strong showing out of the gate this year, foreign stocks may still be undervalued when compared with our own. It could be an opportune time to start or add to a long-term position. But remember, if you prefer a convenient and comprehensive one-stop vehicle for a global commitment, check out the total world fund mentioned earlier.
Bon voyage.
The whole idea of plunking some money down on foreign stocks gives many investors the heebie-jeebies. You’re not a victim of home country bias, you’re just being prudent, right? Aren’t almost all foreign economies—especially government-heavy and bureaucratic Europe—weaker than ours and so grow more slowly? And what about political upheaval? Those are valid concerns, but in fact over time and across many different periods of international unrest, foreign stocks have fared almost as well as our own.
So what would I gain? Two big advantages. You’ll have less bouncing around in your portfolio. Although international and domestic stocks are highly correlated, sometimes our market zigs when the rest of the world’s markets zag.
You also benefit from increased diversification. Don’t be a wise guy. I know many highly regarded investment advisory services maintain you can achieve the same desired result by simply investing in large-cap U.S. stocks that derive substantial revenue from overseas operations. I protest that's just not so. For one thing, exporters’ products may not be affected by local developments in quite the same way as their international counterparts. Another twist is that small companies don’t conduct as much business on foreign soil as large ones, so the stay-at-home investor steeped in small caps does not partake in as much of the benefits (and risks) of a global reach.
But if I deploy new cash or shift some money from U.S. funds into international ones, aren’t I just trading? Not necessarily, though I know many readers will disagree here. I’d call it repositioning for the long-term. Several reputable market observers advocate as much as a 40% allocation to foreign companies. To be sure, Vanguard’s popular Total World Stock Index Fund (VTWAX) holds a 40% international weighting, which accurately reflects the current relative value of U.S. and foreign markets. That level may be too high for you, but maybe you’d feel comfortable with a 20% allotment to the Vanguard Total International Stock Index Fund (VTIAX)
Let’s say you’re curious. How to proceed. Take a look at VTIAX. Besides the trademark low Vanguard fee, it gives you representation in the Far East as well as Europe and has two additional perks. Unlike many international funds it has a notable weighting in small and midcap stocks and also a reasonable stake in emerging markets.
Despite a strong showing out of the gate this year, foreign stocks may still be undervalued when compared with our own. It could be an opportune time to start or add to a long-term position. But remember, if you prefer a convenient and comprehensive one-stop vehicle for a global commitment, check out the total world fund mentioned earlier.
Bon voyage.
The post Traveling First Class in Vanguard’s International Stock Index Fund by Steve Abramowitz appeared first on HumbleDollar.
March 7, 2025
Asking the Editor
NINE MONTHS AGO, Jonathan Clements shared with readers that he’d been diagnosed with an incurable form of cancer. It was devastating news, especially for longtime readers, many of whom regard Jonathan not only as a journalist but also a friend. I count myself among them, so I was grateful that Jonathan agreed to sit for an interview to share more about his background, his early years and his current thinking.
You’ve joked that, when you’re in England, people think you’re American, but when you’re in America, people think you’re English.
I was born in London. But when I was three, my father moved our family to the U.S. to work for the World Bank in Washington. Just before I turned 10, he got posted to Bangladesh for four years, at which point my brothers and I got packed off to boarding school in England. I ended up spending nine years at an English boarding school, which probably explains a lot.
Can you say more about that?
It was a great education and a really rough way to spend your adolescent years. If you take young males and put them in close captivity for days on end, things do not work out well. It was a brutal environment, and you couldn’t escape.
It was during this period that I got interested in economics. I was also writing for the school magazine. I wrote a piece when I was at boarding school that ended up getting published in the school magazine under the headline, “Organ Transplant Fails.” It was about how the school spent £30,000 on a new organ for the church when other facilities were being neglected. Somehow, I managed to get it published, which earned me the enmity of a host of people. But in many ways, that was my entrée to becoming a journalist.
That’s when you knew you wanted to go into journalism?
Just before my 19th birthday, I took the Cambridge entrance exam, but I had nine months until I was meant to be up at Cambridge and needed to do something in the months ahead. By then, my parents were back in the U.S., so I phoned up a local newspaper in suburban Washington called the Potomac Almanac. That’s where I cut my teeth. I spent the next eight months working there. It was a small paper. I ended up as the education reporter, the sports reporter, the police reporter and the business reporter. It was so much fun.
The editor of the paper was this wonderful woman called Leslie Leven. She was probably the most important mentor I had.
Tell me about Cambridge.
I immediately got involved with the student newspaper and ended up as editor. To give you an indication of how I spent my time at Cambridge, in my second-to-last term, I went to exactly four lectures. I spent the rest of my time working on the paper.
The student paper came out every Friday, and it was put to bed on Thursday night. So, every Thursday night, I didn’t go to bed. We’d paste up the paper through the night, generally finishing around 7 a.m. Then we would go out to breakfast, head back to our rooms, fall asleep, and then get up around midday. Now, I can’t stay up past 9 p.m.
After college?
I worked for a specialty finance magazine in London called Euromoney. I did that for 13 months, and then decided that I wanted to be back in the U.S. I moved to the New York area without a job. I got a position as a reporter at Forbes magazine. Now, when you hear "reporter," it sounds like it’s a decent position, but reporter really means I was a fact checker.
After 23 months at Forbes, I managed to get promoted to staff writer. I was given the mutual funds beat and did that for a year and a half. I then got hired away by the Journal. I covered mutual funds for the Journal for a few years.
Do you remember your first article for the Journal?
It was about Dreyfus Corporation. I remember, when that article came out, sitting on the New York City subway and watching somebody read my article, which was a strange experience.
Along those lines, probably 25 years ago, I was at a conference in Napa Valley, and I was sitting next to [Nobel Prize winner] Bill Sharpe, and I watched him read one of my articles. Not for the faint of heart. I kept waiting for him to turn to me and pass judgment. But he didn’t.
You also talked about meeting Vanguard Group founder Jack Bogle.
Jack was definitely the most memorable guy I’ve ever met. My favorite Jack Bogle story was from 2005 or 2006. Jack was in downtown Manhattan. He calls me and says, “I’ve got a couple hours until my next appointment. Can I stop by and use a desk?” And I was like, sure. So, he walks into this newsroom full of reporters who are not easily impressed and, within minutes, he has everybody’s attention. He sits down in one of the cubicles and starts making calls. It was almost like he was a journalist himself.
Jack had this relentless drive, and this plays in my head a little bit at this point in my life. He just kept going and going. He didn’t stop right up until the end, and I wondered whether his family felt neglected. But after his death, I had the opportunity to speak with one of his daughters. To my surprise, she said they used to wonder whether their dad had a job, because he seemed to be at home all the time.
Many people remember your “Getting Going” column at the Journal. How did that come about?
The Journal was a wonderful place to work, but it definitely had a distinctive culture. Giving anything that smacked of financial advice was verboten. I remember I caused an uproar by running a story on mutual funds that included the 800 numbers for the funds involved. The notion that we could help readers by telling them how to find these funds was beyond the pale. The deputy managing editor had to weigh in. He said it’s alright to include 800 numbers, but they can’t appear above the newspaper fold.
