Now, more than ever may be a good reminder that it's never a bad time to downsize your home. Americans are house rich and cash poor, not a great mix in times of economic turmoil. Wealth in cash is very liquid, you can spend it on what you need when you need it. Even stocks and bonds are relatively easy to sell to generate funds. But houses, they're a lot harder to sell quickly if you want to get all the value from them you deserve. In the Wall Street Journal, Ryan Dezember explains how many house-rich but cash-poor Americans are faring today, writing: Americans with mortgages have … [Read more...]
Is Your Stock Portfolio Suffering from the Dunning Kruger Effect?
You could be suffering right now from the Dunning Kruger effect and not even know it. Worst of all, it may be affecting your stock portfolio's performance. If you are one of the recently arrived "Robinhood" investors and think you have cracked the market code, you may, in fact, be suffering from the Dunning Kruger effect. The syndrome is named after Justin Kruger and David Dunning, who outlined it in their 1999 paper in the Journal of Personality and Social Psychology. The authors introduced their paper by describing the effect: People tend to hold overly favorable views of their … [Read more...]
2020: College Is not What You Signed up For
This year, college is not what the freshmen were signing up for. COVID-19 tests, distance learning, no campus activities, parties banned, very little of the true college experience available. In the Boston Globe, Thomas Farragher tells the story of University of Massachusetts students, who are now on campus and facing a very different experience than the one they thought they'd receive. He writes: "I can’t believe this is our life now. I’m really speechless about it,'' said Caroline Ricciardi, a 21-year-old senior from Cherry Hill, N.J., enrolled in the UMass College of Nursing. “I’m sad. … [Read more...]
Are You Prepared? A Long, Cold Winter for Stocks is Nothing New
The stock market/Wall Street has made a full recovery from March, but it certainly doesn’t feel that way on Main Street. The 10-year treasury pays you peanuts and that’s about what local businesses have earned compared to pre-virus. Why will they stay in business, especially in cooler New England when outside dining is basically gone for the winter? Cities like Boston that depend on sports/entertainment/dining are not coming back this season. In times like these, you can be your own barber—you can handle a bad haircut—but will you be your own investment counselor … [Read more...]
Who Wants to Live the Island Life? You Do: Part II
You read yesterday about how to live an "island life," whether that be on an actual island, or by simply protecting yourself from the dangers around you. One of the best parts of living on an actual island is access to the beach. But many islands with top beaches come along with a high cost of living. Thrillist has put together a list of the "World's Most Beautiful Beach Cities Where You Can Live for Dirt Cheap." There are some nearby places like Las Terrenas in the Dominican Republic, and some further afield like Canggu, Bali. The author writes: More than a few Americans fantasize … [Read more...]
Who Wants to Live the Island Life? You Do
Imagine sitting under a palm tree, toes in the sand, gazing across a turquoise sea with not a care in the world. Wouldn’t it be nice to feel like this most days of the week rather than only on vacation, especially in times like these? Now, I know it’s not exactly practical, even if you have a tropical island as the backdrop of your Zoom calls. But you’d be surprised at how much island life is right in front of your eyes. For example, when it comes to investing, my favored Prudent Man certainly stands alone as an island far away from your everyday stock traders: For years my father-in-law … [Read more...]
You Don’t Get To
You don’t get to choose a lot of things in life. In times like these, we're always thinking of loved ones. We look at the world today and wonder what it will be like for them when we’re gone. How will our children survive, when being a productive citizen is frowned upon? Believe me, your instinctual focus on your family is always correct—because they need your guidance. You just need to give it. Your children will always be your children. In my conversations with you, you’re telling me how worried you are about their futures. In many cases, you’re telling me how successful they are in … [Read more...]
The Task of Investing for Your Retirement Security
Let’s run some numbers, shall we? If you’re making twenty-five grand working part-time, how much will you need to invest to match it with a three-percent draw rate? The answer is just over eight hundred thousand dollars. Puts some perspective on how much your time is worth doesn’t it? The more you want to draw, the more you'll need to save. My number one piece of advice for anyone considering retirement is simply this: don’t. You have incredible worth in times like these with interest rates nailed to the floor and assets inflated. The task of investing for retirement … [Read more...]
The “Dumbest Thing” He Ever Did Cost him $1.5 Million
At The Wall Street Journal, Michael Wursthorn and Geoffrey Rogow tell the story of Swedish investor, Kristjan Kullamägi, who found out the hard way that shorting stock can be a dangerous endeavor. They write: “Lately, shorting has been a little more stressful,” said Kristjan Kullamägi, a 32-year-old trader who lives in Stockholm. “Some of these tech stocks have doubled and tripled.” Mr. Kullamägi, who has been trading full time for himself for nearly a decade, was keeping an eye on smaller, more-volatile stocks for a potential opening to short. He found one in late July in shares … [Read more...]
Keep Working, if You Can
The best way to improve your retirement's financial picture is to keep on working if you can. Reshma Kapadla writes at Barron's: RESIST RETIRING PREMATURELY Given the health risks created by the pandemic and uncertain outlook for certain industries, early retirement may seem like an attractive option. But advisors recommend that those who are five to 10 years away from retirement should stay in the workforce, if possible. “The best way to improve retirement financial outcomes is to work longer,” says Jamie Hopkins, director of retirement research at Carson Group. “A year or two before … [Read more...]