Jonathan Clements's Blog, page 99

Friends After All

FLAPJACKS IS LITERALLY on the other side of the tracks. The place is a throwback to the diners of the 1950s, when waitresses wore white aprons and took orders on little green pads, and where the red vinyl seats were cracked.

Charlie and me. I’ve been meeting Charlie at Flapjacks for weekly pancake breakfasts since I partially retired seven years ago. I spot him in our back booth and slide in across from him. He’s staring at his iPhone like it was a crystal ball.

“Charlie, what are you trying to find out? You’re not into individual stocks and your mutual funds don’t trade during the day.”

“Hey, Steve, I’ve been checking on Windsor Fund’s closing price a lot lately. I’ve hardly even looked at it for many, many years, but my first required minimum distribution is coming around. I thought I should get familiar with it again before I do anything.”

“Vanguard Windsor? Holy smokes, are you still in that thing? I told you about it 50 years ago. You must be a millionaire by now.”

Charlie leaned over and gave me a high five. “I started putting in dribs and drabs in graduate school and then used it in my traditional IRA after I got that hospital job. Steve-o, you must have made out like a bandit—you got in even before me.”

“No, not so, Charlie. Too many lunch-hour burritos at Schwab. I was a latecomer to the party.”

“Why did it take us until retirement to become such close friends, Steve? We have so much in common—backgrounds, interests, profession.”

“Charlie, you’re forgetting how I was front and center at the ethics review that almost got you suspended.”                                     

“Yeah, it’s still hard for me to go there. And there was something else, too. You knew a lot about real estate, as well as the stock market. It was intimidating.”

I was shocked. “Same for me. Remember when you looked at a hairline crack in the foundation of one of my duplexes? I was afraid I was in for a $15,000 repair. You immediately saw that the drainage problem causing it could be solved for less than $1,000. No doubt about it, Charlie, you’re the son my father always wanted.”

All relationships are imperfect and frequently have a checkered history. In retirement, we have the opportunity to renew them—and the perspective needed to understand the obstacles to doing so.

Betrayal. “Hi, Steve, it’s Jennifer from Dr. Houston’s office. Something important has come up, and Ken would like to have you stop by.”

Oh, great. You’re a psychologist and the psychiatry chair invites you in for a visit. You never know when the boom is going to be lowered.

“Steve, I’d like your input on what looks like something unethical. Ken handed me the form that faculty use to change a student’s grade. Is that your signature? Jennifer thought it looked off.”

My breath cut short. The form was all filled out. Charlie Seibel’s B in my psych stats course had been changed to an A. I was about to blemish a person’s career and maybe his whole life. “No, I didn’t sign that, Ken.”

Later that day, Charlie admitted the signature was his. Jennifer hastily arranged a meeting to consider whether this ethical breach warranted his expulsion from the medical school.

All of us have to endure violations of our trust. We shouldn’t deny the anger and hurt. But we should also ponder the impact of any disciplinary measure on the offender’s life.

The tribunal. By the time I arrived, the three other faculty members assigned to determine Charlie’s future were already seated around a small conference table. They were Ken, Elizabeth the head of psychology training, and Harris the dean of the medical school.

Ken opened things up. “An unhappy situation for everyone. Let’s see if we can reach a consensus on where to go from here.”

He turned to Liz. “I’m dumbfounded and outraged. He’s an embarrassment to my program and my students. As far as I’m concerned, Charlie has to go.”

Harris was regarded as thoughtful and measured. “I’ll chime in with a less-dire idea. We’ve all lied or cheated at some point in our lives. Truth be told, I veered off track earlier in my career and that, of course, appeared in my file. I had to explain my lapse in the interview for my current position. Charlie’s a good student with no previous instances of ethical frailty. I would favor a stern warning letter and probation through his graduation.”

Harris then swiveled to face me. “I’d like to hear from you, Steve. After all, you’re the aggrieved party.”

“Harris, I really don’t feel violated. This wasn’t about me. It’s something inside Charlie. As I teenager, I plagiarized part of a book review of The Grapes of Wrath from CliffsNotes. Mrs. Goldman caught it and scolded me in class. My embarrassment still lingers.”

I leaned toward leniency, but knew I had to take into account Liz’s preference for a more severe punishment. “I’m thinking a record in his file, a year’s suspension and then extended probation. And, of course, we’ll strongly encourage therapy. Can everyone feel comfortable with that?”

Liz had me in her sights. “I’ll relent on one condition. We require a diary of remorse and personal growth that we review after the year of suspension. Then we make a final decision.”

