Monetary & Fiscal Disaster December 15, 2009
Posted by Andy Robinson in : Educational , add a commentI’m going to let this article speak for itself. It’s a long read but well worth thinking through the sandy foundation upon which our currency is built. We need to be in wealth preservation mode until such point that the government reins in its reckless behavior. Unfortunately our investment options are not terrific at the moment. The stock market is still overvalued. However, some protection against inflation can be found in precious metals, commodity stocks, and sound dividend paying stocks which have lagged the surging market since March. I have been accumulating more Exon Mobile on the recent pullback (XOM).
Keep your focus long-term November 8, 2007
Posted by Andy Robinson in : Educational , add a commentThe article Don’t Be Fooled by Randomness reminded me that I, like many other investors, tend to start thinking too short-term with their investments. This is particularly true during volatile and exciting times. When it comes right down to it, the fact that the market is down 4% since I glibly proclaimed myself “all in” is meaningless to my long-term financial well-being. The best way to gain and preserve wealth is to find valuable companies and invest in them for a long time (forever if the fundamentals stay as good as when you first bought them). I will stay the course with my 100% allocation towards equities. This allocation is not suitable for those anywhere near retirement age, but I would recommend taking some profits on government bonds and reallocating towards a heavier equity exposure at the moment.
Retiring with a mortgage October 15, 2007
Posted by Andy Robinson in : Educational , add a commentAlthough it’s preferable to pay off your mortgage before retirement age, by making extra payments if necessary, the fact is that many people have not retired their debts when they enter retirement. This MSN article addresses this issue by suggesting that the retiree should refinance the debt to reduce monthly debt obligations rather than cash out the 401k to eliminate the mortgage. Most people’s instinct is to take retirement money out to get rid of the mortgage, but the problem with that is that the more you withdraw, the higher your marginal tax bracket will be for that year. It works out better to withdraw the money over time at a lower tax rate. Even though you will end up paying more mortgage interest, your money is staying in the 401k longer making tax-deferred returns.
Keep the same car and get rich September 5, 2007
Posted by Andy Robinson in : Educational , add a commentI’ve always maintained that the biggest secret to becoming wealthy is not making a hefty salary, but keeping your expenses down, which in turn enables you to save and invest a large percentage of your income. I have warned against the dangers of buying too much house and have stated that one of the best ways to achieve your financial goals is to be free of the burden of car payments. So it immediately caught my eye when I ran across this article Drive Your Car to Death, Save $31,000. This CNN Money writer takes the $31,000 figure from Consumer Reports data. I think that this figure is a low estimate of what you could save because it only factors in a 5% return on the interest that you didn’t have to pay. If you invest the extra money in a tax-advantaged retirement plan and choose a stock market index fund, I think the gain in wealth from driving a car to the ground would be substantially higher.
Sage words from the founder of Vanguard August 17, 2007
Posted by Andy Robinson in : Educational , 1 comment so farJohn Bogle is the pioneer of index funds and just gave Newsweek an interview that puts this market volatility into a solid long-term perspective. Excerpts of this interview are printed in this article entitled Hope Will Return. If you stay the course and stick to your appropriate allocation of stocks and bonds, times like these are just a blip on the radar. He made a terrific point concerning the BIG CRASH of 1987 where the stock market went down 25% in a single day. That’s scary stuff and makes our recent 10% correction look like a walk in the park. Well, anyone who had owned the stock market throughout the whole of 1987 (despite the crash) would have been up 3% that year. If you let emotion get the better of you, you end up buying at market tops and selling stocks at the bottom.
Screening for Value August 1, 2007
Posted by Andy Robinson in : Educational , add a commentThis article What would a young Buffet do now? is an interesting look into the reasoning behind one of the most successful investors of our time. Harry Domash has spent a good bit of time reviewing Warren Buffet’s picks to find the qualities that Buffet most prizes, like a high return on shareholder equity. He took these qualities and applied them to a stock screener. I haven’t reviewed any of the companies that the screener turned up, but I approve of the methodology used.
Protection against a falling dollar July 26, 2007
Posted by Andy Robinson in : Educational , add a commentThis Yahoo Finance article called Hedge your Retirement Savings with Currencies reveals several interesting ways to make money in this weak dollar environment. Some of the options include holding certificates of deposit (CD’s) denominated in a foreign currency. I think this is a terrific option because you make interest on the CD and likely some gains from a further dollar decline. There are also some new foreign currency exchange-traded funds and a mutual fund for those interested in other options.
Five mistakes of bad investors July 23, 2007
Posted by Andy Robinson in : Educational , add a commentWhile I disagree with this writer’s assessment that the stock market is inefficient in aggregate, I agree whole-heartedly that certain individuals make bad, bad decisions with their investments. This Morningstar article highlights some of the most dangerous “irrational” impulses that can derail one’s retirement and erase wealth if unchecked.
Top Seven Money Mistakes June 22, 2007
Posted by Andy Robinson in : Educational , add a commentEvery once in a while it’s a good idea to evaluate your finances to check to see if your savings, spending, and investing decisions are logical. I spotted this article on yahoo finance that profiles some common mistakes people make that I feel are worth knowing. For example, being overly cautious with our investments is just as risky as being too aggressive. If we hold too much of our money in fixed-income investments (like bonds), we may sidestep the occasional market decline but forgo the additional returns that stocks make relative to bonds. This exposes you to just as serious a risk that your retirement will be underfunded or inflation will take too large a chunk out of the principal.
Top 10 Retirement Mistakes May 18, 2007
Posted by Andy Robinson in : Educational , add a commentAs a follow-up to my last post, read over the article Don’t Retire Poor - Avoid these 10 pitfalls. Some of the mistakes are repeats, but some are worth mentioning. For example, if you have kids forget about a college fund until your retirement is fully funded. There are many options available for financing education, but only one viable option for funding your retirement - YOU. Social Security? Don’t kid yourself! Over the next few decades taxes will increase while benefits decrease (not a recipe for a luxurious retirement).