Just for fun, Google the words “market pullback.” There are over 2.2 million results–most of them market predictions–and the first page of results is dominated by calls for an imminent market reversal that the simple desk calendar has already proven false.
However, despite their worthlessness, market predictions remain as predictable as market opens and closes. (And I predict no end in sight.)
First, there’s a clear profit motive. Apparent urgency leads to activity, and activity is still how most of the financial services industry makes its money.
“Bullish predictions encourage investors to pour fresh money into the markets, helping asset management companies to enjoy rising profits,” the New York Times reported, noting that the Wall Street forecaster’s consensus since 2000 has averaged a 9.5% increase each year. They accidentally got it (almost) right in 2016, but in 2008, the consensus prognostication missed the mark by 49 percentage points (an outcome that makes your local weatherman seem like a harbinger of accuracy)!
But not everyone’s positive either. My colleague and the co-author of the new book “Your Complete Guide To Factor-Based Investing,” Larry Swedroe, analyzed Marc Faber’s perpetually cataclysmic proclamations and rendered the good doctor “without a clue.”
It’s old news that we’re busy and that we wear our busyness as a badge of honor. But a new study found that Americans, in particular, are actually buying it. Specifically, the study concluded that Americans who always say they’re “busy” are actually seen as more important. Unfortunately, it’s all a charade.
Busy, busy, busy
Numerous studies have shown that busyness isn’t actually good business, and here’s the big reason why: It makes us less productive. We’re all susceptible to it, but If I’m saying to myself (and I have), “Woo, I’m busy; really busy,” I’m likely being distracted from the most important, most productive work that I could be doing. I may feel like I’m doing more, but the net result is actually less. And it often feels like it.
But not everyone wears busyness as a status symbol. In response to the research and their own well-informed gut feelings, many are finding enjoyment in more productive work at a less busy pace. I wanted to know how these people recognize when they’re devolving into busyness and what they do to stop the downward spiral, so I asked 12 thought leaders who’ve inspired me two simple questions:
- How do you know when you’ve gotten too busy?
- What is a technique that you use to “unbusy” yourself?
Here’s what they had to say:
In 1967, the Beatles released the song, “When I’m Sixty-Four.” The lyrics are a preemptive plea to secure a relationship even when the realities of old age set in. Now, as the nation’s largest generation whistles this tune into retirement, the question seems less rhetorical:
Who is going to take care of us in retirement?
Not everyone will need long-term care insurance (LTC), but everyone needs a long-term healthcare plan. Your long-term care plan should incorporate the following: facts about you (and your spouse, if applicable), your age, your personal health, longevity of lineage, your retirement income and assets, your tolerance for risk, the costs and demographics of long-term care in your geographic area and information about any long-term care insurance that you own or have considered owning.
This post is the second in a two-part series. You can read the first on Long-Term Disability (LTD) by clicking HERE.
Long-Term Care Insurance
One very important thing to remember is that Medicare does not cover the costs of most long-term care needs. Allen Hamm, in his book, Long-Term Care Planning, shares the following statistics:
- 71 percent of Medicare recipients mistakenly believe Medicare is a primary source for covering long-term care.
- 87 percent of people under the age of 65 mistakenly believe their private health insurance will cover the cost of long-term care.
As an educator in the arena of personal finance, I generally avoid matters of public policy or politics because they tend to devolve into dogma and division, all too often leaving wisdom and understanding behind. But occasionally, an issue arises of such importance that I feel an obligation to advocate on behalf of those who don’t have a voice. The issue of the day revolves around a single word: “fiduciary.”
At stake is a Department of Labor ruling set to take effect this coming April that would require any financial advisor, stock broker or insurance agent directing a client’s retirement account to act in the best interest of that client. In other words, the rule would require such advisors to act as a fiduciary. The incoming Trump administration has hit the pause button on that rule, a move that many feel is merely a precursor to the rule’s demise.
Why? Because a vocal constituency of the new administration has lobbied for it—hard. They stand to lose billions—with a “b”—so they’re protecting their profitable turf with every means necessary, even twisted logic.
The good news is that informed investors need not rely on any legislation to ensure they are receiving a fiduciary level of service. Follow these three steps to receive the level of service you deserve:
The Trump administration’s move to delay implementation of the Department of Labor’s fiduciary rule has inspired me to delay implementation of my commitment to remain silent on matters of public policy and politics. It’s that important.
It seems pretty obvious that those in the financial establishment who oppose the rule do so primarily out of self-interest. After all, it’s estimated that they will lose billions in profits if the final rule goes into effect. I get it.
But I was fascinated recently when a member of the media wondered aloud if my advocacy for a wider fiduciary standard was also simply an outgrowth of my own bias.
Indeed, who’s to say I’m not just grinding my own axe on this issue? Maybe I’m in favor of all financial advisors being held to a fiduciary standard because I’m a fiduciary financial advisor and part of a national community of financial advisors that supports the fiduciary standard.