The rest of us nodded in agreement. I left the conference room feeling relieved, and hoping we had discharged our responsibility with accountability and sensitivity.

Morality can be relative, so be mindful that others may reach a different conclusion than the one you draw. Charlie returned for his doctorate and has become one of the area’s leading authorities on eating disorders.

Thrown out trying to steal. “You better not leave the store with those, son. I could call the police, but I’d rather call your mother instead.”

I immediately ran to put the packs back in the box. “Oh no, please don’t do that. I’m sorry, Mr. Thurman.”

“You’re Stevie, right? Your grandma comes in here all the time to get you kids baseballs because you’re always losing them in the bushes. I don’t think your folks will be happy to hear their oldest was caught stealing baseball cards from Thurman’s Toyland. What’s your phone number?”

Mr. Thurman had already called by the time I got home. My mother was waiting at the door. “Stevie, how could you do that? It’s so wrong. I’m going to have to tell your father.”

Awareness of blemishes on your own moral record should promote humility when judging others. Empathy need not mean naivety or shrinking from delivering a deserved punishment, but rather the capacity for restraint. We shouldn’t blindly retaliate.

Friendship is not a right. You have to work at it through self-examination and forgiveness, knowing that the wounds the perpetrator suffered early in life may be deeper than yours.

Steve Abramowitz is a psychologist in Sacramento, California. Earlier in his career, Steve was a university professor, including serving as research director for the psychiatry department at the University of California, Davis. He also ran his own investment advisory firm. Check out Steve's earlier articles.

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Words to Remember

"WE CANNOT GET RICH doing dentistry, but we can get rich investing what we make in dentistry." A nationally recognized lecturer on dental-practice management shared that piece of advice with me some 40 years ago.

I’d been out of dental school for a year when Dr. Dick Klein spoke at our local dental society’s annual meeting. The meeting's organizer was a friend. He asked if my wife and I would take Klein and his wife out to dinner after his presentation. The thought of actually having to talk to and socialize with this nationally renowned dentist scared the hell out of me. Just thinking about it caused stomach unrest for a week.

Klein’s speech offered a standing-room-only audience tips on running a dental office efficiently and increasing productivity. Little did I know the dinner that night would change my life.

To my great surprise, the very first hand shake with Klein put me at ease. He was a humble and genuinely nice guy. We found out that we shared an ex-athlete’s interest in sports, as well as strong Italian family backgrounds.

The dinner turned out to be relaxed, fun and enjoyable. It wasn’t until toward the end of the meal that the conversation turned to dentistry. In hindsight, after practicing dentistry for 40 years, I realize his words of wisdom were the reason for my success.

He started with a comment, “We can’t get rich doing dentistry, but we can get rich investing what we make in dentistry.” He then elaborated: “Only so much physical dentistry can be produced in a 32-hour week. Anyone can make a good income doing dentistry, but what one does with that income is what will make a difference.”

He offered this advice: “You’re used to a student’s lifestyle, so keep living like that for a few years.” When I mentioned that my wife was a teacher, he cited statistics that showed financially successful dentists were often married to teachers.

He stressed that the most important years would be the first 10. A practice grows slowly. Even though you’re making a moderate income now, it will go up steadily. Live on your wife’s salary, save for a large down payment on a house, open a Charles Schwab account and start adding to a good mutual fund. Live below your means and, as your salary increases, pay off the house and keep investing.

We didn’t, however, go to dental school to live like paupers, Klein added. We should enjoy life, have fun and spend money on things that will give us the most enjoyment, especially family, but always invest.

My wife and I followed his advice almost exactly as he laid it out that evening. We rented a small house for 10 years, as I built my practice. We then bought a beautiful home, making a large down payment and paying it off in four years. My wife’s job was a huge advantage, thanks to all the benefits the school district provided. Every year-end bonus from my dental practice went directly into our investments.

I’m now retired. I loved being a dentist and all the wonderful things dentistry allowed my family to do. I owe Klein a huge “thank you” for the wonderful advice he offered during a dinner with a young dentist and his wife so many years ago.

Dr. Gary Kelly graduated from the University of Washington’s dental school in 1981. He practiced general dentistry, with an emphasis on complex restorative implants, before selling his practice in 2013. He continues to consult on full arch implant cases.

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Stop the Fussing

BILLY JOEL WROTE a song that declares, “I love you just the way you are.” But as parents, sometimes it isn’t easy to say those words about our children.

We’re supposed to train them to succeed in life. We all probably think we’re excellent trainers, so—when our children don’t get it—it must be their fault. We did our part, so why don’t they learn?

