Last year was a tough one for disciplined investors. Disciplined investors know that diversification is a key element of successful portfolio management. But investors who stayed the course and remained diversified were punished for it in 2014, at least in the short term.
Disciplined investors will continue to be taunted over the coming weeks and months by headlines touting the success of “the market” in 2014. “Which market is that?” many of them will ask.
Well, “the market” we hear about most often is the Dow Jones Industrial Average, which represents only 30 of the largest U.S. companies trading on the New York Stock Exchange. A slightly broader barometer of “the market” is the S&P 500 index, a benchmark tracking 500 of the largest U.S. stocks. In this case, “the market” could more accurately be translated as “the U.S. large-cap stock market.”
“We’re just overwhelmed with life.” That was my response to an attorney looking for insight into the obstacles facing Generation X.
I’d referred a number of 30- and 40-something financial-planning clients to this attorney. All were in need of estate-planning documents.
But he came to me concerned about the difficulty he was having in reconnecting with clients who’d begun the process but were struggling to find the time to complete it. The time to complete anything, really.
While folks of all generations struggle with being overwhelmed by the various responsibilities and obligations of life, I see the problem as endemic within the ranks of Gen X, my peers.
My family celebrates Christmas, and music has always been a big part of the holiday for us. So I thought I’d offer up my top five favorite Christmas albums:
You’ve got a machine just sitting around your house. It’s a money-printing machine, and it’s perfectly legal. This machine is expected to print $75,000 this year before taxes. You’ll use that cash to pay your household expenses.
Each year, the machine will print 3 percent more than it did in the previous year, and it will continue doing so for the next 40. That means, over its lifetime the machine will print $5,655,094.48, easily making it your most valuable asset today.
Yet there it sits, maybe in your garage, between an inherited set of golf clubs and a wheelbarrow with a flat tire, unprotected. Uninsured.
The machine, of course, is you, or more specifically, your ability to generate an income. It didn’t come cheap. You and your parents invested years of training and likely tens of thousands of dollars in hopes that your machine would not only support you financially for a lifetime but launch another generation as well.
We don’t question the need to buy insurance for the things our money machine purchases. But few of us know if—or at least how and to what degree—their income-generation engine is protected.
Giving Tuesday might officially be behind us, but let’s face it—we’re just getting started. The giving season is underway, with the holidays and year-end bearing down on us. So how can we transform one of the more stressful, and sometimes guilt-ridden, elements of the season into something more life-giving?
Whether you’re giving to a family member, a friend or a cause, please consider the following four directives as a guide to happy giving:
1) Give out of impulsion, not compulsion. Compulsion to give can arise from the mountain of expectations, perceived or otherwise, heaped upon us at this time of year. (Those expectations are more often self-imposed, by the way.) Impulsion, on the other hand, comes from within. Give because you want to, not because you have to. And don’t give if you don’t want to.
I travel a decent amount. I don’t mind flying, but I’ve always struggled with the loss of productivity. Hours waiting at the airport. Even more hours in flight. But with the advent of in-flight Wi-Fi, I thought my productivity problems were solved. I was wrong.
I’ve instead concluded that by nixing slow and unpredictable in-flight Wi-Fi altogether, we can save money and use flight time to more productive ends (like reading, writing and resting) better suited for that environment.
My initial plan was to use in-flight Wi-Fi to slay the email dragon. That way, I could land knowing that nothing had slipped through the cracks and that there were no surprises waiting. I might even allow non-urgent emails to pile up for a couple days if I knew I had an upcoming flight. Unfortunately, the strategy was a miserable failure.
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 life—whatever and life—the temptation is to see the “whatever” as a force standing in opposition to life. An alternative to life.
And, unfortunately, this isn’t merely a rhetorical conundrum. As it often does, life follows language. Indeed, the phrase “work-life balance” has become so common that most of us now consider it an either-or proposition. We picture a scale, balancing work on one side and life on the other, as though it’s a zero-sum game. Work or life.
And so it has become with money. We can choose to expend life in pursuit of money or deplete our financial resources in pursuit of life.
Perhaps there’s a third option—the integration of money and life. Consider these seven ways we might view life and money differently if our approach to them was less mutually exclusive:
Even if you get your daily news from one of those celebrity tabloid shows, you have probably still heard that the market has been more than a little crazy in recent weeks.
Indeed, the typically overstated “surge” and “plunge” headlines have been less hyperbolic of late, as the Dow Jones Industrial Average burps out daily gains and losses in the hundreds of points. But over the past several trading days, the results have been all red, and since Sept. 18, the market has taken back more than 6% of what it’s given so far this year.
Is this volatility the precursor to another market gutting? Or perhaps it’s just a momentary ebb in advance of a continued upward flow?
The answer is yes.
The market is in the business of rising and falling, and of making fools of those who attempt to predict which it will do next. But be sure that we will feel both the pain of another big drop—perhaps sooner rather than later—and the euphoria of another unprecedented gain.
Whether this very recent pullback happens to be the beginning or the end of something, most investors have already lost enough to benefit from it.
Benefit? Yes, you did read that correctly. Here are three ways to gain from market losses:
Exchange-traded funds—commonly referred to as ETFs—are all the rage. While there are several excellent reasons to use an ETF over the seemingly archaic traditional mutual fund, they are not a universally preferable solution.
First, to be fair, let’s review a few reasons why ETFs can be a better solution than mutual funds.
ETFs generally have lower associated costs than comparable mutual funds. This isn’t news, I know, but since costs are one of the few variables over which we have control as investors, I don’t mind flogging this deceased ungulate.
The expense ratio is the most obvious cost reduction. For example, the legendarily inexpensive Vanguard 500 Index Fund has an expense ratio of 0.17 percent, while Vanguard’s S&P 500 ETF has a barely noticeable expense ratio of 0.05 percent. This makes ETFs an ideal choice for investors making a sizable, broadly-based, one-and-done purchase.
My son gave me a present. To be fair, I don’t think it was until after he realized the gift was monetarily worthless, but I appreciated it nonetheless. It’s a big hunk of the mineral pyrite, also known as fool’s gold. My son’s gift has value to me far beyond its function as an excellent paperweight. And, ironically, its worth to me is continually rising. It’s become a constant reminder to orient my life away from that which only appears valuable and towards that which truly is.
We all have our own versions of fool’s gold. It’s generally the stuff that, while largely worthless, receives an undue amount of our time, attention and investment. What’s yours?
Here are three ways to spot it:
1) Fool’s gold consumes time you’ve dedicated to other things. Not more than one paragraph into writing this post (on this topic, no less!) I found myself entering this Google search—“what is the best banjo ukulele”—and then navigating to this page, then this one.