The WSJ's Dawn Lim reports that after a temporary lull, the flood of money moving into passively managed index funds and ETFs has resumed. Lim writes: A decadelong shift of money and power from old-fashioned money managers into index funds resumed its march in 2019. Last year, net inflows into funds that track markets fell about 30% from the year before, according to Morningstar data. Some firms said fears around slowing global growth and a particularly volatile stock market led investors to take money from asset management’s most popular products. The 2018 slowdownwas … [Read more...]
Archives for July 2019
Are You Fully Invested?
Do you remember how you felt about your portfolio in December? It wasn’t a happy time for stock investors as they watched values crater. Some investors got out of the market all together and felt much better. But they probably missed this incredible stock market of the first half of 2019. Feeling good about investment decisions is oftentimes not good for your portfolio. Everyone wants to be a contrarian. Everyone wants to be the guy that swims against the tide. The one who chooses her own path. But when you know what hits the fan they look for comfort and sell, sell, … [Read more...]
Part II: The IRS is Coming for Your IRA
As you know from my recent post on the SECURE Act, Congress is pulling a fast one on the savers of America. If passed, the “Stretch IRA” will be eliminated for children, grandchildren and other non-spousal heirs. It will require IRAs to be fully distributed (fully taxed) within ten years—no longer over a lifetime. A granddaughter in her mid-20s, for example, will not be able to “stretch” the distributions over her life expectancy and more fully harness the power of compound growth. Anyone and everyone with a tax deferred savings account should be livid. This toxic waste applies to … [Read more...]
Man vs. Machines: Can Humans Win a New Stock Market War?
In a market that is increasingly dominated by robots, indexing, and algorithms, humans are beginning to play to their own strengths. The predictability of computers and passive funds has created a possible opening for some investors. Bloomberg's Justina Lee and Yakob Peterseil report: Some 60% of assets in U.S. equities are housed in passive products, while quant strategies comprise another 20%, according to JPMorgan Chase & Co. All told, index and exchange-traded funds, quants and options-related strategies dominate all but 10% of U.S. stock trading, the bank calculates. “What it … [Read more...]
Real Estate: “Foreign Buyers Have All but Disappeared”
For years now major coastal real estate markets have been propped up by foreign buyers. That's changing in the face of slowing global growth. The Wall Street Journal's Laura Kusisto reports: Real-estate agents said the pain from the foreign pullback is palpable when they try to sell high-end condos in Miami and New York or mansions in southern California and Seattle. “Generally speaking, we are in the largest market correction since the Great Recession in New York City,” said Martin Eiden, a real-estate agent at Compass, who has had to cut prices on listings from Midtown Manhattan to … [Read more...]
The Simple, Elegant Power of the Retirement Compounders
Long time readers have surely heard about my Retirement Compounders® portfolio (as well as the Dynamic Maximizers®). I don’t publicize the securities included in these strategies anymore, but they are both still integral parts of my family run investment counsel’s planning toolkit. Here’s what I wrote about the simple elegance of the Retirement Compounders® strategy in December of 2010: Durability, Ease of Use, and Reliability I t was minus 5 centigrade on December first, my 72nd birthday, as we departed Kabul, Afghanistan to be joined by Special Forces ODA 594 in the 2001 hunt for bin … [Read more...]
Beat the IRS: Roth IRAs for Your Kids and Grandkids
If you have a child or grandchild who is working this summer, you might be able to help them catch FIRE: Financial Independence Retire Early. Help them establish a Roth IRA, and if they’re under age 18 or 21 (depending on your state) set-up a custodial account Roth IRA. They can contribute $6,000 or the total of their earning income whichever is less. For example, if they earn $3,000 that’s their max not $6,000. The key is to have earned income from an employer. It doesn’t matter where the money comes from either. Let’s say your grandchild earns $3,000 for the summer. You may want … [Read more...]
Hard Criticism for Amazon’s Advertising
Shira Ovide, writing at Bloomberg, unloads some harsh criticisms of Amazon's advertising business. Ovide explains that the option has become a toll that producers must pay in order to get their products in front of customers. She concludes: To be fair, Amazon is doing a lot of work for its cut of sales. It provides a vast customer base for merchants, often stores inventory for them and handles shipments, and takes responsibility for customer service and payments. That’s arguably far more work than Apple does for its 30% commission on a purchase of an iPhone game. 3 And all advertising is, … [Read more...]
The FIRE Movement by the Numbers
The financial industry is full of anecdotes and stories by writers (myself included) providing their own perspective on events. The FIRE (financial independence, retire early) movement is blessed with many blogs and podcasts discussing the early retirement journeys. But anecdotes never tell the whole story, so I want to give you some numbers on the FIRE movement. These numbers were assembled by a Harris Poll conducted for TD Ameritrade. How Many People Are Aware of the FIRE Movement? 11% Know about FIRE 26% Are familiar with the concept but not the term 63% Are not familiar with … [Read more...]
The Disaster Waiting to Happen in Bond ETFs
There's something akin to a bank run happening at some bond ETFs. Despite the easily traded nature of ETFs, when the underlying assets they represent aren't very liquid, redeeming shares can be a real problem. Bloomberg's Rachel Evans and Emily Barrett report: A couple of prominent investment funds are currently living through a portfolio manager’s worst nightmare: So many customers are demanding their money back that withdrawals need to be frozen. Amit Deshpande, a former longtime risk manager, sees it as a wake-up call. In particular, he’s watching the growing ranks of asset managers who … [Read more...]