You could be suffering right now from the Dunning Kruger effect and not even know it. Worst of all, it may be affecting your stock portfolio's performance. If you are one of the recently arrived "Robinhood" investors and think you have cracked the market code, you may, in fact, be suffering from the Dunning Kruger effect. The syndrome is named after Justin Kruger and David Dunning, who outlined it in their 1999 paper in the Journal of Personality and Social Psychology. The authors introduced their paper by describing the effect: People tend to hold overly favorable views of their … [Read more...]

Let’s run some numbers, shall we? If you’re making twenty-five grand working part-time, how much will you need to invest to match it with a three-percent draw rate? The answer is just over eight hundred thousand dollars. Puts some perspective on how much your time is worth doesn’t it? The more you want to draw, the more you'll need to save. My number one piece of advice for anyone considering retirement is simply this: don’t. You have incredible worth in times like these with interest rates nailed to the floor and assets inflated. The task of investing for retirement … [Read more...]

The best way to improve your retirement's financial picture is to keep on working if you can. Reshma Kapadla writes at Barron's: RESIST RETIRING PREMATURELY Given the health risks created by the pandemic and uncertain outlook for certain industries, early retirement may seem like an attractive option. But advisors recommend that those who are five to 10 years away from retirement should stay in the workforce, if possible. “The best way to improve retirement financial outcomes is to work longer,” says Jamie Hopkins, director of retirement research at Carson Group. “A year or two before … [Read more...]

You may be familiar with Ronald Read’s story. It’s a story worth telling over and over and over again to anyone you know. My father in law Dick Young wrote in May 2015: Hard to even comprehend, but this great story, courtesy the WSJ‘s Anna Prior, recounts how Ronald Read accumulated an estate valued at almost $8 million. Mr. Read, who passed away at the age of 92, made a modest living pumping gas for many years at a Gulf gas station in Brattleboro, Vermont. A Five-Inch Stack of Stock Certificates How did Ronald Read manage to become a multi-millionaire? Mr. Read invested in dividend-paying … [Read more...]

If you’ve been with me during this crisis, then chances are your investments are in good shape. I can’t guarantee it, but I can guarantee you’re smiling inside when someone asks how your portfolio is doing. We all know the guy who tells you he sold at the top and waited out the bottom. That guy, however, still has to figure out when to get back in (if he was ever in, to begin with). As far as I’m concerned, he would have been better off collecting dividends and reinvesting them at lower prices and perhaps picking up some cheap, high-income bonds. It’s because of times like these that you’re … [Read more...]

You really can’t make this up. Rather than admitting that they've spent years making the wrong assumptions, and underfunding the pensions of California public workers, CalPERS pension fund managers seem hell-bent on driving the fund off a cliff to save their jobs. In the Wall Street Journal, Ben Meng, chief investment officer of Calpers, does his best to explain why the fund is taking on a load of leverage to fund its overpromised goals. He writes: Yet even before the pandemic, we knew that our goal of achieving a risk-adjusted return of 7% would require addressing the market’s triple … [Read more...]

Coronavirus Infects Stock Market: Part LVIII How are you doing this morning? Hopefully, you’re not too shell shocked. If you are, then you’re not alone. A study by Fidelity Investments finds that close to one-third of investors over the age of 65 sold their stocks during the coronavirus meltdown reports The WSJ. Like a broken record, money managers tsk, tsk, tsk the sellers saying “hold your stocks for the long-term.” Well, that’s fine and good if you’re in your thirties, but a bit more difficult when you’re over 65. A prospective client wants to consolidate her assets with us mainly … [Read more...]

Coronavirus Infects Stock Market: Part LVI “Requests for driving directions on Apple Inc.’s Maps app are back around mid January levels, while data from Dutch location technology firm TomTom International BV show traffic congestion gradually climbing in some late U.S. cities, though it is still down substantially from March levels in many,” reports the WSJ. But after this weekend’s riots, who is in a rush to visit a city? The future of the city is on the rocks. Blue state governors and mayors have gone wild. They’re a fiscal mess. Consider the self-inflicted wreckage of mismanaged … [Read more...]

It was a typical Sunday morning. The kids were up early, shows had been watched, books read to them, and pancakes eaten. Standing up with a cup of coffee, looking out at the backyard full of leaves and sticks, I thought to myself: “I could easily let the morning go and forget about the yard. Or, I could get the job done in a couple hours and perhaps catch some of the Pats game.” As I was tying my boots, I felt them staring down at me. One of them asked, “What are you doing?” “I’m going to rake the yard. It won’t take long.” I said. “Can we help?” they asked. “Maybe you can come out … [Read more...]