Clicky

When and How to Rebalance Your Portfolio

Rebalancing your portfolio means adjusting the current asset allocation, moving it closer to some previously-chosen target. In theory, rebalancing captures a portion of the profits earned by your winning investments, and reinforces your losing investments so they can shine in their own time. The majority of financial experts advocate some form of rebalancing. And virtually …

[Continue reading]

Diversification: Why Seeing Red Can be a Good Thing…

Can watching your investments go down ever be a good thing? To answer that, you need to know a little about my weekly investing routine.… For years I’ve tracked my investment portfolio on a My Yahoo page. It doesn’t take much space: currently just nine mutual funds and ETFs make up the entire portfolio across …

[Continue reading]

A Guide to Retirement Health Care – How Will YOU Get It?

Health care is the single biggest obstacle to retirement for many Americans. My ongoing Reader Survey indicates that health care is also the most common concern for readers of this blog — trumping even running out of money, Social Security, the stock market, inflation, and taxes! Stories of individuals trapped in jobs because of their, …

[Continue reading]

My Top Investment Picks for the Future…

I’m often asked where I think the economy or market is headed. Readers of my CNN Money interview, or my recent article on overcoming the fear of stocks, might think I’m especially bullish on stocks. But that’s not the case. I’m bullish on diversification. I like bonds too. As I write this, my allocation to …

[Continue reading]

Is the 4% Safe Withdrawal Rate Obsolete?

One of the first questions that comes up when looking at modern retirement is “How much money do I need to save?” Amazingly, there was little hard research aimed at answering this question until about the mid-1990’s. Some of the first answers were shown to be overly simplistic, but for the last decade or so …

[Continue reading]

Mastering the Fear of Stocks

“I won’t own stocks — I don’t want my savings to go down.” That seems to be the primary investing criteria for a number of people. But understanding and mastering this fear can be key to achieving financial independence. There are a select few high earners who can afford not to own stocks. And there …

[Continue reading]

One Solution for Cheaper Retirement Travel: A Small RV

If there’s a common retirement dream across many personalities, budgets, and lifestyles, it’s probably traveling more. Though there are some retirees who prefer to stay on the home front during their golden years, the majority seem to envision traveling more often or further afield. Whether it be visiting children and grandchildren, taking a tour of …

[Continue reading]

How Much is Too Much in a Single Investment?

A reader writes: “…what would you consider a safe percentage of one’s portfolio in brick and mortar real estate investments? Currently, approximately one third of my portfolio is in rental properties. I have pulled back on investing in the stock market for now and am considering increasing my percentages in the rental market versus other …

[Continue reading]

Understanding the Two Sides of the Retirement Equation

It’s enough to make even a number-happy engineer dizzy: savings, expenses, interest rates, investment returns, inflation rates, tax rates, safe withdrawal rates…. I pity the prospective retiree who doesn’t like math! What are we talking about? The retirement equation: the essential relationships, now and in the future, between all the variables that determine how long …

[Continue reading]

Passive vs. Active Investing: Will We Ever Learn?

Did you monitor the political and economic news of the past year with unease? Did you make any changes to your investments in response, or wish you had — or hadn’t? As much as I follow passive index investing, there are still vestiges of earlier philosophies in my portfolio. And the temptations to diverge from …

[Continue reading]

How Investment Newsletters “Beat” the Market

You’ve probably seen the over-sized envelopes in your mailbox: “Get the Prognosticator’s Latest Picks,” “We Were Right About Company ABC – Buy XYZ Before It’s Too Late,” “Lock in Returns of 400% or More…” Inside you find a half-dozen various-sized pieces of paper extolling the virtues of yet another investing newsletter, complete with testimonials, a …

[Continue reading]

Is Rebalancing the Achilles’ Heel of Passive Investing?

Pick up any mainstream personal finance publication and you’ll read about the benefits of passive or buy-and-hold investing — putting your assets in a few low-cost index funds or exchange traded funds (ETFs) that will capture market returns with less risk and expense over the long haul. It sounds like the easy, automated route to …

[Continue reading]

Recurring Expenses: Why “A Dollar a Day” is Really $9,000

Whether your goal is retiring early, building wealth, or just making your dollars go farther — an effort that pays huge dividends is cutting recurring expenses. Here I’m talking about regular, usually monthly, charges such as phone bills, gym memberships, or property insurance. These are important, and insidious, for several reasons: They are often fully …

[Continue reading]

How to Retire Early

Here are some of the core principles that can help you become financially successful, and retire sooner too. This list comes from the article How I Retired Early, written shortly after I retired, explaining how I became financially independent. That original article is pretty long, so here are just the action items…. I found that …

[Continue reading]

An Early Warning System for Your Investment Portfolio

It’s every investor’s worst nightmare. You check your portfolio one morning and find it’s worth much less than you thought, or has lagged the market significantly. In my experience, that usually happens due to a lack of diversification. Imbalances of different kinds can sneak up on even the most experienced investor. (I’d categorize my most …

[Continue reading]

How Can You Be Certain About the Retirement Decision?

You’ve worked a long career — several decades, possibly more. You’ve saved diligently, paid off the house, put the kids through college. Your investments have recovered from the latest downturn, and the world seems relatively sane again, for now. You’ve amassed more assets than you dreamed possible when you were younger, and yet you hesitate. …

[Continue reading]

Your Retirement Roadmap

This blog is a useful format for a range of topics related to saving, investing, and retiring. But I’ve also been asked for a more structured approach to retirement. So, after a lot of writing and organizing — and quite a bit of living, in order to learn the lessons described — I’m pleased to …

[Continue reading]

How Much Will it Cost You to Live in Retirement?

Without a deep understanding of what it costs you to live, any discussion of retirement savings or income is pointless. Despite the oft-repeated advice that you will spend some standard percent (perhaps 60% on the low end to 100% or more on the high end) of your pre-retirement income in retirement, what it costs you …

[Continue reading]

Investing for Income When Interest Rates are at Historic Lows

In today’s shockingly-low interest rate environment, which the Federal Reserve has pledged to maintain into 2014, it is more difficult than ever to find safe high-yielding investments. A reader writes: “I have a CD coming due and the interest rate is going to be terrible. I’ll probably just renew it at the best rate I …

[Continue reading]

Most Financial Plans are Dubious Attempts to Predict the Future

“In preparing for battle I have always found that plans are useless, but planning is indispensable.” —General Dwight D. Eisenhower Many flavors of financial, investment, or retirement planning boil down to attempts to predict the future based on the past. Smart people and resourceful organizations develop clever models which give them confidence to market themselves …

[Continue reading]

To Build Wealth: Avoid Changing Locations or Partners

Major life changes are inevitable, but they are often costly. To retire early and well — in some cases even to retire at all — it is critical to avoid the financial equivalent of a major detour or train wreck. I’m talking here about expenses in the tens of thousands of dollars that can completely …

[Continue reading]