I’ve been sitting on this post for a week, but I’ll feel better just letting it out. When we talk about investing, a lot of it is about long-term thinking and exponential growth. There are many charts showing that the person who starts saving early and stops completely after 10/15 years does better than the person who waits around but eventually saves twice as much per year. Once the ball starts rolling, it’s hard to stop. Here is one example from ForUsAll.com: This is the power that comes from forced savings (pensions) and automated savings with default contributions (401k/403bs). Along the same lines, here’s a chart of Warren Buffet’s net worth over time from ValueWalk. Most of his money … [Read More...]

The Federal Reserve further cut their target Fed Funds Rate to zero in March, so we continue to see a steady stream of rate drops. I hope that some of you got a nice rate locked-in if you tried to refinance your mortgage. Here’s my monthly roundup of the best interest rates on cash for April 2020, roughly sorted from shortest to longest maturities. I track these rates because I keep 12 months of expenses as a cash cushion and also invest in longer-term CDs (often at lesser-known credit unions) when they yield more than bonds. Check out my Ultimate Rate-Chaser Calculator to see how much extra interest you’d earn by moving money between accounts. Rates listed are available to everyone nationwide. Rates … [Read More...]

While we see the live price of the S&P 500 index everywhere, there is much less talk about its dividends. Dividends are an important component of the total return from stocks. I love seeing my quarterly dividend payments arrive every quarter, and combined with our reduced work income, they are enough to cover our household expenses. How reliable is the income stream from owning an S&P 500 index fund (or similar total market fund)? Here is the growth of the 12-month dividend per share of the S&P 500 on an inflation-adjusted basis (source). Looks pretty good overall, but how bad were those drops? Inside this Movement Capital article about managing sequence-of-return risk, I came across a helpful chart showing the historical drawdowns of dividends … [Read More...]

In an article about the challenges of autonomous vehicles, I came across a chart of the Hype Cycle from the consulting firm Gartner that supposedly models the life cycle of new technology: Maybe it’s just me, but I found this curve to also describe my self-confidence in investing over time. Trigger. One day, something makes you want to learn about investing. For me, it was finally leaving broke academia and getting a “real job” that had triple the salary and this 401(k) match thing. Peak of inflated expectations. Read some books! 8% annual returns… double my money every 9 years… yes! Asset allocation… backtesting… of course! 4% withdrawal rate… just accumulate 25x expenses… simple! Trough of Disillusionment. I get laid off at the same time … [Read More...]

Updated March 2020. Webull is a brokerage app (PC and web version also available) that has unlimited free stock trades with no platform fees, free real-time quotes, and no minimum balance requirement. As of March 2020, it has now added $0 options trades with $0 per contract fees. (Fidelity, Schwab, and TD Ameritrade all still charge $0.65 per contract.) The free stock and options trades make it similar to Robinhood, but Webull seems like more of a full-featured traditional brokerage shrunk down into an app. Robinhood has a sleeker minimalist feel, while Webull has a ton of options for real-time stock quotes, technical indicators, charting, etc. Webull has traditional margin accounts that allow shorting. You can’t short stocks at all on Robinhood. Most importantly… [Read More...]

During times of market volatility, people often start looking for other options. There is always a new “alternative” asset class being pitched that in theory both reduces the risk in your portfolio and increases returns. Longboard Funds looked at data from the past 15 years and examined what happened when you added 20% of various asset classes to a traditional 60/40 stock/bond portfolio. Below is a chart of the results based on two factors: Did the asset class have a lower or higher correlation in declining markets? This reduces maximum drawdown. Did the asset class improve overall historical return? The 6 asset classes that both lowered max drawdown and increased overall return were: Managed Futures (Trend Following) (SG Trend Index) U.S. Treasuries (Barclays 1-3 Yr US Treasury TR… [Read More...]

It might be a little painful, but it may be worthwhile to check on your pre-tax IRAs during this dip. If you have been thinking of converting your “Traditional” IRAs over to Roth IRAs, your shrunken gains will lead to a smaller tax bill now, while your (hopefully) future gains from this point onward will be tax-free after 5 years and age 59.5. Roth IRAs have a few unique qualities, but the primary consideration regarding conversions is still whether you think your tax rate will be lower today or when you withdraw. This is outlined in greater detail in the WSJ article A Strategy for Taking Advantage of the Market Meltdown (paywall?). One interesting suggestion is to convert just enough money from a traditional IRA … [Read More...]

The Federal Reserve just cut their target Fed Funds Rate by 0.50% in response to the market volatility brought on by the coronavirus. This will likely result in many rates drops this month for savings accounts and certificates across the board. (Lower rates may also make it a good time to refinance your mortgage with rates at all-time lows.) Here’s my monthly roundup of the best interest rates on cash for March 2020, roughly sorted from shortest to longest maturities. I track these rates because I keep 12 months of expenses as a cash cushion and also invest in longer-term CDs (often at lesser-known credit unions) when they yield more than bonds. Check out my Ultimate Rate-Chaser Calculator to see how much extra … [Read More...]

When the market sell-off first started in February, there were several articles proudly pointing out how few 401k investors made any changes to their accounts. Nobody panicked! Yay! I remember thinking that such a declaration of victory was rather premature. If you have held onto your stocks so far according to your formal investment plan, then I applaud your conviction (or ability to not check your 401k balance). However, I also think it’s important to realize that the ride may be far from over. This chart made the rounds in 2007 during the Great Financial Crisis, and has been copied so many times (you can tell by the blurriness) that I have no idea the original source. However, I still come back to it time and … [Read More...]

Update 3/24/20: For the next three months, you can earn 20% cash back when you charge the following on your SoFi Money debit card: • Streaming services, including Netflix, Amazon Prime Video, Disney+, Hulu, HBO Now, CBS All Access, Spotify, Pandora Music, and Google Play Music.* • DoorDash orders.** Update 3/9/20: Log into your SoFi Invest account and you should find a pseudo-claw game that can win you some free stocks. No cost to play. Screenshots below. I got $5 of Berkshire (no dividends = no tax paperwork), but maybe you’ll do better! Original post: SoFi (“Social Finance”) has expanded from students loans into a cash management and stock brokerage account. They’ve also updated their bonuses for trying them out, and if … [Read More...]

While helping a 92-year-old relative with her estate planning last week, I discovered that she receives dividend checks from ExxonMobil mailed to her every quarter. I also discovered she was an early retiree herself, retiring at age 50 with a government pension and these Exxon shares. What a long retirement! She has the literal mailbox money that Jack Bogle was talking about! I went home and ran some quick numbers. I’m not going to disclose how much she owns, these are just some round numbers. In 1980, the Exxon quarterly dividend averaged 8.45 cents per share. As of 2019, the quarterly dividend has grown to 87 cents per share. (Thank you Divdata.com.) That means that the dividend has grown roughly 10X in the last 40 years, roughly 6% annualized. … [Read More...]