A friend was asking for some financial advice.  It involved what to do with the proceeds of selling a rental property.  It turns out his sister’s financial guy made her a lot of money lately.  I tried to explain that she made money because the stock market went up.  A financial guy can help you find an appropriate mix of stocks, bonds, and cash, but whether you make or lose money in the short term has nothing to do with the financial guy.   People always look skeptical at this point.  They seem to firmly believe that whether or not their investments do well is 100% attributable to the “moves” their financial guy makes.  I always lose credibility by saying something that is true but the opposite of what is widely believed.  Such is life. Here are my posts for the past two weeks: Behavioural Issues with Variable Asset Allocation The Boomers Retire Here are some short takes and some weekend reading: Tom Bradley at Steadyhand says investors are danci...

It’s no secret that the interests of financial advisors and their clients are not well aligned.  Even financial advisors who mean well can believe that a choice is best for the client when it’s really best for the advisor.  That’s the nature of conflicts of interest.  These conflicts will shape how advisors use the book The Boomers Retire: A Guide for Financial Advisors and Their Clients , whose fifth edition was written by Alexandra Macqueen and David Field.  Lynn Biscott wrote the earlier editions. Throughout my review of this book, I will sometimes be commenting on the substance of its contents and sometimes on how financial advisors might use or misuse the contents, which is arguably not the fault of the authors. The book covers a wide range of important topics that financial advisors should understand, including government benefits, employer savings plans, personal savings, investing, tax planning, where to live in retirement, insurance, and estate planning....

I recently adopted a specific type of dynamic asset allocation for my personal portfolio.  I call it Variable Asset Allocation (VAA) .  It only deviates from my original long-term plan when the world’s stocks become pricey, but any time you change your long-term investing plan, there’s the possibility you’re just looking for a smart-sounding justification for giving in to your emotions. It’s certainly true that I’ve been concerned for some time that stock prices are high and that the chances of a stock market crash have been rising.  But I know better than to join the chorus of talking heads predicting the imminent implosion of the stock market.  I don’t know what will happen to stock prices in the future. I’m not tempted to just sell everything and wait for the crash.  It’s possible that stocks will keep rising, and when they finally do decline, it’s possible they’ll remain above today’s prices.  It must be sickening to wait for a crash that doesn’t happen...

My post describing my plan to shift slowly out of stocks as the CAPE exceeds 25 drew some good comments.  Only one comment indicated a lack of interest in such a plan, but I suspect the majority of readers with indexed portfolios intend to stick with a fixed asset allocation that doesn’t take into account the CAPE.  For these investors, I wonder if they would keep owning the same percentage of stocks even if the CAPE doubles from its current level into the range of Japanese stocks before 1990.  If there is some stock price level at which you’d take some money “off the table”, then the difference between your plan and mine is that I start shifting slowly out of stocks at a CAPE of 25, and your threshold is higher. I wrote one post in the past two weeks: What to Do About Crazy Stock Valuations Here are some short takes and some weekend reading: Mikhail Samonov explains why trying to use Shiller’s CAPE ratio to make hard switches between stocks and bonds is likely to fail....

The last time I had to put a lot of effort into thinking about my finances was back when I retired in mid-2017.  I had ideas of how to manage my money after retirement, but it wasn’t until a couple of years had gone by that I felt confident that my long-term plans would work for me.  I had my portfolio on autopilot, and my investing spreadsheet would email me if I needed to take some action. I was fortunate that I happened to retire into a huge bull market.  I got the upside of sequence-of-returns risk.  The downside risk is that stocks will plummet during your early retirement years, and your regular spending will dig deep into your portfolio.  Happily for me, I got the opposite result.  My family’s spending barely made a dent in the relentless rise of the stock market. However, stock prices have become crazy, particularly in the U.S.  One measure of stock priciness is Robert Shiller’s Cyclically Adjusted Price-Earnings (CAPE) ratio .  In the U.S...

BMO has expanded its marketing to me.  It used to just alternate between low-interest credit card balance transfer offers and offers to give me a few thousand dollars if I deposit a few million dollars in my account.  They seemed to figure out that I’m between those two extremes.  Now they want me to come in for a personalized financial plan because “Research shows that advised households accumulate 2.31 times more assets after 15 years!”  Of course, this research is deeply flawed .  Further, I’m not interested in their ridiculously overpriced mutual funds. I wrote one post in the past two weeks: A Conversation about Wealth Inequality Here are some short takes and some weekend reading: Morningstar Research says the 4% rule is now more like a 3.3% rule, but that we can spend more safely if we’re flexible about adapting to market returns.  One part of the report that I disagree with is too much reliance on spending less as you age.  It’s true that you’l...