In 1994, the Journal decided they were willing to consider some columnists for the news pages, and I put up my hand. To my surprise, at age 31, I was one of three people picked. One of the others was Walt Mossberg, who wrote the technology column.
What were some of your most popular articles at the Journal?
Anything with a list, anything that mentioned my kids, and anything on the topic of money and happiness.
What’s changed since those days?
Go back to the late 1980s and through the 1990s, all the focus was on investing, how to build a portfolio, what’s the expected return, yada yada yada. Since then, people have realized that there’s a limit to how much we can optimize a portfolio. Instead, there’s a lot of focus on other issues, like helping people buy the right-size home, making sure they have all their estate-planning documents, making sure they have the right insurance policies, making sure they claim Social Security at the right age, and so on. There has been more focus on the psychological aspects of managing money. And finally, there’s now a focus on helping people figure out what money means to them.
At the Journal, you became well known for advocating index funds. At what point did you arrive at that philosophy?
At Forbes and also in my early years at the Journal, a common story format was the fund manager interview and, as part of that, the fund manager would typically offer three stock picks. Those recommendations were no better than coin flips and maybe worse. There was one guy I profiled who had a really good record. The company that was the fund’s top holding turned out to be pretty much a fraud.
Do you remember your final article at the Journal?
When I left in 2008, I wrote a piece about three ways that money can help happiness. One, money can give you a sense of financial security. Two, it can allow you to spend your days doing what you love. And three, it can allow you to have special times with friends and family. I believe that those are the three ingredients for not only a happy financial life, but also a happy life—period. It’s certainly the three things that I’m focused on.
What do you see as the next frontier in personal finance?
I still don’t think we have a good way of assessing people’s risk tolerance. There are also all kinds of interesting psychological insights that could be brought to bear on personal finance. For instance, there are the five personality types. I think that’s interesting stuff, but we need to make the connection between that and financial behavior.
Because of your upbringing, you have more of a global outlook than most investors. How do you think that’s influenced your thinking?
I own a globally diversified stock portfolio. My default investment is Vanguard Total World Stock fund. My performance has suffered because of it, but I’m not going to change. I still think that, for investors, the starting point should be the global market portfolio, and then you have to decide how you’re going to deviate from that.
Can you describe how the idea for HumbleDollar came to you?
I’d like to say I had a vision for HumbleDollar, but I didn’t. After I left Citigroup in 2014, I worked on a book called the Jonathan Clements Money Guide, which was going to be annually updated. But I realized that the day it appeared it was out of date, so I decided to put it on the web, where I could update it continuously. To make the site more interesting, I figured I’d start blogging, and I would see if other people were interested in blogging as well.
I racked my brain for months trying to come up with a name for the site. It had to be something to do with money, and I wanted a word that would express my financial philosophy. Somewhere in the middle of the night, the words “humble” and “dollar” met in my brain. I got out of bed, it was 2 a.m., and I went to GoDaddy and banged in humbledollar.com, and it was available. That’s how HumbleDollar was born.
Since your diagnosis, you’ve written about the steps you’ve taken to streamline your finances. Are there things you’ve learned that you’d recommend to others?
I’ve moved four times in the past 14 years, and each time I’ve thrown stuff out. We hang on to this stuff thinking that it’s so important, and it simply isn’t. I cannot think of anything I’ve thrown away that I want back.
What approach did you take toward financial education with your children?
Talking about money is important. But the behavior that you model is much more critical. My kids learned from my frugality. They both have very good financial habits. In fact, their financial habits are probably too good. Maybe I emphasized frugality too much.
Was frugality something that your parents modeled?
I credit the frugality to what I call our big family story. When my great-great grandfather died in 1888, the newspapers said that he was one of the richest men in England. All that money was inherited by my great-grandmother Lillian, and she lived the Downton Abbey lifestyle. She had an estate in the Cotswolds with five houses on it.
Lillian had eight kids. Three of them died relatively early on. Five of them inherited the fortune and, with one exception, the fortune was blown, often in short order. That was the story I grew up with, and the message was clear: You’ve got to be careful about money. My two brothers, my sister and I are all very different people, but all of us are frugal, and I credit this great family story.
There’s a message here for readers: Think carefully about the family stories that you tell to your kids because they’ll guide their behavior. You can lecture all you want, and they might listen to you. But if you tell a really compelling story, it can change their behavior.
Has your thinking changed about anything since your diagnosis?
In the last couple of years, I’ve become better about giving money to my kids and funding my grandchildren’s 529 plans. In retrospect, I think I should have started earlier and could have been more generous, because it’s clear to me that I’d never have been able to spend all this money I’ve accumulated, even if I did live to a ripe old age.
If you’re pretty sure that your kids have good financial habits, and you’re not going to undermine their ambitions or send them on some wayward path, by all means give them money now. Why have them live with unnecessary financial anxiety? Why not make them feel a little more financially secure? I really believe that’s one of the greatest gifts that we can give to family members, this sense of financial security.
Would you have done anything differently? You’ve joked that you would’ve had more French fries.
I love French fries. They’re probably my favorite food. But even at this late stage, I find it hard to order French fries because I know they’re unhealthy.
Over the years, you’ve mentioned that your asset allocation has always been aggressive. Can you say more about how you were able to tolerate that risk?
I’ve always had a strong faith in capitalism and in the stock market. I’ve never had any doubt during a market decline that share prices would recover. I’ve almost always had at least 80% in stocks. Right now, I’m at 92%. My diagnosis has not changed my allocation because I’m not investing for myself anymore. I’m investing for Elaine and for my kids.
In your writing, you’ve shared that you aren’t feeling negative emotions about your diagnosis. In fact, you wrote that your first reaction was, “I’m okay with this.” Can you say more about that?
I feel like I’ve been very fortunate. It’s not that bad things haven’t happened in my life. They have. But I’ve been able to spend my life doing what I love. I have a close-knit family, and I’ve largely been free of financial worry. All in all, I feel like I’ve managed to get a whole lot out of my life.
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.
You’ve joked that, when you’re in England, people think you’re American, but when you’re in America, people think you’re English.
I was born in London. But when I was three, my father moved our family to the U.S. to work for the World Bank in Washington. Just before I turned 10, he got posted to Bangladesh for four years, at which point my brothers and I got packed off to boarding school in England. I ended up spending nine years at an English boarding school, which probably explains a lot.
Can you say more about that?
It was a great education and a really rough way to spend your adolescent years. If you take young males and put them in close captivity for days on end, things do not work out well. It was a brutal environment, and you couldn’t escape.
It was during this period that I got interested in economics. I was also writing for the school magazine. I wrote a piece when I was at boarding school that ended up getting published in the school magazine under the headline, “Organ Transplant Fails.” It was about how the school spent £30,000 on a new organ for the church when other facilities were being neglected. Somehow, I managed to get it published, which earned me the enmity of a host of people. But in many ways, that was my entrée to becoming a journalist.
That’s when you knew you wanted to go into journalism?
Just before my 19th birthday, I took the Cambridge entrance exam, but I had nine months until I was meant to be up at Cambridge and needed to do something in the months ahead. By then, my parents were back in the U.S., so I phoned up a local newspaper in suburban Washington called the Potomac Almanac. That’s where I cut my teeth. I spent the next eight months working there. It was a small paper. I ended up as the education reporter, the sports reporter, the police reporter and the business reporter. It was so much fun.