That would be a convenient rebuttal from the anti-fiduciary community, but here’s the (huge) problem with that rationale:
Much—too much—has been said and written about the relative superiority of Roth IRAs versus Traditional IRAs. The debate over which is better too often involves the technical numerical merits. In truth, the Roth wins in almost every situation because of its massive behavioral advantage: a dollar in a Roth IRA is (almost) always worth more than a dollar in a Traditional IRA. This is true regardless of one’s age, but the Roth IRA is even more advantageous for Millennials.
I must first disclaim that you can disregard any discussion of Roth or Traditional IRA if you’re not taking full advantage of a corporate match in your employer’s 401(k)—free money is still better than tax-free money. But after you’ve “maxed out” the match in your corporate retirement account, here are the top three reasons Millennials should consider putting their next dollar of savings in a Roth IRA:
1) Life is liquid, but most retirement savings isn’t.
Yes, of course, in a perfect, linear world, every dollar we put in a retirement account would forevermore remain earmarked for our financial futures. But hyperbolic discounting—and the penalties and tax punishments associated with early withdrawal from most retirement savings vehicles—can scare us away from saving today for the distant future. The further the future, the more we fear.
The Roth IRA, however, allows you to remove whatever contributions you’ve made—your principal—without any taxes or penalties at any time for any reason. Therefore, even though I’d prefer you to generally employ a set-it-and-forget-it rule with your Roth and not touch it, if the privilege of liquidity in a Roth helps you save for retirement, I’m all for it.
Michael Brundage had everything working for him: a great marriage, healthy children and a successful career in commercial real estate. But something—something big, but invisible—was missing, and the result was a depressive streak that led my friend and colleague to pursue therapy.
Then, in the middle of an early session, his therapist discerned the problem, which she immediately shared with Michael: “You hate your job. That’s the problem.”
Initially, Michael protested, somewhat confused. He was good at his job—very good—and it paid well, ensuring a more than comfortable lifestyle for his family. Wasn’t that what a job was supposed to be about? Indeed, several generations of Americans have bought into the notion that our work is primarily—if not solely—a means, not an end in itself.
“As a culture, we’ve collectively bought into the lie that work has to be miserable,” writes career expert Jon Acuff in his newest book, Do Over.
Michael had learned, in his words, “what a long shadow not liking your job can cast over the rest of your life.” So he decided to do something about it.
He read voraciously, including Do Over, in which Acuff offers a method to career management regardless of where you stand on the love/hate job continuum.
Acuff’s counsel applies to four different types of career transitions that everyone faces:
Investing is a pursuit best liberated from short-term analysis that tends to mislead more than edify. But 2016 was one of those rare years that provided a lifetime’s worth of education in a brief period.
Here are the three big investing lessons of 2016 that can be applied to good effect over the long term:
1) Discipline works.
January was greeted with panic-inspiring headlines like, “Worst Opening Week in History.” While hyperbolic, the truth in headlines such as these may have been more than enough to scare off investors frustrated by seemingly unrewarded discipline in recent years.
With threats of international instability (Brexit) and domestic volatility (historically wacky election cycle), there were ready reasons to cash in even the most well-conceived investment plan, opting for observer status over participant. But to do so would’ve been a huge mistake.
Indeed, the S&P 500 logged an impressive 11.9% for the year, with small- and value-oriented indices pointing even higher.
Because personal finance is more personal than it is finance, just about every step we take in our personal development aids us in financial planning, and vice versa.
It is in better understanding ourselves that even the most confounding financial decisions are made simple. Therefore, it’s entirely possible for a seemingly non-financial book to have a meaningful impact on your financial life, while the reverse is also true.
Consider, then, this list of my choices for the top five (mostly) recent books that can improve your life, work and financial serenity in 2017:
5) The Whole 30: The Official 30-Day Guide To Total Health And Food Freedom is not your typical diet book. I don’t do those. But I am fascinated by various “life hacks,” small behavioral changes we can make in our diet, exercise and sleep patterns that make life more livable.
My adopted home of Charleston might have been ranked the “Best City in the World,” but the state of South Carolina is earning a less distinguished label as a harbinger of the country’s worst pension crises. And yes, that’s crises—plural—because U.S. state and local government pensions have “unfunded liabilities” estimated at more than $5 trillion and funding ratios of just 39%.
What does that mean, exactly?
When a company or government pledges to pay its long-term employees a portion of their salary in retirement—a pension—the entity estimates how much it (and its employees) will need to set aside in order to make those payments in the future. An underfunded pension is one that simply doesn’t have sufficient funds to make its promised future payments.
Corporate pensions in the United States are in trouble, with the top 25 underfunded plans in the S&P 500 alone accounting for more than $225 billion in underfunding at the end of 2015. But states and municipalities are in even worse shape. This week, the Charleston-based Post and Courier estimated that South Carolina’s shortfall alone was at $24.1 billion, more than triple the state’s annual budget!
How did we get here?
There are two glaring reasons: poor investment decisions and greedy assumptions.