For parents of special needs children, things are different, but also similar. We also have to train our children for life. But they don’t learn or perform as “typical” children do. But good parents persevere, training their children in different ways or with more intensity. We all need to get to the finish line, so we can say, “I did my part.”

But what happens if we never get to the finish line? What happens if the usual events that parents enjoy—graduations, marriages, grandchildren—never happen? That’s what I was facing.

Luckily, in recent years, I’ve been able to look at my life differently. I’ve accepted my son for who he is, not for what he could be. I was afraid I’d feel I was giving up, but the opposite happened. I started to look at him as complete—that he couldn’t be anything more than what he is.

I believe we all want to be better. Take our finances. We read books, try to save more, buy things when they’re on sale and take out loans when it makes sense. But when do we stop trying to make our finances better, and instead accept them for what they are? To me, the goal of accumulating money and having wealth is to live a comfortable life. We do it so that, at some point, we can stop struggling.

Thinking we can always improve our finances—or always improve our children—can be a lifelong mission. But should it be? Wouldn’t we be better off looking at our children as complete or our financial plan as all set?

I no longer feel I have to fix my son. I no longer feel I need to ensure he can do everything, because he can’t. Whatever he can’t do, I’ll do it instead. The uncertainty for me: Will he be able to figure things out when I’m not around? I'm not sure. But at least I get to enjoy him while I’m still here.

We can all fuss with our lives, or we can just enjoy things as they are. Enjoyment is so much better.

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From COW to KARS

RETIRED HEDGE FUND manager Jim Cramer is the host of Mad Money, a staple of financial television. For years, critics have derided his investment recommendations—to the point where there’s now a fund designed specifically to bet against him: the Inverse Cramer Tracker exchange-traded fund (symbol: SJIM).

For investors who see Cramer as the P.T. Barnum of finance, this fund offers the ability to make bets that are precisely the opposite of what Cramer recommends. “We watch Mad Money so you don't have to,” reads the fund's website. “Find out what Jim likes so you can sell it, and what he doesn't like so you can buy it.”

While colorful, the Cramer fund is just one of more than 500 new exchange-traded funds (ETFs) introduced last year. Investors in the U.S. now have more than 3,500 ETFs to choose from. Among them: COW to invest in agriculture and KARS to bet on electric vehicles. The latest development: The SEC recently approved 11 new bitcoin-tracking ETFs.

With thousands of options, you may be wondering how to make sense of the investment universe. Which funds are worth considering? To help answer this, I would start with this basic principle: Every investment can be evaluated through three simple lenses. In order of importance, they are:

Risk level
Growth potential 
Tax efficiency

Since risk is first on this list, that—I think—is the easiest way to decide if an investment is worth your time. How can you assess risk? While every investment is different, most can be plotted somewhere on the spectrum outlined below—going in order from most risky to least:

Alternatives. In the world of investments, stocks, bonds, cash and real estate represent the basic building blocks. But there are many alternatives, including gold, commodities, managed futures and cryptocurrencies, all of which are available in the form of exchange-traded funds. Some ETFs are even set up to mimic hedge funds and other strategies typically found only in private funds.

These alternatives carry above-average risk, in my view. Why? In most cases, the underlying investment is one that lacks intrinsic value, meaning the investment doesn’t produce income in the way that stocks produce dividends or bonds produce interest. That poses a risk because it means there’s no logical basis for valuing these assets, and thus there’s no floor to support their prices.

That, for instance, is why the price of bitcoin is so volatile. Unlike a stock or a bond, there’s no fundamental basis for determining the “right” price for bitcoin. That makes cryptocurrencies and other alternatives among the riskiest investments out there.

Leveraged single stocks. Stocks generally do have intrinsic value, and that makes them inherently less risky than alternative asset classes. But any individual stock still carries risk simply because adverse events can affect any one company. Unfortunately, Wall Street has found a way to amplify this risk.

Suppose you like Tesla. You could buy the stock, but if you wanted to dial up the risk in your portfolio, you could buy a fund like GraniteShares 2x Long TSLA Daily ETF (TSLR). This fund uses leverage to promise investors 200% of the daily performance of Tesla’s shares. If Tesla’s stock gains 5%, this fund should rise 10%. If, on the other hand, you have a negative view of Tesla, GraniteShares offers a fund (TSDD) that promises 200% of the inverse performance of Tesla’s stock.

Some funds take this a step further, using leverage to bet on alternative investments. That’s what the 2x Bitcoin Strategy ETF (BITX) does. This is very far out on the risk spectrum.