The editor of the paper was this wonderful woman called Leslie Leven. She was probably the most important mentor I had.
Tell me about Cambridge.
I immediately got involved with the student newspaper and ended up as editor. To give you an indication of how I spent my time at Cambridge, in my second-to-last term, I went to exactly four lectures. I spent the rest of my time working on the paper.
The student paper came out every Friday, and it was put to bed on Thursday night. So, every Thursday night, I didn’t go to bed. We’d paste up the paper through the night, generally finishing around 7 a.m. Then we would go out to breakfast, head back to our rooms, fall asleep, and then get up around midday. Now, I can’t stay up past 9 p.m.
After college?
I worked for a specialty finance magazine in London called Euromoney. I did that for 13 months, and then decided that I wanted to be back in the U.S. I moved to the New York area without a job. I got a position as a reporter at Forbes magazine. Now, when you hear "reporter," it sounds like it’s a decent position, but reporter really means I was a fact checker.
After 23 months at Forbes, I managed to get promoted to staff writer. I was given the mutual funds beat and did that for a year and a half. I then got hired away by the Journal. I covered mutual funds for the Journal for a few years.
Do you remember your first article for the Journal?
It was about Dreyfus Corporation. I remember, when that article came out, sitting on the New York City subway and watching somebody read my article, which was a strange experience.
Along those lines, probably 25 years ago, I was at a conference in Napa Valley, and I was sitting next to [Nobel Prize winner] Bill Sharpe, and I watched him read one of my articles. Not for the faint of heart. I kept waiting for him to turn to me and pass judgment. But he didn’t.
You also talked about meeting Vanguard Group founder Jack Bogle.
Jack was definitely the most memorable guy I’ve ever met. My favorite Jack Bogle story was from 2005 or 2006. Jack was in downtown Manhattan. He calls me and says, “I’ve got a couple hours until my next appointment. Can I stop by and use a desk?” And I was like, sure. So, he walks into this newsroom full of reporters who are not easily impressed and, within minutes, he has everybody’s attention. He sits down in one of the cubicles and starts making calls. It was almost like he was a journalist himself.
Jack had this relentless drive, and this plays in my head a little bit at this point in my life. He just kept going and going. He didn’t stop right up until the end, and I wondered whether his family felt neglected. But after his death, I had the opportunity to speak with one of his daughters. To my surprise, she said they used to wonder whether their dad had a job, because he seemed to be at home all the time.
Many people remember your “Getting Going” column at the Journal. How did that come about?
The Journal was a wonderful place to work, but it definitely had a distinctive culture. Giving anything that smacked of financial advice was verboten. I remember I caused an uproar by running a story on mutual funds that included the 800 numbers for the funds involved. The notion that we could help readers by telling them how to find these funds was beyond the pale. The deputy managing editor had to weigh in. He said it’s alright to include 800 numbers, but they can’t appear above the newspaper fold.
In 1994, the Journal decided they were willing to consider some columnists for the news pages, and I put up my hand. To my surprise, at age 31, I was one of three people picked. One of the others was Walt Mossberg, who wrote the technology column.
What were some of your most popular articles at the Journal?
Anything with a list, anything that mentioned my kids, and anything on the topic of money and happiness.
What’s changed since those days?
Go back to the late 1980s and through the 1990s, all the focus was on investing, how to build a portfolio, what’s the expected return, yada yada yada. Since then, people have realized that there’s a limit to how much we can optimize a portfolio. Instead, there’s a lot of focus on other issues, like helping people buy the right-size home, making sure they have all their estate-planning documents, making sure they have the right insurance policies, making sure they claim Social Security at the right age, and so on. There has been more focus on the psychological aspects of managing money. And finally, there’s now a focus on helping people figure out what money means to them.
At the Journal, you became well known for advocating index funds. At what point did you arrive at that philosophy?
At Forbes and also in my early years at the Journal, a common story format was the fund manager interview and, as part of that, the fund manager would typically offer three stock picks. Those recommendations were no better than coin flips and maybe worse. There was one guy I profiled who had a really good record. The company that was the fund’s top holding turned out to be pretty much a fraud.
Do you remember your final article at the Journal?
When I left in 2008, I wrote a piece about three ways that money can help happiness. One, money can give you a sense of financial security. Two, it can allow you to spend your days doing what you love. And three, it can allow you to have special times with friends and family. I believe that those are the three ingredients for not only a happy financial life, but also a happy life—period. It’s certainly the three things that I’m focused on.
What do you see as the next frontier in personal finance?
I still don’t think we have a good way of assessing people’s risk tolerance. There are also all kinds of interesting psychological insights that could be brought to bear on personal finance. For instance, there are the five personality types. I think that’s interesting stuff, but we need to make the connection between that and financial behavior.
Because of your upbringing, you have more of a global outlook than most investors. How do you think that’s influenced your thinking?
I own a globally diversified stock portfolio. My default investment is Vanguard Total World Stock fund. My performance has suffered because of it, but I’m not going to change. I still think that, for investors, the starting point should be the global market portfolio, and then you have to decide how you’re going to deviate from that.
Can you describe how the idea for HumbleDollar came to you?
I’d like to say I had a vision for HumbleDollar, but I didn’t. After I left Citigroup in 2014, I worked on a book called the Jonathan Clements Money Guide, which was going to be annually updated. But I realized that the day it appeared it was out of date, so I decided to put it on the web, where I could update it continuously. To make the site more interesting, I figured I’d start blogging, and I would see if other people were interested in blogging as well.
I racked my brain for months trying to come up with a name for the site. It had to be something to do with money, and I wanted a word that would express my financial philosophy. Somewhere in the middle of the night, the words “humble” and “dollar” met in my brain. I got out of bed, it was 2 a.m., and I went to GoDaddy and banged in humbledollar.com, and it was available. That’s how HumbleDollar was born.
Since your diagnosis, you’ve written about the steps you’ve taken to streamline your finances. Are there things you’ve learned that you’d recommend to others?
I’ve moved four times in the past 14 years, and each time I’ve thrown stuff out. We hang on to this stuff thinking that it’s so important, and it simply isn’t. I cannot think of anything I’ve thrown away that I want back.
What approach did you take toward financial education with your children?
Talking about money is important. But the behavior that you model is much more critical. My kids learned from my frugality. They both have very good financial habits. In fact, their financial habits are probably too good. Maybe I emphasized frugality too much.
Was frugality something that your parents modeled?
I credit the frugality to what I call our big family story. When my great-great grandfather died in 1888, the newspapers said that he was one of the richest men in England. All that money was inherited by my great-grandmother Lillian, and she lived the Downton Abbey lifestyle. She had an estate in the Cotswolds with five houses on it.
Lillian had eight kids. Three of them died relatively early on. Five of them inherited the fortune and, with one exception, the fortune was blown, often in short order. That was the story I grew up with, and the message was clear: You’ve got to be careful about money. My two brothers, my sister and I are all very different people, but all of us are frugal, and I credit this great family story.
There’s a message here for readers: Think carefully about the family stories that you tell to your kids because they’ll guide their behavior. You can lecture all you want, and they might listen to you. But if you tell a really compelling story, it can change their behavior.
Has your thinking changed about anything since your diagnosis?
