During 2018, my portfolio’s return was -4.9%, my first annual loss since 2011. So, naturally I’m firing my financial advisor and ... Wait. I don’t have a financial advisor. And even if I did, it’s a myth that financial advisors can prevent losses. Nobody can predict short-term stock market movements. If you’re in the stock market, you’ll have losses sometimes. I manage my own investments, and in the wake of the poor returns in 2018, I’ve sold all my stocks to cash to wait out the uncertainty ... Wait. I didn’t do that. There is always uncertainty in markets, even if our faulty hindsight makes the past seem less risky. The fact that markets dropped in the last few months of 2018 tells us little about the near future because momentum effects are too weak. In reality, I stuck to my chosen asset allocation which includes a mix of stock ETFs , and a mix of cash and GICs to cover 5 years of my family’s spending. I use threshold rebalancing calculated on a spreadsheet that e...

It’s not easy to make personal finance entertaining, but Melissa Leong succeeds in her book Happy Go Money: Spend Smart, Save Right & Enjoy Life . Some books slip in a couple of jokes near the beginning to lighten the material, but Leong’s writing is lively and fun throughout. Another thing that sets this book apart is its focus on the connections between money and happiness, often referring to scientific studies of happiness. I don’t often laugh out loud while reading, but I did a few times with this book. Leong isn’t afraid to use some suggestive material to keep things interesting. Her discussion of compounding involves “horny rabbits” where “one rabbit bones another rabbit to make 10 more.” When her friend starts talking about insurance, “my eyes cross as I achieve boregasm.” The last chapter is called “Happy Endings.” If you think you can’t be happy without more money, it might help to realize that many of the things that make you happy have little to do with money....

Here are my posts for the past two weeks: The Ages of the Investor Skating Where the Puck Was Firing Male Brokers and Financial Advisors Here are some short takes and some weekend reading: John Bogle, who founded Vanguard and revolutionized retirement savings, dies at 89 . It’s hard to overstate the profound impact Bogle had on investing for the little guy. Without him, it’s plausible that index investing would still be a niche area and would cost 1% or more per year. His idea was to create a mutual fund company owned by the funds themselves where employee bonuses are tied to how low the fund costs are compared to their competition. This drove costs way down to sensible levels. Personally, I save the cost of a few vacations per year because of Bogle. Mastercard to stop letting companies automatically bill you after free trials . This sounds like a positive step. We’ll see how things go in the implementation. The Blunt Bean Counter provides us a simple tool for org...

The article Consider Firing Your Male Broker by Investment Advisor Representative Blair duQuesnay in the New York Times has generated a firestorm of comments. Most readers didn’t like the obvious sexism, but I’m more concerned about the muddled reasoning. The article says research shows women investors outperform men, and therefore, you should choose a female financial advisor or broker. This reasoning presupposes that financial advisors and brokers are focused on the performance of their clients’ portfolios. This is far from the truth. Most financial advisors and brokers are salespeople who sell what their employers tell them to sell. Typically, they either don’t know or don’t care that what they’re selling isn’t good for their clients. The fact that so many advisors invest their own money the same way they invest their clients’ money shows they don’t have bad intentions. Even those advisors and brokers who know they’re hurting their clients didn’t necessarily start out t...

Diversifying your portfolio reduces volatility and improves compound average returns. Portfolio theorists dream of finding risky asset classes with low correlation to known risky asset classes. However, author William J. Bernstein argues that correlations between asset classes have been rising. He explains why this is so in his book Skating Where the Puck Was: The Correlation Game in a Flat World , the second book of his four part Investing for Adults series. One of the side effects of rising correlations is that everything tends to crash at once. We are moving toward “a cohort of nearly identically behaving asset class drones.” “When everyone owns the same set of risky asset classes, the correlations among them will trend inevitably toward 1.0.” Bernstein asks “Will things really get that bad?” The surprising answer is “We are, in fact, already there; further, it’s always been that bad. Yes, international REITs were a wonderful diversifying asset, but the ordinary globally...

Different stages of life call for different investing approaches and the need for transitioning from one stage to the next. William J. Bernstein addresses this challenge in his short book The Ages of the Investor: A Critical Look at Life-cycle Investing , the first book in his four part Investing for Adults series. His suggested method of transitioning toward retirement is very sudden. Bernstein splits life-cycle investing into opening moves, middle game, and endgame. When you’re young, he suggests taking on as much risk as you can handle. Because this book is aimed at “investing adults,” he presumes the reader knows that stock picking and market timing are losing strategies. So, in this context, “risk” means compensated risk that comes with higher expected returns and comes mainly from stocks. Young investors are best off taking as much risk as they can handle without losing their nerve and selling out when stocks hit a difficult patch. “The young investor’s first encounter ...

I managed only one post in the past two weeks: Rational Expectations Here are some short takes and some weekend reading: Canadian Couch Potato reviews iShares’ new all-in-one ETF portfolios and compares them to similar ETFs from Vanguard. Doug Hoyes makes sense of some Canadian debt statistics. One of his conclusions: “I fully expect our Homeowners’ Bankruptcy Index to rise, dramatically.” Preet Banerjee interviews Melissa Leong, author of the new book Happy Go Money: Spend Smart, Save Right and Enjoy Life. Big Cajun Man got into the spirit of the holidays with 12 days of Christmas debt. Robb Engen at Boomer and Echo implores us to stop giving markets our attention.

It’s not easy to choose your portfolio’s asset allocation and decide how to change it as you head into retirement. William J. Bernstein discusses the many considerations that affect asset allocation decisions in his book Rational Expectations: Asset Allocation for Investing Adults , the last of four books in his Investing for Adults series. Rather than just provide a set of model portfolios, the book includes a range of topics to help the reader choose his or her own allocation. These topics include historical asset-class returns, factor tilts, market efficiency, asset location, risk tolerance, your brain, liability matching portfolio, ETFs, rebalancing, and a lot more. You’re not left entirely on your own in building a portfolio; there are tables of recommended funds to cover the different asset classes. To explain the intended meaning of “adult,” Bernstein says, “If the terms ‘standard deviation,’ ‘correlation,’ and ‘geometric average’ are Greek to you, or if you think you ca...