Leveraged index exposure. Using leverage to bet on a single stock is very risky. Lower down the risk ladder are funds that use leverage to bet on the entire market. A fund like Direxion Daily S&P 500 Bull 3X Shares (SPXL) is designed to give investors 300% of the daily return of the S&P 500-index. Last year, when the S&P 500 rose 26%, this fund soared 69%.

The fund’s cousin, the Direxion Daily S&P 500 Bear 3X Shares (SPXS), is designed to do the opposite: It provides 300% of the inverse of the S&P 500’s daily return. Last year, it declined by 46%.

Narrow indexes. Investment commentators—myself included—spend a lot of time talking about the differences between actively managed funds and index funds. The reality, though, is that there are thousands of index funds, and some are much riskier than others.

If you’re evaluating an index fund, make sure it isn’t limited to a narrow corner of the market. Very common, for example, are funds that hold stocks in just one sector—technology, for example. That can be risky because stocks in a given industry tend to rise and fall together. Instead, look for a broadly diversified fund, such as one that includes the entire S&P 500-index of large-cap stocks, or one that covers the entire U.S. market.

Actively managed funds. Why do actively managed funds have so many detractors? The problem is that they rely on human judgment, and no one can see the future. That’s why—counterintuitive as it may seem—index funds, which have no real manager, have beaten the performance of funds run by well-informed, hard-working and highly compensated managers.

To be sure, some actively managed funds do outperform each year, so it’s important to look at industry-wide data. Actively managed funds, on average, tend to underperform index funds while generating larger annual tax bills.

Broad-market index funds. How can you avoid all the risks outlined above? The ideal investment, in my opinion, is a simple, broadly diversified stock or bond index fund, such as one that tracks the S&P 500. While no investment is without risk, my view is that funds like this carry the least risk. That’s because stocks and bonds have intrinsic value, there’s no leverage amplifying the risk, the fees are low, they’re tax-efficient and there’s no risk of misjudgment by an active manager.

Postscript: It turns out Jim Cramer may have had the last laugh. Last week, the manager of the Inverse Cramer ETF, which was launched just last year, announced that it’s shuttering the fund.

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 (Twitter) @AdamMGrossman and check out his earlier articles.

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Called to Account

MY FAMILY HAS BEEN regularly visiting a remote corner of southwest England since 1968, when I was five years old. My maternal grandparents retired to the area, and for a while my parents owned a holiday house nearby. It is, to me, the world’s most beautiful place.

Decades ago, while walking the country lanes, I came across the ruins of a church that was under the protection of a group called Friends of Friendless Churches, a name that made me chuckle. Lately, I’ve been thinking we need a similar group in the U.S.—to offer support for traditional, tax-deductible retirement accounts, which also seem to be notably friendless.

In recent years, I’ve seen repeated comments from retirees lamenting the big tax bills they now face as they draw down their traditional 401(k)s and IRAs, and how they wish they’d never funded these accounts. Many are taking evasive action, including converting big chunks of their traditional retirement accounts to Roths, something I’ve also been doing. Still, all the handwringing strikes me as overdone, because it ignores four often-overlooked benefits that traditional 401(k)s and IRAs offer.

Tax-free growth—or better. Roth accounts, which don’t offer an initial tax deduction but do give investors tax-free growth, were introduced in 1998. That means many of today’s retirees had no choice early in their career but to fund traditional retirement accounts, where you get an initial tax deduction but all withdrawals are taxed as ordinary income.

But here’s what folks forget: Tax-deductible retirement accounts can also give you tax-free growth, just like a Roth. If you’re in the same tax bracket when you draw down a tax-deductible retirement account as when you funded it, the initial tax deduction effectively pays for the final tax bill. In fact, if your tax bracket in retirement is lower than it was during your working years, you can come out ahead, making more from the initial tax deduction than you lose to the final tax bill. You can read an explanation of the math here.

One way you can take advantage of a lower tax bracket in retirement: convert part of your traditional IRA to a Roth. I made big Roth conversions in 2022 and 2023, and I’ll probably do another one this year, with a view to shrinking my required minimum distributions once I’m in my 70s.

I’ll need to be more careful starting in 2026, because I’ll be turning age 63 that year. The issue: Boosting my taxable income with Roth conversions could drive up my Medicare premiums once I turn age 65. On top of that, the 2017 income-tax cuts may sunset at year-end 2025. In any case, I don’t want to overdo the Roth conversions—and I certainly wouldn’t want to have everything in Roth accounts—because there are some good reasons to keep a decent sum in traditional retirement accounts.