In the last couple of years, I’ve become better about giving money to my kids and funding my grandchildren’s 529 plans. In retrospect, I think I should have started earlier and could have been more generous, because it’s clear to me that I’d never have been able to spend all this money I’ve accumulated, even if I did live to a ripe old age.
If you’re pretty sure that your kids have good financial habits, and you’re not going to undermine their ambitions or send them on some wayward path, by all means give them money now. Why have them live with unnecessary financial anxiety? Why not make them feel a little more financially secure? I really believe that’s one of the greatest gifts that we can give to family members, this sense of financial security.
Would you have done anything differently? You’ve joked that you would’ve had more French fries.
I love French fries. They’re probably my favorite food. But even at this late stage, I find it hard to order French fries because I know they’re unhealthy.
Over the years, you’ve mentioned that your asset allocation has always been aggressive. Can you say more about how you were able to tolerate that risk?
I’ve always had a strong faith in capitalism and in the stock market. I’ve never had any doubt during a market decline that share prices would recover. I’ve almost always had at least 80% in stocks. Right now, I’m at 92%. My diagnosis has not changed my allocation because I’m not investing for myself anymore. I’m investing for Elaine and for my kids.
In your writing, you’ve shared that you aren’t feeling negative emotions about your diagnosis. In fact, you wrote that your first reaction was, “I’m okay with this.” Can you say more about that?
I feel like I’ve been very fortunate. It’s not that bad things haven’t happened in my life. They have. But I’ve been able to spend my life doing what I love. I have a close-knit family, and I’ve largely been free of financial worry. All in all, I feel like I’ve managed to get a whole lot out of my life.
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 Asking the Editor appeared first on HumbleDollar.
March 2, 2025
Don’t Assume You Know
THE U.S. STOCK MARKET has historically delivered similar returns under both Democrat and Republican administrations. For that reason, my view is that investors shouldn’t worry too much about who occupies the White House, and I tend to stay away from investment discussions that involve politics.
But sometimes, the news coming out of Washington dominates the headlines in a way that can’t be ignored. Such is the case today. Moreover, with the stock market faltering recently, investors have been asking questions about the new administration’s policies and wondering how they might respond.
To think through this question, we can start with a closer look at the two policies that have received the most attention: the imposition of higher tariffs and the creation of a new cost-cutting department under the leadership of Elon Musk.
Tariffs raise a number of concerns. Most obvious is that they could result in higher prices for American consumers. Some consumers are already stretched thin by the recent spike in inflation, and further price increases would be unwelcome.
On top of that, tariffs can have broader implications for the economy. When prices are higher, people can’t afford as much, and that can cause the economy to slow. When the economy slows, corporate profits fall and that, in turn, can lead to lower stock prices.
In addition, there’s the risk that other countries could retaliate in response to U.S. tariffs, imposing their own tariffs on American goods. That could hurt domestic manufacturers. It’s for all these reasons that economists are nearly unanimous in seeing tariffs as a bad idea.
What about the new Department of Government Efficiency (DOGE)? This initiative too is raising concerns because it seems to be focused primarily on reducing government headcount. Since the federal government employs about three million people, the worry is that significant cuts could materially affect unemployment.
Compounding that would be a dynamic economists call the multiplier effect. When people lose their jobs, they aren’t able to spend as much, and that can lead to a slowing of the economy. They might also sell their houses, leading to downward pressure on home prices. A further concern is that, if the government workforce is cut too significantly, critical services might be impacted.
That, I think, summarizes the key concerns around these new policies. The question, though, is how to respond, and that’s the hard part. It’s hard because the negative scenarios I described above are all realistic but not necessarily guaranteed.
The use of tariffs, for example, could end up being temporary and just a negotiating tactic to achieve political aims with other countries. If that’s the case, then there would be little, if any, inflationary impact.
Even if higher tariffs were put in place permanently, they aren’t guaranteed to cause the spike in inflation that many fear. That’s the view of Scott Bessent, the new U.S. Treasury secretary, who explained the administration’s thinking in a recent interview.
Even critics of the administration have argued that higher tariffs may result in only modestly higher inflation. In November, Alan Blinder, an economist who served in the Clinton administration, wrote an opinion piece that carried the headline “Trump’s Economic Plan Has Inflation Written All Over It.” But when he broke down the math on prospective tariffs, his conclusion was that consumer prices might rise, at most, by 3%. And Blinder notes, it would be a “one-shot price increase.”
Similarly, DOGE’s efforts to cut back on the federal workforce may not have the negative impact that many fear. To be sure, the impact is negative for those who lose their jobs, and I don’t minimize that. DOGE’s objective, though, is to reduce the government’s annual deficit, which has reached alarming levels in recent years. Reducing the deficit would help bring down interest rates. That would benefit both the government as well as everyday consumers. And since interest payments now account for one-seventh of the federal budget, the impact of reducing interest rates could be considerable.
In short, the ultimate impact of these new policies is not a foregone conclusion. Proponents and opponents each have their own views, but it’s too early to know for sure how the administration’s policies will affect the economy now and into the future. As you think about your own portfolio, you may find the following analogy helpful.
Nassim Taleb, author of The Black Swan, compares investment markets to a pool table. When you hit the first ball, you can be pretty sure where it’s going to go. A skilled player might even be able to control what happens when that first ball hits the next one. But beyond that, it’s anyone’s guess. Things are just too random.
That image, I think, does a good job illustrating the dilemma investors face today. It’s hard enough to know what will happen in the short term. It’s even harder to know what will happen in response. And it’s nearly impossible to know how that will all net out to affect investment markets a year or two or three from now. And thus, it’s nearly impossible to know what action an investor should take.
That might sound like an unhelpful conclusion, but the good news is that we don’t need to be able to see the future to guard against negative outcomes.
Instead, this is the approach I recommend: As a thought experiment, let’s assume that all of the negative predictions are borne out—that the tariffs and cost-cutting do result in a recession and a stock market downturn. If we assume that these negative outcomes are guaranteed, investors can then ask themselves a question which is, I think, much easier to answer. How should my portfolio be positioned for a market downturn?
The good news: This is a question that investors should always be asking themselves. It has, to a great degree, a straightforward answer: An investor’s best defense is asset allocation and diversification. If you have sufficient resources outside the stock market—in some combination of bonds and cash—you should be well positioned to weather even a multi-year disruption to the market.
Adam M. Grossman is the founder of Mayport, a fixed-fee wealth management firm. Sign up for Adam's Daily Ideas email, follow him on X @AdamMGrossman and check out his earlier articles.
But sometimes, the news coming out of Washington dominates the headlines in a way that can’t be ignored. Such is the case today. Moreover, with the stock market faltering recently, investors have been asking questions about the new administration’s policies and wondering how they might respond.
To think through this question, we can start with a closer look at the two policies that have received the most attention: the imposition of higher tariffs and the creation of a new cost-cutting department under the leadership of Elon Musk.
Tariffs raise a number of concerns. Most obvious is that they could result in higher prices for American consumers. Some consumers are already stretched thin by the recent spike in inflation, and further price increases would be unwelcome.
On top of that, tariffs can have broader implications for the economy. When prices are higher, people can’t afford as much, and that can cause the economy to slow. When the economy slows, corporate profits fall and that, in turn, can lead to lower stock prices.
