August 2024 Best of the Web
I have some fantastic resources for you this month. We will start by reinforcing one of the core principles this blog has embraced over its history: simplicity in your finances and life.
Articles will challenge you to question your assumptions. One will also clarify rules around inherited IRA accounts that had been unclear for years after a pandemic era law change.
We’ll look at what comes after financial independence and how to create a meaningful life in retirement. Finally, I close out by sharing some great opportunities, including one where I hope I can connect with blog readers while we learn together.
Let’s dive in…
K.I.S.S.
This month I wrote about my long held belief in having a simple approach to investing. That belief has only grown stronger since I started working with financial planning clients. 5 Reasons to Simplify Your Investment Portfolio.
Nick Maggiulli tackles this same topic from a different viewpoint. He writes The Sustainable Path is the Only Path.
Jeffrey Ptak shares Why Investors Missed Out on 15% of Total Fund Returns, explaining that keeping things simple and doing less allows you to close this gap.
Don’t Look For the Needle In The Haystack
John Bogle has a famous maxim regarding index fund investing. “Don’t look for the needle in the haystack. Just buy the haystack.”
Ben Carlson shares some fascinating recent research that backs that up. Carlson writes The Biggest Winners in the Stock Market.
Mike Piper further backs this idea up by explaining that the risk of owning individual stocks doesn’t result in outsized returns. Why It’s Usually a Mistake to Own Individual Stocks.
Are You Sure About That?
Another favorite quote of mine comes from Mark Twain. “It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so. “
John Rekenthaler writes 3 Investment Fallacies I’ve Had to Unlearn.
Jeremy Zuke challenges the certainty that many investors currently hold about the inferiority of international stocks. He writes The Value of International Diversification.
Know the Rules
A common theme of this blog is an emphasis on understanding the rules that impact your finances. But that’s not always easy.
Jeffrey Levine and Ben Henry-Moreland explain the long awaited IRS Final Regulations on laws related to RMDs on inherited accounts originally passed in December 2019. Untangling the IRS’s New Finalized (And Proposed) Regulations on RMDs: The 10-Year Rule, Trust Beneficiaries, Spousal Beneficiairies, Annuities, And More!
Learning to Live Well
Jonathan Clements continues to produce some of his best content and share valuable lessons in the wake of receiving a terminal cancer diagnosis. He writes On the Clock.
James Hollis, author of many excellent books including a personal favorite, Finding Meaning in the Second Half of Life, sat down with Andrew Huberman for a rare interview. Dr James Hollis: How to Find Your True Purpose & Create Your Best Life.
Dave had an opportunity to share lessons he’s learn in early retirement as well as what excites him as he enters the second five years of retirement on the Clipping Chains Podcast. I encourage you to check it out to learn more about our newest regular contributor here on the blog. David Champion: The Psychololgical Challenge of Early Retirement.
Jackie Cummings Koski was interviewed on Morningstar’s the Longview Podcast : Late Starters Can Still Find FIRE. Jackie shared how she applied classic FIRE principals despite taking an unconventional path to financial independence. She also discusses what continues to drive her after financial independence, which is a mission I love and share.
See You At Bogleheads?
I recently registered for the Bogleheads conference coming up from September 27-29 in Minneapolis. I had the privilege of speaking at this conference in 2022 and was blown away by the quality of the sessions. I’m excited to go this time as an attendee and soak it all in.
If you have been on the fence about attending this event, I’d highly recommend it. Registration is still open. If you’re going, let me know and I’d love to meet any blog readers there.
Have a great end of summer and I hope to connect with some of you in Minnesota next month!
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Valuable Resources
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[Chris Mamula used principles of traditional retirement planning, combined with creative lifestyle design, to retire from a career as a physical therapist at age 41. After poor experiences with the financial industry early in his professional life, he educated himself on investing and tax planning.
After achieving financial independence, Chris began writing about wealth building, DIY investing, financial planning, early retirement, and lifestyle design at Can I Retire Yet? He is also the primary author of the book Choose FI: Your Blueprint to Financial Independence.
Chris also does financial planning with individuals and couples at Abundo Wealth, a low-cost, advice-only financial planning firm with the mission of making quality financial advice available to populations for whom it was previously inaccessible.
Chris has been featured on MarketWatch, Morningstar, U.S. News & World Report, and Business Insider. He has spoken at events including the Bogleheads and the American Institute of Certified Public Accountants annual conferences.
Blog inquiries can be sent to chris@caniretireyet.com. Financial planning inquiries can be sent to chris@abundowealth.com]
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The Abundo article on international investing is a bit suspect with respect to some of its reasoning. Particularly the quote:
“That’s one of the reasons why the price-to-earnings ratio is lower in international stocks—which makes them inexpensive to buy! ”
In general, the industry profile of international stocks is completely different as compared to the S&P500. Take Europe for example. The EU stock indexes are often heavy on financials, which are low PE stocks while the S&P500 consists of a significant portion of higher PE tech companies. Comparing the PE of international funds to the S&P500 is simply not an apples to apples comparison.
Furthermore the history of returns for international markets(particularly emerging markets) are somewhat limited relative to the US market. As a result it is difficult to draw conclusions about long term returns of these markets and whether they constitute an uncorrelated counter-balance to US investments with similar returns.
SS,
Those are fair points. They are not apples to apples comparisons. However, I think that is part of the argument FOR and not against international diversification.
All sectors of the market are cyclical and the recent US outperformance has largely been tech outperformance, making those stocks so expensive. I would anticipate that, as in the past, the dominance of any sector won’t last forever. When that time comes, diversification is likely to dull the volatility.
Regarding international stocks being “an uncorrelated counter-balance” that would be ideal. However in reality, they are correlated and unfortunately highly correlated in some of the worst of times (Global Financial Crisis, COVID) when you would want them not to be. However, there are extended periods of outperformance for International Stocks. One key example is the 2000’s when US had essentially no return for a decade. International, again positively correlated, did worse than its historical averages BUT had positive returns which were several percent higher annually than US, This would have been key to a retirement portfolio.
Bottom line, no one has a crystal ball that can know exactly what the future holds. That’s the point of diversification.
Smart people can disagree about this. JL Collins and none less than John Bogle disagreed with the idea of international diversification. That’s OK if you agree with them. The key thing if you feel that way that you have to be willing and able to stick with your strategy through thick and thin. I think a lot of people’s current dislike of international is based in recency bias and not strong convictions based on sound arguments as theirs was and yours seems to be.
Best,
Chris