Filling those lower brackets. Many folks love the idea of paying zero income taxes. They shouldn’t. You don’t want to pay high taxes during your working years and then find yourself paying nothing in retirement. Instead, ideally, you pay a similar tax rate throughout your life. Filling up tax-deductible retirement accounts during your working years and then draining them in retirement can allow you to do just that.

Are you retired with little taxable income? Drawing down your traditional retirement accounts or converting them to a Roth can allow you to take advantage of the 10% and 12% federal tax brackets, which strike me as a bargain. To hit the top of the 12% tax bracket in 2024, a married couple could generate as much as $123,500 in income, after factoring in the standard deduction. What if you had all your money in Roth accounts? You wouldn’t be able to take advantage of these lower brackets, which would be a shame after a career during which you might have paid taxes at 22% or higher.

Giving back. Money in a traditional IRA would also allow you to take advantage of qualified charitable distributions (QCDs) once you reach age 70½. A QCD is one of the most appealing ways to support your favorite causes.

True, you won’t get a tax deduction for your charitable contributions. But the money that goes directly from your IRA to a charity avoids all income taxes, which means your gift is effectively tax-deductible. On top of that, the withdrawal counts toward your required minimum distributions, which these days kick in at age 73, and you can get the tax savings while also taking the standard deduction, a double win not available for regular charitable contributions. In effect, by funding a tax-deductible retirement account and then later making QCDs, you get a handsome tax break during your working years, plus you avoid the tax on all subsequent growth.

What if you’d funded a Roth instead? Sure, you could make a QCD from your Roth. But you wouldn’t be doing the charity any special favor—it doesn’t pay taxes whether the money comes from a Roth or a tax-deductible account. You, on the other hand, should be kicking yourself, because you effectively missed out on a valuable tax break by funding the Roth.

Paying medical costs. Many of us will face steep medical costs later in retirement. If those costs exceed 7.5% of adjusted gross income, they’re deductible on Schedule A. The expenses that qualify for the deduction include many related to long-term care.

Thanks to the deduction for medical costs, you could potentially tap a traditional retirement account and pay little or no tax on your withdrawals. What if you avoided traditional retirement accounts or earlier converted everything to a Roth? The medical deduction would be worthless to you.

The upshot: Most folks should go for tax diversification, funding both traditional and Roth accounts during their working years. And while it’s tempting to make big Roth conversions early in retirement, especially if you find yourself in a low tax bracket, don’t overdo it. In your later years, you may face hefty medical expenses, find yourself in a low tax bracket or want to make QCDs—and, at that juncture, you could put your traditional retirement accounts to good use.

Jonathan Clements is the founder and editor of HumbleDollar. Follow him on X (Twitter) @ClementsMoney and on Facebook, and check out his earlier articles.

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Pizza, Anyone?

AND NOW FOR SOMETHING completely different: I'd like to try a HumbleDollar meetup on Monday, March 4, at 5 p.m. at Pizzeria Vetri, 1615 Chancellor Street, Philadelphia.

All attendees will be responsible for their own bill, but it shouldn't be wildly expensive, not least because happy hour runs through 6 p.m. I believe Vetri has the best pizza in Philly. The restaurant doesn't take reservations, but the manager assures me that things should be quiet at that time. Be warned: Pizzeria Vetri has more than one location, so make sure you go to the right one.

If you plan to attend, please shoot me an email at jonathan@jonathanclements.com. That way, if there's some glitch, I can let you know ahead of time. If the March 4 meetup proves popular, I'll do it again over the summer—and it could even become a regular event here in Philly and perhaps an occasional event in other cities, depending on my travel plans.

For those with good memories—and there seem to be a lot of you—I had mused about holding a HumbleDollar conference. I even got as far as checking out a few venues and getting pricing. But it became clear that I couldn't pull it off at a price point that would appeal to a broad swath of HumbleDollar's thrifty audience. Indeed, even the excellent Bogleheads Conference—which I'd recommend—costs almost $600, plus travel, hotel room and meals, including $100 for the Saturday night banquet.

Still, what strikes me about the Bogleheads Conference, as well as others I've attended over the years, is that folks enjoy them less for the financial insights and more for the socializing. With any luck, pizza in Philly will (pun intended) satisfy that appetite.

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Closing Doors

MY FAVORITE CLASS freshman year in college was introductory psychology. I found the lectures interesting, the textbook fascinating, and the course much less time-consuming than my engineering classes. Based on my positive experience, I decided I’d take a class called psychology of personality as an elective. What I didn’t realize was that many students considered the professor to be something of an oddball.