In addition, there’s the risk that other countries could retaliate in response to U.S. tariffs, imposing their own tariffs on American goods. That could hurt domestic manufacturers. It’s for all these reasons that economists are nearly unanimous in seeing tariffs as a bad idea.
What about the new Department of Government Efficiency (DOGE)? This initiative too is raising concerns because it seems to be focused primarily on reducing government headcount. Since the federal government employs about three million people, the worry is that significant cuts could materially affect unemployment.
Compounding that would be a dynamic economists call the multiplier effect. When people lose their jobs, they aren’t able to spend as much, and that can lead to a slowing of the economy. They might also sell their houses, leading to downward pressure on home prices. A further concern is that, if the government workforce is cut too significantly, critical services might be impacted.
That, I think, summarizes the key concerns around these new policies. The question, though, is how to respond, and that’s the hard part. It’s hard because the negative scenarios I described above are all realistic but not necessarily guaranteed.
The use of tariffs, for example, could end up being temporary and just a negotiating tactic to achieve political aims with other countries. If that’s the case, then there would be little, if any, inflationary impact.
Even if higher tariffs were put in place permanently, they aren’t guaranteed to cause the spike in inflation that many fear. That’s the view of Scott Bessent, the new U.S. Treasury secretary, who explained the administration’s thinking in a recent interview.
Even critics of the administration have argued that higher tariffs may result in only modestly higher inflation. In November, Alan Blinder, an economist who served in the Clinton administration, wrote an opinion piece that carried the headline “Trump’s Economic Plan Has Inflation Written All Over It.” But when he broke down the math on prospective tariffs, his conclusion was that consumer prices might rise, at most, by 3%. And Blinder notes, it would be a “one-shot price increase.”
Similarly, DOGE’s efforts to cut back on the federal workforce may not have the negative impact that many fear. To be sure, the impact is negative for those who lose their jobs, and I don’t minimize that. DOGE’s objective, though, is to reduce the government’s annual deficit, which has reached alarming levels in recent years. Reducing the deficit would help bring down interest rates. That would benefit both the government as well as everyday consumers. And since interest payments now account for one-seventh of the federal budget, the impact of reducing interest rates could be considerable.
In short, the ultimate impact of these new policies is not a foregone conclusion. Proponents and opponents each have their own views, but it’s too early to know for sure how the administration’s policies will affect the economy now and into the future. As you think about your own portfolio, you may find the following analogy helpful.
Nassim Taleb, author of The Black Swan, compares investment markets to a pool table. When you hit the first ball, you can be pretty sure where it’s going to go. A skilled player might even be able to control what happens when that first ball hits the next one. But beyond that, it’s anyone’s guess. Things are just too random.
That image, I think, does a good job illustrating the dilemma investors face today. It’s hard enough to know what will happen in the short term. It’s even harder to know what will happen in response. And it’s nearly impossible to know how that will all net out to affect investment markets a year or two or three from now. And thus, it’s nearly impossible to know what action an investor should take.
That might sound like an unhelpful conclusion, but the good news is that we don’t need to be able to see the future to guard against negative outcomes.
Instead, this is the approach I recommend: As a thought experiment, let’s assume that all of the negative predictions are borne out—that the tariffs and cost-cutting do result in a recession and a stock market downturn. If we assume that these negative outcomes are guaranteed, investors can then ask themselves a question which is, I think, much easier to answer. How should my portfolio be positioned for a market downturn?
The good news: This is a question that investors should always be asking themselves. It has, to a great degree, a straightforward answer: An investor’s best defense is asset allocation and diversification. If you have sufficient resources outside the stock market—in some combination of bonds and cash—you should be well positioned to weather even a multi-year disruption to the market.
Adam M. Grossman is the founder of Mayport, a fixed-fee wealth management firm. Sign up for Adam's Daily Ideas email, follow him on X @AdamMGrossman and check out his earlier articles.The post Don’t Assume You Know appeared first on HumbleDollar.
February 28, 2025
Four Thoughts
WHEN I STARTED writing about personal finance in the late 1980s, my focus was on giving “actionable” money advice. Here, at the end of my career, I’m more interested in offering thoughts that’ll help folks with all areas of their life, financial and otherwise.
I’m not sure how many articles I have left in me. Fingers crossed, it’ll be many more than my current diagnosis suggests. But whatever the case, here are four thoughts that I'd like readers to remember:
1. Worry less. As I eye the exit, my mind keeps coming back to the same notion: I hope folks can find a way to spend less time fretting, and not just about their finances.
We are, alas, hardwired to worry. That’s how our hunter-gatherer ancestors were able to survive countless dangers and reproduce, thus ensuring we’re here today. But constant worry isn’t necessary for survival anymore. Instead, it’s often a waste of time, one that mostly serves to make us unhappy.
Want to fret less? Start by pondering what stresses you out. Is there a way to address your fears? Often, when it comes to money, the path to less worrying involves simplifying our finances, keeping a healthy cash reserve, settling on the right stock-bond mix, making sure we diversify broadly, limiting debt, buying the right insurance, getting our financial affairs organized and listening less to market pundits.
Sometimes, our anxiety is the result of our own procrastination. We might dillydally over buying life insurance or getting a will drawn up. Sometimes, we’re worrying about issues over which we have no control, and what we need is some level of acceptance.
The unfortunate reality is, we’ll never stop worrying. But perhaps we can at least deal with our big fears, so our stress level isn’t quite so high, and sweat less over the small stuff. No, it doesn't much matter whether we rebalance every year or every two years, or whether we have 75% in stocks rather than 70%, or whether our credit card pays 2% cash back on restaurant spending instead of 1.5%.
2. Talk it through. So much nonsense could be avoided by discussing the issues that estrange us from others, rather than assuming we know what they're thinking. We might imagine that folks are out to cause us harm. But often, the reason for their apparently unkind behavior has nothing to do with us and everything to do with some misfortune in their life about which we have no clue.
Similarly, we can save a lot of time by asking about the matters that puzzle us, rather than worrying that our questions will lead others to view us as ignorant. I’ve sat through countless meetings where someone finally confesses, “Sorry, I don’t understand….” At that point, a majority of participants then admit that they too are confused.
3. Think for yourself. When folks raise their voice and pound the table, we sit up and take notice. Perhaps we shouldn’t. I’ve found that the loudest folks often least understand the issue at hand. Instead, they’re noisily trying to justify their own choices, about which they aren’t all that confident.
We also shouldn’t allow ourselves to be bullied into action by popular opinion, whether it’s reflected in the words of neighbors, colleagues or market pundits. In addition, we shouldn’t let ourselves be swayed by stock and bond prices, believing the pattern we see in market prices offers some message about the future. Got a sensible, low-cost, diversified portfolio? It’s important to stand our ground, even as those around us flit from one investment to another.
When folks offer seemingly sensible advice, keep in mind that there’s more than one way up the mountain. Personal finance is indeed personal. What makes sense for others may not make sense for you—because you have a different financial situation and different emotional makeup. Yes, we can learn a lot from others, but we shouldn’t necessarily mimic their actions. My advice: Listen when others tell you what they themselves have done. But don’t listen when they tell you what you ought to be doing.
4. Understand what’s influencing you. We aren’t just swayed by those around us, by the media, by advertising and by recent market returns. We’re also influenced by the past—the good and bad experiences that shape our fears and values.
