October was a wild ride for investors. At its low, the Dow Jones Industrial average plunged 5.2 percent from its September high. The Standard & Poor’s 500 index lost 6.2 percent and the Nasdaq was down 7.4 percent. Global headlines seized upon market uncertainty and featured tabloid-style “advice,” posing questions such as, “Is this the…
Every market pundit has an opinion on whether the market is now at or near a bubble. And after the recent bout of volatility, triggered by a resurgent and scary narrative about a “slowing global economy,” investors who have been in on the six-year bull market run would be right to question the profits they…
One of the more persistent investment myths holds that a winning strategy is to sell stocks in May and wait to buy back into the market until November. While it is true that stocks have provided greater returns from November through April than they have from May through October, the equity risk premium has still…
Let’s define “popular” as being liked or admired by the general public. One might reasonably think that popularity is a good thing, right? But when it comes to investing, research shows popularity often comes with lower returns. This correlation can sometimes result in a conflict with traditional economic theory, where risk and expected return should…
The municipal bond market has almost $4 trillion in total debt outstanding. That compares with about $18 trillion in outstanding U.S. Treasury debt. Besides market size, municipal bonds differ from Treasurys in that they carry credit risk, are less liquid and are exempt from federal income tax. The size of the spread between Treasury bonds…
We got the subtitle of my last book wrong. It reads, “Balancing Money and Life.” And while the book is still substantively solid and its aging content remains mostly relevant, the subtitle, I now believe, is a misnomer. It may actually contradict the book’s fundamental message. Whether we’re talking about money and life, work and…
The securities industry has a vested interest in making investments complicated and opaque. Confusion, obfuscation, fear and anxiety are often the basic tools of its trade. While purportedly “market-beating” brokers and advisors tend to profit handsomely in all market conditions, the performance of the typical investor over the past 20 years has been accurately described…
Q: What are TIPS and how do they work? A: Similar to nominal (non-inflation-adjusted) U.S. Treasury fixed income investments, TIPS are issued with fixed coupon rates and fixed maturity dates (such as five, 10 or 20 years). The key difference between TIPS and nominal bonds is that the coupon rate for TIPS is a guaranteed…
Income inequality can arise from a number of things, like gender, race, social class and education. We know it’s an issue. But the most recent recession revealed what may be an even bigger problem: wealth inequality. When we talk about wealth, we’re referring to everything you can claim as an asset, including savings accounts, your…
Q: What is a bond ladder? A:A bond ladder is a portfolio of individual bonds that have different maturities. For example, a bond ladder could be constructed with equal numbers of bonds with maturities across 1–10 years, or it could consist of bonds that mature in 2–7 years. Since buying small lots of individual bonds…
So far, we have seen how “practice makes perfect” in Talent is Overrated and discovered the importance of developing right-brain capabilities in A Whole New Mind. In my final installment of articles on the subject of guiding our youth into financial and professional adulthood, I will take a look at another important question: “What motivates…
Last week was the worst week for the S&P 500 and the NASDAQ since May 2012. The S&P 500 index dropped 3.1 percent on the week to 1,906.13 and the NASDAQ fell 2.3 percent to 4,276.24. Not surprisingly, the market’s volatility and rapid decline brought out the worst in the financial media. The amount of…
Q: Should you stay invested in the short term while waiting for interest rates to rise? A: First, other than very short-term interest rates that are heavily influenced by the Federal Reserve, it’s difficult to predict changes in interest rates. Second, to determine whether a short-term fixed income approach will be superior to an intermediate-term…
Last week was uncomfortable for market watchers. The Dow dropped more than 200 points one day and surged more than 200 the next. Both moves were attributed to small, seemingly random things. The International Monetary Fund cut its global forecast, and the Federal Reserve released its meeting minutes. I’ll leave it to you to figure…
You might think that the most important work a financial advisor can do is related to allocating a client’s investment portfolio, or perhaps helping secure a timely insurance policy or drafting the optimal estate plan. In fact, the most important work is done when clients are in the midst of navigating life’s major transitions. I…