Sound Advice

  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...

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...

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...

What changes are likely in Social Security as available funding runs out? As Social Security’s available funding runs out—most notably, with the Old-Age and Survivors Insurance (OASI) Trust Fund projected to be depleted in 2033 and the combined retirement and disability (OASDI) funds likely exhausted by 2035—several significant changes are expected if current laws remain unchanged: Benefit Reductions:  When trust fund reserves are depleted, Social Security will only be able to pay benefits from current payroll tax revenues. According to the 2024 trustees’ report, this would mean that only about 79% of scheduled benefits could be paid for OASI recipients starting in 2033, or about 83% for the combined OASDI program if reserves are exhausted in 2035. This translates to a roughly 17–21% cut in monthly benefits for recipients. Pressure for Legislative Action:  Lawmakers will face increasing pressure to reform Social Security before ...

What is the risk of investing in top-performing mutual funds? And why is recently great performance usually followed by poor performance? Investing in top-performing mutual funds comes with several risks, and recent strong performance is often followed by weaker results due to well-documented market phenomena. Risks of Investing in Top-Performing Mutual Funds Mean Reversion:  Mutual fund performance tends to revert to the mean over time. Funds that outperform their peers are likely to see their excess returns diminish as the factors or luck that drove their success fade. This means that investing in funds after a period of strong performance may expose you to disappointment as returns normalize.   Herding and Overcrowding:  When a fund achieves top performance, it often attracts large inflows from new investors. These inflows can force the fund to buy more of the same assets, potentially driving up prices and reduci...