What are the situations we seek to avoid? How do we like to spend our time? Why do we use our money in the way that we do? Events in our past—perhaps involving our parents or our schooling—likely bear heavily on our behavior today, even if we no longer remember many of those incidents.
Still, it’s worth getting a good handle on our values and fears. For instance, I hate the sense that I’m under attack, I loathe pretense and boasting, and it can ruin my day if I know a bad meal awaits me. All this I can trace to my time at English boarding school.
Perhaps nothing is more important in managing money, and in how we conduct ourselves more generally, than knowing ourselves. No, you’ll never totally get there. I know I haven’t. But the more we understand about ourselves, the better we can cope with our fears—and the more we can create a life where we’re truly happy.
This is my final week writing the lead Saturday newsletter article. In future weeks, you'll be treated to Adam Grossman's wisdom, with my wife Elaine overseeing the newsletter. Meanwhile, I plan to continue contributing articles and Forum posts for as long as I'm able.
Jonathan Clements is the founder and editor of HumbleDollar. Follow him on X @ClementsMoney and on Facebook, and check out his earlier articles.The post Four Thoughts appeared first on HumbleDollar.
February 27, 2025
Among Friends
ONE OF THE PERILS of being a HumbleDollar contributor is that you sometimes get hit up for advice that you aren’t necessarily qualified to give.
Such was the case recently when I was having breakfast with an old buddy. The topic turned to money and investments. Joe and I have been good friends since the days when we played on the high school basketball team. We try to get together every month or so to catch up and reminisce about old times.
These days, our conversations tend to revolve around aging joints, Medicare and, of course, retirement. Both of us turned age 65 last year. While I’m now semi-retired after leaving the corporate world three years ago, Joe is still gainfully employed as a minister for a local church. His goal, if he can make it happen financially, is to step back from the work world in the next four or five years.
Now, Joe is one of the kindest, most caring people I know—traits that have served him well in his career as a pastor and spiritual counselor. He’s the first to admit, though, that investments are not his strong suit, and it doesn’t help that the ministry isn’t exactly a highly paid profession.
Joe’s wife doesn’t make big bucks either as a hairdresser and yet, despite their limited means, they have managed to raise four kids, who are all now out of the nest and married. Joe and his wife own their house, which is mortgage-free, and they have been careful to steer clear of carrying credit card balances and other high-interest debt.
As for retirement assets, they have two buckets of funds: a 403(b) plan sponsored by the church, which matches 50% of the contributions that Joe makes to it, and a rollover IRA where Joe has consolidated retirement funds from previous employers.
This is where the problem comes in.
About five years ago, as Joe explained to me over eggs and toast, he handed over management of his IRA to an advisor friend from church who works at Edward Jones. It was a big move for Joe and his wife, since the majority of their retirement assets are in that IRA.
Unfortunately, the portfolio has not performed well. Over the past five years, the account is up only 4% net of fees. This is despite the portfolio climbing 26% over the past year, buoyed by the overall market’s rising tide.
While Joe and his wife are happy about the recovery in their balance over the past year, they aren’t at all pleased with the fact that their seven-figure IRA is barely larger today than it was when they handed it over to their friend five years ago.
Joe’s wife is pressing him to move the account from Edward Jones to Vanguard Group, which manages their 403(b) plan. While Joe sees the sense of this, he’s concerned about the impact on the relationship with their friend at church.
“Do you have any suggestions?” Joe asked me.
My first thought was that we were in dangerous territory. I learned long ago that money and friendships don’t mix, and I’ve been careful over the years to avoid financial entanglements that involve friends or family members. It’s a surefire way to either ruin a relationship or end up with subpar results, and sometimes both.
I told Joe that, while I have an MBA and possess a basic understanding of finance and investments, I’m not a financial advisor and don’t consider myself qualified to give financial advice. It was for this reason, I told him, that I have my own retirement portfolio being managed by an independent advisor at Vanguard.
Joe said he understood, but would still welcome any thoughts I might have. So, I gave him a Boglehead’s perspective on the basics of investing: the difference between active and passive funds; the power of indexing and dollar-cost averaging; the advantages of trying to track the long-term performance of the overall market rather than attempting to beat it; the importance of minimizing management expenses and fees in delivering results.
I asked Joe what funds his portfolio at Edward Jones was invested in. Sure enough, when Joe showed me the account, it was loaded up with active funds that charged commissions and high fees. This likely explained why Joe’s one-year performance of 26% was below the S&P 500’s 32%.
The gut punch for Joe came when I told him what my own fund performance at Vanguard has been over the past five years: 90% vs. his 4%.
That was it, he said. He was going to talk to his friend at church and inform him he was moving his rollover IRA to Vanguard. If it damaged their relationship, so be it. This money was too important to his and his wife’s future security.
I reminded Joe that past performance is no guarantee of future results, and that it was possible his portfolio, when rolled over to Vanguard, could underperform his Edward Jones portfolio in the short term. Joe acknowledged this, but said the risk was worth it.
He thanked me profusely for my help and we left the restaurant. I admit that I gave a sigh of relief, feeling confident that I’d stayed within the bounds of providing factual information without giving financial advice. As I drove home that morning, it struck me that the test of a good friendship—just like that of a good investment portfolio—is how it fares over the long term.
Such was the case recently when I was having breakfast with an old buddy. The topic turned to money and investments. Joe and I have been good friends since the days when we played on the high school basketball team. We try to get together every month or so to catch up and reminisce about old times.
These days, our conversations tend to revolve around aging joints, Medicare and, of course, retirement. Both of us turned age 65 last year. While I’m now semi-retired after leaving the corporate world three years ago, Joe is still gainfully employed as a minister for a local church. His goal, if he can make it happen financially, is to step back from the work world in the next four or five years.
Now, Joe is one of the kindest, most caring people I know—traits that have served him well in his career as a pastor and spiritual counselor. He’s the first to admit, though, that investments are not his strong suit, and it doesn’t help that the ministry isn’t exactly a highly paid profession.
Joe’s wife doesn’t make big bucks either as a hairdresser and yet, despite their limited means, they have managed to raise four kids, who are all now out of the nest and married. Joe and his wife own their house, which is mortgage-free, and they have been careful to steer clear of carrying credit card balances and other high-interest debt.
As for retirement assets, they have two buckets of funds: a 403(b) plan sponsored by the church, which matches 50% of the contributions that Joe makes to it, and a rollover IRA where Joe has consolidated retirement funds from previous employers.
This is where the problem comes in.
About five years ago, as Joe explained to me over eggs and toast, he handed over management of his IRA to an advisor friend from church who works at Edward Jones. It was a big move for Joe and his wife, since the majority of their retirement assets are in that IRA.
Unfortunately, the portfolio has not performed well. Over the past five years, the account is up only 4% net of fees. This is despite the portfolio climbing 26% over the past year, buoyed by the overall market’s rising tide.
While Joe and his wife are happy about the recovery in their balance over the past year, they aren’t at all pleased with the fact that their seven-figure IRA is barely larger today than it was when they handed it over to their friend five years ago.
Joe’s wife is pressing him to move the account from Edward Jones to Vanguard Group, which manages their 403(b) plan. While Joe sees the sense of this, he’s concerned about the impact on the relationship with their friend at church.