My first—and only—day in the class was surreal. The professor kept repeating that his class was “designed to be a real system.” Multiple times, he exclaimed, “The sincere student will experience closure at the conclusion of this real system.”

Apparently, grades for the class weren’t determined on the basis of tests, but on some nebulous project requirement. At the end of the hour, the professor mentioned something about many students being “weirded out” of his classes. That was me. I immediately dropped his class and signed up for economics.

While I never regretted ditching that second psychology class, the professor’s statement about “closure” stuck with me. What was he talking about? It seems closure is a fairly complex concept in psychology. Don’t ask me to explain the intricacies—remember, I dropped the course.

The best working definition I’ve found: “Closure is the sense of resolution or completion of a life event, problem, or situation.” There are several important areas of my life where I’ve desired and, to some degree, achieved closure.

I was a driven student in high school. Good grades and college board test scores were a major part of my adolescent self-image. I achieved my academic goals, finishing high school with a perfect transcript, Scholastic Aptitude Test (SAT) scores that exceeded my wildest fantasies, and a hefty college scholarship. I felt closure at graduation, but it was an uncomfortable emotion. For some reason, on that day, the academic achievements for which I’d worked so hard seemed meaningless.

My father died in 2001 and my mother in 2013. I had a good relationship with both of them. Although I grieved their passing, I didn’t feel I had unresolved issues with either. I was able to spend significant time with my father in the months leading up to his death. I asked a lot of questions and wrote down his answers. This process was a blessing that eventually helped me to feel closure in our relationship.

My mother, unfortunately, had dementia for years before she died at age 91. Still, when she died, I did experience closure. I had been grieving the gradual loss of my mom for years, and this was just the final stage.

Another area of my life where closure was important to me was ending my 38-year career with my first employer. For years, I imagined how I might feel on my retirement day. Would it be bittersweet, recalling the emotions I felt at my high school graduation? Would I regret retiring? I almost retired after year 36 to work for another company. The decision, however, didn’t feel right, and I ended up declining the job offer.

When I finally did retire two years later, I was satisfied the time was right. To help further my sense of closure, I wrote a piece looking back on my career and posted it on LinkedIn, later adapting it for a HumbleDollar article. My coworkers also helped me by holding a farewell luncheon.

In addition, they gave me a picture of the nuclear power plant where I’d worked, which they all signed, along with their congratulations and best wishes. Strangely, my last day in the office didn’t generate much emotion. I quietly turned in my computer and drove the familiar route home that I’d traveled almost 10,000 times before.

Psychologist Gene Cohen identified a phase of aging he calls the “summing-up phase.” This phase has been described as “a time of review and resolution and heralds a desire to give back. The review is of one’s life with recognition of its meaning. It is a time of putting photos in albums, of writing memoirs.”

I may be a little young for this phase, which according to Cohen typically occurs between the late 60s and the 80s. Still, I find myself periodically drawn to reflect on the big picture of my life story, which is closer to its end than its beginning. I suspect many of my fellow HumbleDollar writers and readers can relate.

Ken Cutler lives in Lancaster, Pennsylvania, and has worked as an electrical engineer in the nuclear power industry for more than 38 years. There, he has become an informal financial advisor for many of his coworkers. Ken is involved in his church, enjoys traveling and hiking with his wife Lisa, is a shortwave radio hobbyist, and has a soft spot for cats and dogs. Check out Ken's earlier articles.

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Comparison Culture

WHEN I VISITED INDIA after working in the U.S. for a decade, it struck me that people seemed happy, despite harsh living conditions.

How could that be? “People compare themselves with others,” my brother said to me. “That’s human nature. If they’re better off than their immediate community, they’re happy. It doesn’t matter how bad their situation may be compared to more prosperous countries.”

That made sense. I was making the mistake of applying U.S. yardsticks of prosperity to their lives, and wondering how they could be so happy with so little.

From childhood on, there’s constant pressure to compare ourselves to others and to aspire to the things that seem to make them happy. No wonder corporate advertisers always show happy, smiling customers enjoying their company’s products. The inference is that buying these products will make the rest of us happy, too. Social media makes matters worse.

In an interview, legendary investor Warren Buffett talked about the home he bought in Omaha in 1958 and why he still loves it. “I’m happy there,” Buffett said. “I’d move if I thought I’d be happier someplace else. I’m warm in the winter, I’m cool in the summer, it’s convenient for me. I couldn’t imagine having a better house.”

