1. Preet gives us a credit card payoff calculator. Hopefully this will inspire people to pay off their high-interest debt and not cause them to give up because it will take too long.
Common advice about controlling spending is to track all your purchases and add them up each week or month. I believe that this is effective, but have been fuzzy on why it seems to work so well. Why can’t people just spend less without the constant reminder of how well they are doing? I got some insight on this question from, of all places, poker. For poker players there is a certain thrill to dragging in a pot of chips. The thrill is there whether it is a $1 pot or a $10 pot. The $10 pot gives a bigger thrill, but not 10 times bigger. Similarly, losing a $10 pot feels worse than losing a $1 pot, but not 10 times worse. This leads to some players playing in such a way that they maximize happiness by taking in many small pots, but losing some big ones. As long as they don’t count their dwindling chips, they can actually be happy playing this way. Counting your chips is a lot like adding up your spending at the end of the month to see what happened. You may feel good about ...
Inflation is a risk we have to face in financial planning, particularly in retirement. We need to measure inflation risk correctly to be able to make reasonable financial plans. The best guide we have to the future takes into account past inflation statistics. But the field of statistics is full of subtleties, and even Dimensional Fund Advisors (DFA) can make mistakes. DFA creates good funds, and their advisors tend to do good work for their clients. I’d prefer to find errors in the work of a less investor-friendly investment firm, but they provided a clear example to learn from. They misapplied a statistical rule, and as a result, they misinterpreted the history of inflation over the past century. I discussed this issue with Larry Swedroe in posts on X. I respect Larry and have followed his work as he tirelessly explains evidence based investing to the masses. A Simple Example To explain the problem, let’s first begin with a simpler example. So...
I recently moved some cash into BMO InvestorLine’s high-interest savings accounts (HISAs) that are structured as mutual funds. Their designations are BMT104, BMT109, and BMT114, and they purportedly pay 4.35% annual interest (which they can change whenever they like). However, the way they report the monthly interest payments is so baffling that I wasn’t able to sort it out in my first 15 minutes of trying. A further complication is the following text in the HISA description: “The Bank may pay, monthly or quarterly, compensation to your Dealer at an annual rate of up to 0.25% of the daily closing balance in the BMO HISA.” I couldn’t find any evidence of such a charge, but I haven’t been invested for a full quarter, and I can’t yet say that such a charge isn’t buried somehow in the confusing reporting. I have more digging to do before I can recommend these HISAs. Here are some short takes and some weekend reading: Preet Banerjee explains the dangers of Robi...
Thanks for the mention, have a superior fin de semaine.
ReplyDeleteCC: Thanks for including me in your list. I almost didn't recognize your picture -- you're almost always smiling in person :-)
ReplyDeleteThicken: Thanks for the vote. I count your blog among the more thoughtful and useful blogs as well.
Thanks for the link Michael and congrats on the G&M coverage!
ReplyDeleteCongrats on the Globe and Mail mention.
ReplyDeleteI'll be reading that book as well.
Thanks for the link Michael - you got my vote in the poll. Have a great weekend!
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