The municipal bond market has almost $4 trillion in total debt outstanding. That compares with about $18 trillion in outstanding U.S. Treasury debt. Besides market size, municipal bonds differ from Treasurys in that they carry credit risk, are less liquid and are exempt from federal income tax. The size of the spread between Treasury bonds …Read More.
We got the subtitle of my last book wrong. It reads, “Balancing Money and Life.” And while the book is still substantively solid and its aging content remains mostly relevant, the subtitle, I now believe, is a misnomer. It may actually contradict the book’s fundamental message. Whether we’re talking about money and life, work and …Read More.
The securities industry has a vested interest in making investments complicated and opaque. Confusion, obfuscation, fear and anxiety are often the basic tools of its trade. While purportedly “market-beating” brokers and advisors tend to profit handsomely in all market conditions, the performance of the typical investor over the past 20 years has been accurately described …Read More.
Q: What are TIPS and how do they work? A: Similar to nominal (non-inflation-adjusted) U.S. Treasury fixed income investments, TIPS are issued with fixed coupon rates and fixed maturity dates (such as five, 10 or 20 years). The key difference between TIPS and nominal bonds is that the coupon rate for TIPS is a guaranteed …Read More.
Income inequality can arise from a number of things, like gender, race, social class and education. We know it’s an issue. But the most recent recession revealed what may be an even bigger problem: wealth inequality. When we talk about wealth, we’re referring to everything you can claim as an asset, including savings accounts, your …Read More.
Q: What is a bond ladder? A:A bond ladder is a portfolio of individual bonds that have different maturities. For example, a bond ladder could be constructed with equal numbers of bonds with maturities across 1–10 years, or it could consist of bonds that mature in 2–7 years. Since buying small lots of individual bonds …Read More.
So far, we have seen how “practice makes perfect” in Talent is Overrated and discovered the importance of developing right-brain capabilities in A Whole New Mind. In my final installment of articles on the subject of guiding our youth into financial and professional adulthood, I will take a look at another important question: “What motivates …Read More.
Last week was the worst week for the S&P 500 and the NASDAQ since May 2012. The S&P 500 index dropped 3.1 percent on the week to 1,906.13 and the NASDAQ fell 2.3 percent to 4,276.24. Not surprisingly, the market’s volatility and rapid decline brought out the worst in the financial media. The amount of …Read More.
Q: Should you stay invested in the short term while waiting for interest rates to rise? A: First, other than very short-term interest rates that are heavily influenced by the Federal Reserve, it’s difficult to predict changes in interest rates. Second, to determine whether a short-term fixed income approach will be superior to an intermediate-term …Read More.
Last week was uncomfortable for market watchers. The Dow dropped more than 200 points one day and surged more than 200 the next. Both moves were attributed to small, seemingly random things. The International Monetary Fund cut its global forecast, and the Federal Reserve released its meeting minutes. I’ll leave it to you to figure …Read More.
You might think that the most important work a financial advisor can do is related to allocating a client’s investment portfolio, or perhaps helping secure a timely insurance policy or drafting the optimal estate plan. In fact, the most important work is done when clients are in the midst of navigating life’s major transitions. I …Read More.
Exchange-traded funds—commonly referred to as ETFs—are all the rage. While there are several excellent reasons to use an ETF over the seemingly archaic traditional mutual fund, they are not a universally preferable solution. First, to be fair, let’s review a few reasons why ETFs can be a better solution than mutual funds. ETFs generally have …Read More.
Earlier this week, we discussed some of the academic literature surrounding historical versus current valuations as a metric for forecasting future returns. We learned that because there’s so much variation over time in the equity risk premium, there isn’t any methodology that will produce highly accurate forecasts of stock returns. Stocks are risky investments, no …Read More.
At a recent meeting with a nonprofit organization, my firm was asked to explain why we don’t consider historical stock returns the best estimator of future returns. They wanted to understand why we instead rely on our own forecasts. Their request came in part because another firm had suggested in a previous pitch that forecasts …Read More.
I have long felt the greatest threat to the retirement dreams of most investors can be found in the combination of misinformation promulgated by the securities industry and much of the financial media. Together, they deliver a stream of marketing hype carefully crafted to enrich themselves at your expense. They seem to go into overdrive …Read More.