Obviously, Buffett isn’t comparing himself to other billionaires, who often have more homes than they can count on one hand. Buffett knows who he is, what makes him happy and isn’t influenced by what others do. But many of us aren’t nearly so level-headed. It’s hard not to compare ourselves to others.

Comparison culture is also pervasive among investors. When the “magnificent seven” stocks outperform the broad market, investors often struggle to feel happy with their portfolio—unless, of course, they’re heavily invested in these highflying stocks.

Still, comparison doesn’t have to work to our detriment. When I compare myself to others, there are always some folks who are better off than me, no matter what metric I use—money, looks, abilities, you name it. If I compare myself to them, I’m not going to be happy.

But if I can learn from their success and find ways to improve myself, comparison starts to work to my advantage. Similarly, there are many who are worse off than me. When I compare myself to them, I feel blessed—and it inspires me to find ways to help others.

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Investing Softly

HEY GUYS, DO YOU carry a rifle like Clint Eastwood when you invest—or are you a vulnerable romantic like Hugh Grant? My contention: Most of us lean toward a traditionally masculine or feminine orientation when building our portfolio, similar to how we handle many other life choices, from career to sports preferences.

This gender orientation is, I believe, a pervasive bias when buying and selling mutual funds and exchange-traded funds (ETFs), not unlike the behavioral-finance you’ve likely read about, such as recency bias and hindsight bias. But gender-influenced investing tends to be more nuanced—it’s personal and specific to you and me.

What follows is how I developed into a sensitive, neurotic investor, reflecting my inner Dustin Hoffman. Perhaps my story will help you identify your own value inclinations when evaluating an investment’s merits—and perhaps allow you to correct the resulting distortions in your portfolio.

My first encounter with my family’s sex-role dynamics came when I was a crafty three-year-old. For the first time, my mother didn’t hang out with me as I fell asleep. Mortified and outraged, I let out a wail, demanding this indignity be rectified. But I had underestimated my father’s determination to shout down my attempt to cling to my guardian. “Fay, don’t go back upstairs to his room. I want Stevie to be a man, not a wimp.”

The messages here were undeniable. Danger lurked everywhere and could pounce at any time. Women more than men would be my ally. I was destined for a scaredy-cat existence.

My experience learning how to ride a two-wheel bike only reinforced these impressions. After promising to steady my start-off by holding on to the back of the seat, my father quickly withdrew his support. I fell hard on the concrete sidewalk and scraped my knee. My mother, watching intently from the front door, screamed at my father and soon put a band-aid across the wound.

Hey, I’m no dummy. As I navigated a threatening world, the feminine stereotype would be my ally. At age five, I was well on my way to becoming a timid and risk-averse investor.

How does my unheroic streak translate into my fund transactions? Take defense stocks. What do Boeing’s planes do? They crash and prolong wars. No surprise, I’ve never sought out defense stocks.

Another twist: As a nice Jewish boy, I’ve never handled a gun and never even seen one up close. All I remember is the Lone Ranger ponying up with his Indian sidekick Tonto, his revolver safely tucked into his holster. Give me one of those socially responsible funds, not because I have good intentions, but because their goals are less terrifying.

Another flashback: My father started out as a TV repairman. He could reach back behind a boxy RCA set, replace the bad tubes and, voila, the picture would turn from snowy to clear. To an impressionable kid, this was the unattainable height of masculine power—and this, too, influenced my investing.

As I’ve mentioned before on HumbleDollar, technology stocks have been my nemesis. I’ve been chronically underinvested in the sector, even skimping on tech-heavy broad market index funds, including the current S&P 500 with its 30% tech weighting. Despite my interest and self-declared expertise in the shenanigans of the stock market, I’ve only partly participated in the technology revolution of the past 50 years.

That brings me to a telling investment adventure. When I discovered no-load mutual funds in the 1960s, I predictably gravitated toward those that hedged relatively volatile common stocks by also including an allocation to bonds. This strategy protected my downside but limited my upside. Then, during a bull run, I noticed the ascent of 44 Wall Street Fund. In my Daily Graphs glossy, the fund showed an eye-popping rise from the chart’s lower left-hand corner to the upper right-hand corner. Misconstruing a bull run with market savvy, I couldn’t resist taking the plunge.

I tracked 44 Wall Street’s performance in The Wall Street Journal almost daily. One morning, maybe a few months after my purchase, I let out a shriek. The fund had lost 12%, even though the market was flat on the day. I was drenched in emotional sweat. The world was indeed treacherous, and I needed to take refuge in a balanced fund.

