It used to be that you were supposed to use your experience from the 2008 stock market drop to help understand your true risk tolerance. Well, now we have a more recent reference point in the 2020 stock market drop. Allan Roth reminds us that thanks to the unprecedented recovery, we have A Rare Second Chance to Protect Nest Egg Savings. Remember that the purpose of money is to give you choices in life. I’ve seen many people take unnecessary risks with their money and have to either go back to work or drastically cut back on their lifestyle. So use this second chance the market gave you to assess how much risk you want to take with your financial freedom. Let me repeat — don’t blow … [Read More...]

Another month of slight rate drops, although bank accounts can still beat out Treasury bonds and/or brokerage cash sweep options by a significant margin. Here’s my monthly roundup of the best interest rates on cash for June 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 checked as of 6/2/2020. High-yield savings accounts While the huge megabanks make huge profits while paying you 0.01% APY, … [Read More...]

I am re-reading a series called “Investing for Adults” by William Bernstein. By “Investing for Adults”, Bernstein means that he assumes that you already know the basics of investing and that he can skip to more advanced insights. There are four parts: The Ages of the Investor: A Critical Look at Life-cycle Investing Skating Where the Puck Was: The Correlation Game in a Flat World Deep Risk: How History Informs Portfolio Design Rational Expectations: Asset Allocation for Investing Adults A commonly-cited part of the first book The Ages of the Investor is the question “Once you have won the game, why keep playing?”. If you have enough money to buy a set of safe assets like inflation-adjusted annuities, delayed… [Read More...]

Updated. As noted in my post on best online brokers, my favorite option in the now-crowded “robo-advisor” category is now M1 Finance. Here’s a quick rundown of what makes them different: Fully customizable. You pick your own target asset allocation “pie”. (You can add ETFs or individual stocks.) You can simply copy one of the many model portfolios out there, or customize it as you like. You have full control! M1 handles the boring stuff, like rebalancing or dividing a $100 contribution across 8 different ETFs. Here is my pie which I named the My Money Blog Portfolio. No commissions. Free stock/ETF trades with a low $100 minimum account size for taxable accounts and a $500 minimum for retirement accounts. 0.00%… [Read More...]

If you like having a complicated portfolio and owning exotic asset classes for diversification, you might want to prepare yourself before reading Skating Where the Puck Was: The Correlation Game in a Flat World by William Bernstein. Most of the exotic classes you’ve ever thought about owning will be struck down: Commodities futures? – disaster. Private equity? – nope. Hedge funds? – don’t bother. Gold? – sorry, even the Permanent Portfolio would have been better off historically without gold if you measure since 1980 (after going off gold standard). The basic premise is “Rekenthaler’s Rule”: If the bozos know about it, it doesn’t work any more. Even international stocks are not nearly as useful a diversifier as they used to be. The book included a… [Read More...]