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A stock’s valuation is measured on a continuum from “value” to “growth” In broad strokes, value stocks are cheap and growth stocks are expensive.
The second factor of investing is size as measured by a stock’s total capitalization. Over time small cap will outperform large cap even after factoring out measurements of volatility.
Modeling investment returns seeks to find an equation to predict your expected returns as much as possible. The simplest equation for the markets would be “Return equals 11.71%.” This has been the average return from 1927 through 2010, the zero factor model.
Couples that fail to prepare for a shared money maturity will likely experience longer and sharper growing pains.
Social Security benefits can represent a big stack of cash. A typical monthly benefit of $2,200 has a present value well over $500,000. Consider all your Social Security options carefully to avoid making a costly mistake.
You may be a good candidate for a Roth conversion in 2012 if you can answer “yes” to any of these statements.
Now at year end, I will review how freedom investing fared in 2011 and in the decade since 2002.
“Many investors think active managers can shift out of stocks in time to stem losses in bear markets. Not true.”
Computing your net worth annually is like taking a sextant reading to chart your course toward financial security. Net worth gives you a snapshot of how much money would be left if you converted everything you owned into cash and paid off all your debts.
Financial resolutions usually don’t even last until the end of January. Making a permanent change in our behavior requires both time and a steely resolve. We can only develop financial character one action at a time. Here are seven practices to take you from pauper to prince or princess if you add one each year.
With impulses reeling, it is easy to find a gift that children will appreciate but difficult to find one that they will love to have. The gifts that I loved to have and the presents that I still cherish are the vocational gifts that my parents purchased for me.
True life planning begins when you realize you are unique. There will never be another you in the history of the universe. Your calling is yours alone. Understanding yourself is the first step in managing your financial affairs to support your life plan.
In the midst of this turmoil, especially after this past summer’s sharp drop, many investors wonder if they should put all of their investments into something safe and avoid the markets altogether.
Just because something costs a lot doesn’t mean it is an investment. An investment is something that pays you money.
If my parents had been in control of the purse strings, I would not have learned the value of money. To a child, “My Money” is valuable where “Your Money” is worthless.
With money in my pocket and impulse in my veins, I used to cherish our weekly trips to Toys ‘R’ Us. However, it was on the Barbie aisle under my parents’ guidance that I became a money-savvy kid with the millionaire mindset.
When it comes to teaching financial lessons, setting a good parental example is important, but actually giving the child some experience making wise financial decision is essential.
Most of us rationalize why we can’t get our finances together right now. Many Americans prolong these excuses during their entire working careers. Here are three lies you must stop telling yourself in order to build a solid financial foundation.
“Small changes over a long period of time make all the difference.” Learn how to teach financial wisdom to your children with Megan Marotta’s series, “Rich Dad, Rich Daughter.”
Not every investment consultant has your interests as the top priority, or even the necessary credentials. Here’s how to find the right type of adviser.
I recently read two articles that provided insight on how investors should respond to a market downturn.
Americans seem to be divided on the importance of raising the U.S. debt ceiling. Regardless of your personal politics, avoid investing in countries that cavalierly allow their debt and deficit to balloon.
The old saying is true: Money can’t buy happiness. Families earning $25,000 a year overspend trying to keep up with those making $50,000, who in turn attempt to live like those making $100,000. For many families the lure of consumerism wins out over qualities like foresight and patience that saving requires.
Someone asked me what disclosures I would require for financial advisors. I’ve written these principles in a yes-or-no format and reworded the questions. “Yes” is the best answer and “no” means you should seek more information or not consider that advisor at all. Although answering affirmatively to all 10 questions would be my first screen in selecting a financial advisor, it still does not guarantee the person has the competence necessary to offer comprehensive wealth management.
Finding countries where you can plant your investments in fertile soil may be one of the most important asset allocation decisions you make for the next several years.
Surprisingly, studies show that onetime windfalls can actually impoverish you. They make you feel rich, which inevitably leads to overspending. But wealth is what you save, not what you spend.
To build real wealth, you need specific wealth management tools.Most families have less than half of the accounts they really need, and young newlyweds often only have a checking account.
The greatest engine to generate real wealth is saving and investing. And the best way to ensure that your default is saving and investing is to automate the process. Pay yourself first, and your savings will grow exponentially.
Most investors are not aware of a critical division of professionals in the world of financial services. This distinction lies between fee-only fiduciaries who are free to act in your best interests and commission-based agents and brokers who are required to act in the best interest of the companies that employ them.
Most plans have funds laden with fees. Some share this revenue with plan sponsors, enticing them to pick more expensive funds to subsidize the costs of the plan or even make a profit.
Everything in wealth management begins with savings. All wealth comes from producing more than you consume. Unfortunately, most Americans are better at consuming than producing.
Many U.S. investors crowd their assets into a combination of large-cap U.S. stocks and U.S. bonds. This allocation represents only one and a half of the six asset classes described here.
Imagine that your doctor shocks you with the news that you only have 24 hours to live. Notice what feelings arise as you confront your very real mortality. Ask yourself: What did you miss? Who did you not get to be? What did you not get to do?
“Imagine that you visit your doctor, who tells you that you have only 5-10 years to live. You won’t ever feel sick, but you will have no notice of the moment of your death. What will you do in the time you have remaining? Will you change your life and how will you do it?”
Life planning takes a holistic look at what you truly value. And for most people, their life is more important than their money. Only after exploring your life goals can you structure your finances to help you realize your dreams.
Your investments should be working for you, appreciating more than inflation to become an engine of growth that pays you money and provides some measure of financial freedom.
All assets are not equal. Some investments appreciate better on average than others.
My youngest is a first-year student at the University of Virginia. My coauthor Matthew’s youngest child was born only a month ago. There is no such thing as saving too early.
No one approaches financial planning with the goal of paying more taxes. Tax management, like all financial planning, is based on the premise that small changes made over time can achieve big goals.
Retirement planning is even more crucial for women than for men.
Identity theft is becoming distressingly common as personal information becomes easier to swipe.
Excellent advisors communicate clearly exactly how bad the markets have been and can be.
There isn’t a better time to invest than today. Getting started can be intimidating, but these simple steps will help you through your first few years of investing.
To safeguard your money, you must be able to extricate yourself from any bad investment quickly. Of course, the companies that sell mistakes don’t want you to be able to do that, so they use financial hooks to hold your money captive.
You have a critical part to play in financial planning. Certain responsibilities cannot be delegated to others.
Crazy volatile markets push people toward irrational investment schemes. Know how to avoid them in order to safeguard your money.
I was recently asked if investors should trust their financial advisors. And my short answer, you may be surprised to hear, was no. Your financial advisor should not also have custody of your investments.
A year ago when the markets were all setting new highs, people were asking what they should do with their retirement portfolio. I answered, “Rebalance.” Now that the market is setting new lows, I get the same question, and my response hasn’t changed.
Certain assumptions such as maximum safe withdrawal rate are critical in order not to compromise a long and successful retirement.
Avoid debt and don’t burden your family with any expenses after you are gone.