Chapter 11 sounds like a verse from the Bible. But for my father, filing for bankruptcy, no matter how strategic, was the purgatory for fallen investors. “Stevie, Stevie, never go that route. It would be a shanda on us.” I was, it seemed, destined to be the family shanda—its source of shame.

A few days later, I received the best letter I’d opened since I was notified that I’d passed my driver’s test. It was a transaction statement from 44 Wall Street. It showed a reinvestment of a 12% capital gains distribution, whose proceeds were used to buy additional shares. Minus the unavoidable taxes, the whole fiasco was a wash.

Where do investors like me tend to hide? You’ll find us in the maternal domains of the fund universe. The satellite sector funds adorning my broad market foundations are often health care-related, like Vanguard Health Care ETF (symbol: VHT), and home products-related, like Vanguard Consumer Staples ETF (VDC). As you may have guessed, I’m a genius in bear markets and an oaf when the bulls run.

You might want to explore the family origins of your own personal investment values—which might be political rather than sex-role related—with an eye toward correcting any unintentional portfolio tilts. Liberal investors, for example, may shun oil stocks, possibly unaware they’re compromising their portfolio’s diversification.

Steve Abramowitz is a psychologist in Sacramento, California. Earlier in his career, Steve was a university professor, including serving as research director for the psychiatry department at the University of California, Davis. He also ran his own investment advisory firm. Check out Steve's earlier articles.

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When It’s Worth It

REGULARLY CHANGING the oil is the most important step you can take to extend your car’s engine life. Oil is the engine’s life blood and changing it is one of the least costly maintenance steps. It’s also one of the dirtiest, crummiest, least pleasant jobs you can do.

Before I got married, I lived in a six-story apartment building in Brooklyn, with a parking garage in the basement. A friend of mine lived in the same building. One day, he was complaining about the cost of keeping his car running, especially the amount he was spending on auto mechanics. I offered to help him change his oil. He thought that would be wonderful.

We bought the oil and oil filter at a local auto parts store. I brought down a lifting jack and support to the garage, so we could lift the car up to gain access to the drain plug. But I didn’t crawl under the car to get to the drain plug. I let my friend do that, along with everything else, but with my supervision.

After we’d drained the oil, replaced the oil filter and filled up the engine with fresh oil, my friend looked at me and said, “What a dirty job that turned out to be.”

“Now you know why you pay a mechanic to change your oil,” I replied.

“It doesn’t seem like such an expensive job, after all,” he concurred.

I look carefully at what items cost, what someone is charging me to perform a service and how much I’m tipping a waitress. I’m cheap. There, I said it. I hate spending money.

But the cost is always relative to the alternative. That alternative could include cuts and scrapes on your hands from doing the job yourself. Buying a cheaper item can result in it quickly wearing out or breaking, requiring you to buy another one. Waiting at a fast-food counter, instead of sitting in a quiet white-tablecloth restaurant and enjoying a nice meal, also has its costs.

Everything has a cost and a reward. The reward should exceed the cost. Otherwise, it isn’t a good purchase. The cost is usually known. The reward is subjective, based on the purchaser’s needs and wants.

The reward for doing a job yourself is the satisfaction of knowing you can do it on your own, along with the cost savings from not paying others. But if the quality of the work is inferior to what a professional could do, the reward is diminished. On the other hand, if you’ve been ripped off by professionals in the past, the quality may not be as important as the satisfaction of knowing that, this time around, no one took advantage of you.

Hiring a financial advisor may be a good use of your money if you panic every time the stock market nosedives, or if you can’t seem to put away enough money to afford the finer things in life. But there’s also the cost, including the risk of being sold something you don’t need.

As with most things in my life, I take the DIY—do it yourself—approach to managing money. I feel better finding out I made a mistake with my money, rather than learning someone else made a mistake for me. So, I go it alone. That’s required me to spend a great deal of time and money studying investing and deciding what’s a good approach to managing my wealth. To me, it’s worth it.

I might have had a larger pot of gold if I’d used a financial advisor. But I’m happy following the immortal words of Frank Sinatra, when he sang, “I did it my way.”

David Gartland was born and raised on Long Island, New York, and has lived in central New Jersey since 1987. He earned a bachelor’s degree in math from the State University of New York at Cortland and holds various professional insurance designations. Dave’s property and casualty insurance career with different companies lasted 42 years. He’s been married 36 years, and has a son with special needs. Dave has identified three areas of interest that he focuses on to enjoy retirement: exploring, learning and accomplishing. Pursuing any one of these leads to contentment. Check out Dave's earlier articles.

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