“Do you have any suggestions?” Joe asked me.
My first thought was that we were in dangerous territory. I learned long ago that money and friendships don’t mix, and I’ve been careful over the years to avoid financial entanglements that involve friends or family members. It’s a surefire way to either ruin a relationship or end up with subpar results, and sometimes both.
I told Joe that, while I have an MBA and possess a basic understanding of finance and investments, I’m not a financial advisor and don’t consider myself qualified to give financial advice. It was for this reason, I told him, that I have my own retirement portfolio being managed by an independent advisor at Vanguard.
Joe said he understood, but would still welcome any thoughts I might have. So, I gave him a Boglehead’s perspective on the basics of investing: the difference between active and passive funds; the power of indexing and dollar-cost averaging; the advantages of trying to track the long-term performance of the overall market rather than attempting to beat it; the importance of minimizing management expenses and fees in delivering results.
I asked Joe what funds his portfolio at Edward Jones was invested in. Sure enough, when Joe showed me the account, it was loaded up with active funds that charged commissions and high fees. This likely explained why Joe’s one-year performance of 26% was below the S&P 500’s 32%.
The gut punch for Joe came when I told him what my own fund performance at Vanguard has been over the past five years: 90% vs. his 4%.
That was it, he said. He was going to talk to his friend at church and inform him he was moving his rollover IRA to Vanguard. If it damaged their relationship, so be it. This money was too important to his and his wife’s future security.
I reminded Joe that past performance is no guarantee of future results, and that it was possible his portfolio, when rolled over to Vanguard, could underperform his Edward Jones portfolio in the short term. Joe acknowledged this, but said the risk was worth it.
He thanked me profusely for my help and we left the restaurant. I admit that I gave a sigh of relief, feeling confident that I’d stayed within the bounds of providing factual information without giving financial advice. As I drove home that morning, it struck me that the test of a good friendship—just like that of a good investment portfolio—is how it fares over the long term.
Author and blogger James Kerr is a former corporate public relations and investor relations officer who now runs his own agency, Boy Blue Communications. His debut book, “
The Long Walk Home
: How I Lost My Job as a Corporate Remora Fish and Rediscovered My Life’s Purpose,” was published in 2022 by Blydyn Square Books. Jim blogs at
PeaceableMan.com
. Follow him on Twitter
@JamesBKerr
and check out his previous
articles
.
The post Among Friends appeared first on HumbleDollar.
February 26, 2025
Take a Seat
MILESTONES MARK the growth of a child as she moves from infancy through school age. In similar fashion, we adults tend to measure our life’s progress with “firsts” or other significant events. Perhaps we remember the feeling of maturity that came with our first kiss or our first job. Milestones help us attach meaning to the course of a life that sometimes seems beyond our control.
Financial milestones often command special significance, like my first “real” job at age 15. My older brother got me hired by a company building a bank. My parents surprised me with unusual lenience by letting me drive myself in a borrowed vehicle, though I was still a few months from having an unrestricted license.
On my first day, my initial task was enlarging the vent hole for the concrete vault with a hammer and chisel. Next came breaking up a sidewalk with a sledge hammer. I thought I was lucky to be called away from that work, but instead found myself hauling heavy landscaping timbers in the rain at the boss’s friend’s beach house. I got back to the jobsite wet and covered with sand. When I pointed out to the foreman that I’d had no lunch, he begrudgingly let me leave with the admonition to “hurry back.” Instead, I hurried to my truck, hurried home and never looked back. I don’t say that with pride, but I have no regrets.
Despite my rough start, followed by a few tough years, my financial journey eventually smoothed out. The milestones began passing by with some regularity for my wife and me. Whether frugal by nature or nurture, our aggressive saving—and lack of troubles—left ample money from each paycheck to ladle into growing retirement accounts. I kept close tabs on the burgeoning balances, excited to see the numbers rising, despite the market plunges that come along every few years.
The first total that truly grabbed my attention was in the low six figures, an amount I suspect is surpassed by the annual income of some folks reading this. It’s many times less than the sum in our current portfolio, but it was huge at the time. While I knew we were still a lengthy trek from retirement, seeing that figure convinced me our spartan living was worth it.
Since then, other milestones once on the distant horizon are now in the rearview mirror. Our daughter’s college tuition is secure. My wife’s retirement is paid for, awaiting her decision to hang up her part-time work. Even my own phased retirement is already in motion, as my boss and I try to sway administration over to our plan for my shift to a part-time position.
All these milestone goals are linked to money, and for good reason: They each demand a truckload of dollars. But one elusive goal with a relatively small cost was snatched from me by nothing more than my own stubbornness.
Some 15 years ago, my wife and I spent some of our savings on new furniture, including a comfy leather chair to replace my inexpensive recliner. I loved my new chair, but it didn’t recline. That was fine for a decade, until I started hankering to own a recliner again. I dreamt of drifting off into an afternoon nap after a post-lunch talk with my wife, without the need to walk the achingly long distance to the bedroom. Trouble was, the purchase seemed such an indulgence that I couldn't pull the trigger without tying it to a money goal.
Fool that I am, I chose to tag it to our total retirement account balance. The milestone I was aiming for was a big round number. My restless nature was still uneasy with the thought of a special purchase just to be lazy, so the self-denial was comforting. Even so, the destination appeared not too distant in the superheated, post-pandemic stock market. Though I knew better, I thought the market run-up might last long enough to propel me to my target.
Instead, I proved that predicting the market is the path to disappointment. Just as I was preparing to search out New Year’s deals on recliners in January 2022, the market swerved in the other direction, away from my new chair.
My wife suggested I get the chair anyway, that I was silly to suffer when we could afford to part with a bit of savings to buy a lot more comfort. She was right. I had no control over the stock market, and we were well past the “tipping point” where our annual savings might appreciably affect our portfolio’s total balance. Still, my new chair was spinning in the wind of market whim, and I refused to veer from my charted course.
But despite my obstinance, the story has a happy ending. The stock market has never bumped along the bottom forever. Our stocks did recover and, indeed, zoomed past the milestone they’d failed to reach before. True to character, I dragged my feet in ordering my reclining chair, but I’m finishing this article a few days after its delivery.
Are recliner naps a meaningful milestone on the road to a happy life? My afternoons have been busy, so I’ve yet to find out. But I’ll keep you posted.
Financial milestones often command special significance, like my first “real” job at age 15. My older brother got me hired by a company building a bank. My parents surprised me with unusual lenience by letting me drive myself in a borrowed vehicle, though I was still a few months from having an unrestricted license.
On my first day, my initial task was enlarging the vent hole for the concrete vault with a hammer and chisel. Next came breaking up a sidewalk with a sledge hammer. I thought I was lucky to be called away from that work, but instead found myself hauling heavy landscaping timbers in the rain at the boss’s friend’s beach house. I got back to the jobsite wet and covered with sand. When I pointed out to the foreman that I’d had no lunch, he begrudgingly let me leave with the admonition to “hurry back.” Instead, I hurried to my truck, hurried home and never looked back. I don’t say that with pride, but I have no regrets.
