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Sound Advice: August 13, 2025

Why investing in inexpensive market index funds is a great idea Investing in inexpensive market index funds is widely regarded as a smart and effective strategy for most investors.  Here’s why: 1. Broad Diversification Market index funds track a wide variety of companies across different sectors. For example, an S&P 500 index fund gives you exposure to 500 of the largest U.S. companies. This diversification lowers the risk compared to picking individual stocks, as poor performance in one company or sector can be offset by better performance in others. 2. Low Fees = Higher Returns Inexpensive index funds have very low expense ratios (often 0.03%–0.10%), meaning you keep more of your investment gains.  Actively managed funds often charge 1% or more, which can significantly erode returns over time due to compounding costs. 3. Consistent, Market-Matching Performance Index funds don’t try to beat the market—they match it. Since most active fund managers fail to c...
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Sound Advice: August 8, 2025

An Important Market Signal is Flashing RED Robert Shiller is a prominent American economist, academic, and author, best known for his work on financial markets, behavioral economics, and housing markets.  He is Sterling Professor of Economics at Yale University.  In 2013, he was awarded (along with Eugene Fama and Lars Peter Hansen) the Nobel Memorial Pri ze in Economic Sciences for empirical analysis of asset prices. Robert Shiller’s CAPE index is a valuation measure for the stock market that compares current stock prices to average inflation-adjusted earnings over the past 10 years.   It’s designed to smooth out short-term earnings fluctuations and better reflect long-term value.     In 1999-2000, the CAPE index soared to over 44, for above its long term average. The Shiller CAPE (Cyclically Adjusted Price-to-Earnings) index is currently at historically elevated levels—recent readings hover between 36.8 and 38.6, compared to a long-term median value of...
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Sound Advice: August 6, 2025

Which stocks are driving the market averages and what percentage of the overall market capitalization do they account for?   The  market averages —such as the S&P 500—are being primarily driven by a small group of very large companies. These firms wield enormous influence due to their high market capitalizations, and their performance can significantly impact the entire index. Here are the current top 10 individual stocks by their weight in the S&P 500 index: Rank Company Ticker Index Weight (%) 1 NVIDIA NVDA 7.28 2 Microsoft MSFT 7.12 3 Apple AAPL 5.78 4 Amazon.com AMZN 3.95 5 Meta Platforms META 3.03 6 Broadcom AVGO 2.45 7 Alphabet (Class A) ...
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Sound Advice: July 30, 2025

  Here are some amusing commercials about investing:   “Thank You, Paine Webber”.           Paine Webber is long gone.   “When E.F. Hutton talks, people listen.”           E.F. Hutton passed into the Great Beyond in 1993, when its parent was                     sold to Primerica.   From an E*Trade commercial: “If your broker’s so great, how come he still has to work?”   Smith Barney: “They make money the old-fashioned way.  They earned it.”           THEY made money.   Smith Barney ceased independent existence in                          2009.   Fisher Investments : “We do better when you do better.”           So do mo...
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Sound Advice: July 23,2025

Don't let high mortgage rates stop you from buying a house. You can always refinance when rates are lower.   The idea that you shouldn’t let high mortgage rates stop you from buying a house—since you can always refinance when rates are lower—contains some truth but also comes with important caveats. Key Points to Consider Refinancing Is Not Guaranteed:  Mortgage rates can fall, but there is no certainty about when or by how much.   Historically, rates have fluctuated, and while refinancing has saved many homeowners money over time, it’s never a sure thing. Rule of Thumb:  Most experts recommend refinancing when rates are at least 0.75% to 1% lower than your current rate, but even a half-point drop can be worthwhile for some borrowers if the costs are low and the savings significant. Closing Costs:  Refinancing involves upfront costs, such as application fees, appraisal fees, and closing costs. You...
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Sound Advice: July 16, 2025

Fixed annuities are poor investments Fixed annuities are often criticized as poor investments for several reasons, despite their reputation for providing stable, predictable income.  Here are the key drawbacks and concerns:   High Fees and Commissions Internal Fees:  Fixed annuities can carry a range of fees, including administrative charges, mortality expense risk fees, and rider fees. These can add up to 2%–4% per year, significantly eroding returns over time. Commissions:  Sales agents and financial advisors often receive high commissions for selling annuities—sometimes as much as 5%–8% of the invested amount. This creates a financial incentive for advisers to recommend them, even when they may not be the best fit for the client. Comparison to Other Investments:  Mutual funds and ETFs typically have much lower fees and commissions, making them more cost-effective for long-term growth. Limited Growth a...
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