Recently, my family needed a new vehicle. I’ve always wanted a truck, and I knew we would get tons of use out of it. Could I have found a cheaper vehicle? Sure. But I knew we could afford the truck, so after lots of careful thought, we decided to buy it. Anytime I make a…
Life insurance is one of the pillars of personal finance, deserving of consideration by every household. I’d even go so far as to say it’s vital for most. Yet, despite its nearly universal applicability, there remains a great deal of confusion, and even skepticism, regarding life insurance. Perhaps this is due to life insurance’s complexity,…
Eleven years ago, I needed a new bike. At the time, I rode a lot. I was in a big group of relatively competitive riders, and we’d often put hundreds of miles on our bikes each week. I agonized over what bike to buy, but I kept coming back to one made by a company…
We just completed the second consecutive year where U.S. large-cap stocks outperformed most other asset classes, including U.S. small stocks, U.S. value stocks and international stocks. This development has led some investors to wonder whether diversification still works. We believe diversification should remain an essential part of a well-devised, long-term investment plan, and that investors…
“Recency” can be described as the tendency to overweight recent events or trends and ignore the long-term evidence. It’s one of the more common and costly behavioral mistakes that individual investors can make, often leading them to buy high and sell low. Clearly, this represents a major problem, as such behavior is exactly opposite of…
I am not endorsing any political views, but I did note an observation made by Bernie Sanders in the recent Democratic presidential primary debate. He stated that Wall Street’s “business model is greed and fraud.” There’s a lot of data supporting that view. A history of unethical conduct The Securities and Exchange Commission (SEC) compiled…
Years ago, my colleagues and I conducted a fairly large-scale research project. We interviewed a bunch of high-income professionals who provided professional services. This group included doctors, dentists and lawyers, and like most of us, they earned money only when they were working. In essence, they traded their time for dollars. Our finding was this:…
Ask someone how they invest, and you’ll probably get a pretty standard answer involving stocks, bonds and maybe some real estate or cash. But rarely will people mention something that is even more important: their investments in human capital. They don’t talk about it because human capital investments can look a lot like any other…
As we have discussed many times, much of the “conventional wisdom” on investing is simply wrong. For our purposes, we can define conventional wisdom as those ideas that become so commonly accepted that they go unquestioned. Today we’ll look at the idea that rising interest rates would doom returns to real estate investments, specifically the…
It’s been said that diversification is the only free lunch in investing because, done properly, an investor can reduce risk without reducing their expected return. Yet despite this wisdom, many individuals hold concentrated positions in a single stock when they could easily diversify away that idiosyncratic, single-company risk. Which, then, begs a critical question: given…
Do you remember the scene from It’s A Wonderful Life—only the best holiday movie ever—when George and Mary Bailey are cruising out of Bedford Falls on their well-earned honeymoon, only to notice a literal run on the banks (including the Bailey Savings and Loan, which George reluctantly operates)? Well, as Mark Twain is attributed as…
By Sylvia Nissenboim Both caregiving for an elderly loved one and preparing for the holidays can come with a lot of joy, but also some unintended stress. As such, it’s vital that caregivers don’t overload themselves as they balance the day-to-day demands of caring for an older family member with the additional commitments that pop…
With the recent spate of positive economic news, highlighted by the strong jobs numbers for both October and November, all signs point toward the Federal Reserve raising the federal funds target rate 25 basis points from 0–0.25 percent to 0.25–0.50 percent. Based on federal funds futures, the market is assigning a roughly 76 percent probability…
When we talk about the chances of something bad happening, people tend to fall into three general groups. The Numbers Don’t Matter No matter the odds, this group dismisses the statistics. People insist they can trust their gut. I suspect this group buys lottery tickets every week. The Odds Look Great This group focuses on…
It seems like almost every week a new study appears to debunk the myth of active management. This week was no exception. Robin Powell, a U.K.-based journalist and financial blogger, discussed a recent study that covered 561 U.K.-based stock funds between 1998 and 2008. The study’s findings were consistent with similar research done on funds…