Despite my rough start, followed by a few tough years, my financial journey eventually smoothed out. The milestones began passing by with some regularity for my wife and me. Whether frugal by nature or nurture, our aggressive saving—and lack of troubles—left ample money from each paycheck to ladle into growing retirement accounts. I kept close tabs on the burgeoning balances, excited to see the numbers rising, despite the market plunges that come along every few years.
The first total that truly grabbed my attention was in the low six figures, an amount I suspect is surpassed by the annual income of some folks reading this. It’s many times less than the sum in our current portfolio, but it was huge at the time. While I knew we were still a lengthy trek from retirement, seeing that figure convinced me our spartan living was worth it.
Since then, other milestones once on the distant horizon are now in the rearview mirror. Our daughter’s college tuition is secure. My wife’s retirement is paid for, awaiting her decision to hang up her part-time work. Even my own phased retirement is already in motion, as my boss and I try to sway administration over to our plan for my shift to a part-time position.
All these milestone goals are linked to money, and for good reason: They each demand a truckload of dollars. But one elusive goal with a relatively small cost was snatched from me by nothing more than my own stubbornness.
Some 15 years ago, my wife and I spent some of our savings on new furniture, including a comfy leather chair to replace my inexpensive recliner. I loved my new chair, but it didn’t recline. That was fine for a decade, until I started hankering to own a recliner again. I dreamt of drifting off into an afternoon nap after a post-lunch talk with my wife, without the need to walk the achingly long distance to the bedroom. Trouble was, the purchase seemed such an indulgence that I couldn't pull the trigger without tying it to a money goal.
Fool that I am, I chose to tag it to our total retirement account balance. The milestone I was aiming for was a big round number. My restless nature was still uneasy with the thought of a special purchase just to be lazy, so the self-denial was comforting. Even so, the destination appeared not too distant in the superheated, post-pandemic stock market. Though I knew better, I thought the market run-up might last long enough to propel me to my target.
Instead, I proved that predicting the market is the path to disappointment. Just as I was preparing to search out New Year’s deals on recliners in January 2022, the market swerved in the other direction, away from my new chair.
My wife suggested I get the chair anyway, that I was silly to suffer when we could afford to part with a bit of savings to buy a lot more comfort. She was right. I had no control over the stock market, and we were well past the “tipping point” where our annual savings might appreciably affect our portfolio’s total balance. Still, my new chair was spinning in the wind of market whim, and I refused to veer from my charted course.
But despite my obstinance, the story has a happy ending. The stock market has never bumped along the bottom forever. Our stocks did recover and, indeed, zoomed past the milestone they’d failed to reach before. True to character, I dragged my feet in ordering my reclining chair, but I’m finishing this article a few days after its delivery.
Are recliner naps a meaningful milestone on the road to a happy life? My afternoons have been busy, so I’ve yet to find out. But I’ll keep you posted.
Ed Marsh is a physical therapist who lives and works in a small community near Atlanta. He likes to spend time with his church, with his family and in his garden thinking about retirement. His favorite question to ask a young person is, "Are you saving for retirement?" Check out Ed's earlier articles.
The post Take a Seat appeared first on HumbleDollar.
February 25, 2025
Hole Truth
SOON AFTER GRADUATING college and starting work, I visited a dentist I found in the Yellow Pages for a long overdue teeth cleaning and exam. Although I had never had a cavity, the dentist informed me that I had multiple cavities that urgently needed to be filled. Naïve me allowed this dentist to fill the two supposed cavities of most concern.
Somewhat traumatized, I avoided dentists for a time. Finally, I queried several older coworkers, who recommended another dentist. Over the next 15 years, this dentist never filled a single cavity, including those that Dr. Yellow Pages said needed filling.
When I transferred to a job in a new location, wiser me asked coworkers to suggest a dentist. The recommended dentist filled just two cavities over the next three decades.
In 2022, my wife and I moved to a new state, and I again needed to find a new dentist. We asked several contacts, but their recommended dentists weren’t accepting new patients. No worries, we thought. Finding a reputable dentist should be easy, thanks to Yelp and Google reviews. Moreover, our insurance network covered just a few dentists in our rural area, making the research quick.
My wife visited the new dentist first, and her teeth received a clean bill of health. On my subsequent visit, the dentist advised that my teeth had three cavities that needed filling. I hadn’t had a new cavity in decades, and none was found at a check-up six months earlier. I also had no tooth discomfort or sensitivity.
I asked for more details about the alleged cavities, and the dentist responded that my insurance would cover nearly all the costs. I again queried about the specific teeth and cavity concerns. The dentist summarized that I had three cavities that needed prompt attention, but didn’t provide any specific information. The cheerful dentist then reemphasized the positive news that my insurance would cover almost all the costs. I would only incur a nominal out-of-pocket co-pay.
I balked and walked.
Five months later, I arranged a check-up with my former dentist in our old locale. As you might guess, I had zero new cavities requiring attention.
Both my wife and son had a nearly identical experience: cavities diagnosed during their initial dental exams post-college. Fortunately for our cavity-less son, we had warned him not to succumb to a potentially overzealous dentist until he obtained a second opinion.
A bit of web research confirms that dentistry is an inexact science and regulations differ from that of other medical fields. If you’re getting a sudden case of increased recommended dental procedures without having tooth issues or discomfort, the advice is to seek a second opinion and be a strong advocate for yourself.
After we told our insurance company about our experience, it agreed to expand the choice of in-network dentists.
Somewhat traumatized, I avoided dentists for a time. Finally, I queried several older coworkers, who recommended another dentist. Over the next 15 years, this dentist never filled a single cavity, including those that Dr. Yellow Pages said needed filling.
When I transferred to a job in a new location, wiser me asked coworkers to suggest a dentist. The recommended dentist filled just two cavities over the next three decades.
In 2022, my wife and I moved to a new state, and I again needed to find a new dentist. We asked several contacts, but their recommended dentists weren’t accepting new patients. No worries, we thought. Finding a reputable dentist should be easy, thanks to Yelp and Google reviews. Moreover, our insurance network covered just a few dentists in our rural area, making the research quick.
My wife visited the new dentist first, and her teeth received a clean bill of health. On my subsequent visit, the dentist advised that my teeth had three cavities that needed filling. I hadn’t had a new cavity in decades, and none was found at a check-up six months earlier. I also had no tooth discomfort or sensitivity.
I asked for more details about the alleged cavities, and the dentist responded that my insurance would cover nearly all the costs. I again queried about the specific teeth and cavity concerns. The dentist summarized that I had three cavities that needed prompt attention, but didn’t provide any specific information. The cheerful dentist then reemphasized the positive news that my insurance would cover almost all the costs. I would only incur a nominal out-of-pocket co-pay.
I balked and walked.
Five months later, I arranged a check-up with my former dentist in our old locale. As you might guess, I had zero new cavities requiring attention.
Both my wife and son had a nearly identical experience: cavities diagnosed during their initial dental exams post-college. Fortunately for our cavity-less son, we had warned him not to succumb to a potentially overzealous dentist until he obtained a second opinion.
A bit of web research confirms that dentistry is an inexact science and regulations differ from that of other medical fields. If you’re getting a sudden case of increased recommended dental procedures without having tooth issues or discomfort, the advice is to seek a second opinion and be a strong advocate for yourself.
After we told our insurance company about our experience, it agreed to expand the choice of in-network dentists.
The post Hole Truth appeared first on HumbleDollar.
