Sound Advice

What is the best asset allocation for a recently retired investor?   The best asset allocation for a recently retired investor is typically a balanced mix of stocks, bonds, and cash that prioritizes income, growth, and capital preservation while managing risk and market volatility. Typical Asset Allocation Ranges Stocks (Equities):  40–60% of the portfolio, with a higher allocation for those at the beginning of retirement and a gradual reduction as age increases. Bonds (Fixed Income):  30–50%, primarily to provide steady income. Cash/Cash Equivalents:  10–20%, meant to cover 1–2 years of living expenses and provide liquidity for unexpected needs.   Asset Class Suggested Allocation (%) Stocks 40–60 Bonds 30–50 Cash 10–20   Popular Guideline Approaches “Rule of 110” : Subtract your age from 110 to get your stock allocation (e....

SCAMS “R” US Watch or listen to advertising on the media at your own peril.  Years ago, we tended to believe what we saw on TV, heard on the radio or read in a newspaper.  Those days are long gone. The overwhelming majority of what’s offered today ranges between a stretch and utter and complete nonsense. Let’s start with commercials from major drug producers that include the suggestion that you ask your doctor if it’s “right for you.” All kinds of drugs are offered in settings that suggest that a wonderful life is just around the corner.  Most of these show groups of happy people.  Yet another miracle?  Probably not. One example are weight loss drugs.  Yes, they work, but there’s a hitch.  For one thing, there’s the monthly cost that will be at least $165 and possibly much more.  For another, to maintain the weight loss, you need to continue taking the drug.  An improved diet and exercise routine might be as successful and long-lasting ...

Can a psychic help me? Most assuredly, the answer is yes, if you also believe in the Tooth Fairy.   Yet these days there are continuing radio commercials for psychics that would have you believe they can lead you into the future.   One would hope that they could, especially because the sponsor is proud to let you know that they accept only 2% of all psychics considered for the job.   Even better is their offer of free service if you are not pleased with the experience.   The experience begins with a 20-minute session for which the cost appears to be only $20, but you can be sure that whoever is on the other end of the phone is skilled is spending considerable prep time and following up with a wide range of gross generalizations to keep you going. Much of this is likely to be amateurish attempts to provide psychological assistance for those in need.   The problem is that these people are not trained in any area other than running up the clock.   Psychi...

How many investors have outperformed the stock market over the last 20 years? Very few investors have outperformed the stock market over the past 20 years.   Data shows that only about 6% to 8% of actively managed equity funds in the U.S. beat the market over this period, with the vast majority—over 90%—underperforming the S&P 500 or equivalent broad indexes. Percentage of Investors Beating the Market Only 8% of equity funds investing in large companies managed to outperform the market over a recent 20-year span. About 94% of all domestic funds underperformed the S&P 1500 Composite Index from 2005-2024. Over shorter timeframes (5-10 years), typically fewer than 15-20% of fund managers beat the S&P 500, and performance persistence is rare. Why It Is Rare The S&P 500’s high returns have proven immensely difficult to beat, especially as indexing has become popular and markets have ...

How is the similarity between Germany in 1933 and the current turbulence in U.S. politics likely to affect the financial markets? The parallels between Germany in 1933 and current U.S. political turbulence may amplify financial market volatility, but there may be important distinctions.   In 1933, Germany's political upheaval and rise of authoritarian leadership fostered extreme market reactions—companies with political connections to the new regime outperformed the rest of the market, while general uncertainty and crisis sharply affected investor sentiment and economic stability.   In the current United States, political divisions, government shutdowns, and leadership controversies have triggered immediate market downturns, increased risk aversion, and surges in safe-haven assets like gold.   Even so, the scale and nature differ:   America retains robust institutional checks, and financial markets tend to rebound after periods of political tension. Those rebounds,...

Is a total market index fund a better choice than a broad portfolio of stocks?   A total market index fund is generally considered a  better choice for most investors  compared to attempting to assemble a broad portfolio of individual stocks, primarily due to superior diversification, lower costs, and simplicity. Total market index funds provide exposure to essentially all publicly traded stocks in a market (such as the entire U.S. stock market), including large-cap, mid-cap, and small-cap companies, thus reducing company-specific risk and the need for individual stock-picking skills. Key benefits of total market index funds: Diversification:  One fund can offer broad market exposure across thousands of companies and all major economic sectors, lowering the impact of poor performance from any single stock or sector. Low Cost:  These funds typically have very low management fees (expense ratios), which helps investors keep more ...