A Simple Retirement Formula

A Simple Retirement Formula

Most of us get up and work hard every day so that someday we don’t have to. That day is called retirement. Getting to that point requires you to learn how to manage your money week to week and month to month. Retirement is a whole new game; it requires a lifelong perspective. Your early decisions will impact the next 20 or 30 years. Many people don’t give retirement planning the time it deserves until too late in the game.

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ETFs Are Growing

Today’s Chart of the Day comes from Morningstar Direct and shows the openings and closings of mutual funds vs. exchange traded funds (ETFs) since 2012.

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Be Wary of Non-Traded REITs

Today’s Chart of the Day comes from the Wall Street Journal and highlights why investing in Non-Traded, or illiquid, assets pose additional risk.

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Purchasing a Home with Today’s Prices

To Buy, or Not to Buy, That Is the Question

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Year End Comment

What a wild ride. In 2022 we experienced:

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Retiring Sooner Causing Inflation

Today’s Chart of the Day comes from the Financial Times and includes an article asking if higher wage demands will increase inflation like in the 1970s. However, this time it is different since the workforce is shrinking as shown by the Participation Rate, the falling orange line in the chart. The participation rate is defined as the percentage of healthy people 16 or older who are actively working or looking to do so.

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Dow vs. S&P

Today’s Chart comes from Benedek Voros from S&P Dow Jones Indices. I always like to point out firsts, and this year there have been many.

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20 Year Active to Passive

Today’s Chart of the Day comes from FinancialTimes.com and shows that starting in 2015, and each year after, investment funds left actively managed funds, in red, and were reinvested into passive funds, in blue, which have grown each year for the last 22 years. 

The interesting part is the year over year growth is accelerating in 2022 as the downturn in both stock and bond prices provided an opportunity to sell out of many funds and not pay capital gain taxes. Any further downturns in 2023 could accelerate this trend even more.  

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Average Can Be Hard to Achieve

Today’s Chart of the Day comes from Compounding Quality, @QCompounding on Twitter, and shows that over the last 20 years, the average investor realized only an annual return of 3.6%. This is less than 4.3% on bonds, and not much higher than inflation of 2.2%, meaning that many just barely broke even after inflation and taxes. This can be compared to a return of 9.5% on the large-cap stock index, or 7.4% for even a conservative generic portfolio of 60% stocks and 40% bonds.

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Family Matters

In the desperation of trying to stay relevant and up-to-date within the banking industry, more and more community banks are falling prey to merger mania, albeit losing these banks means losing a part of the community. However, the Crews family

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Top 10 Things to Do if Your Account Is Compromised

We’ve all heard nightmare stories about someone who has become the victim of credit fraud; however, what have you done to protect your financial well-being? Phishing links in texts or emails, compromised passwords or pins, and stolen credit card information are all ways fraudsters can hack your accounts, so it’s important to stay vigilant when it comes to your credit. Learn steps to ensure you’re protected from identity or credit theft.

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Housing Un-Affordability

Today’s Chart of the Day is the history of the Housing Affordability Composite Index provided by the National Association of Realtors going all the way back to 1986, with the average line in dotted red.

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Lack of Persistence in Mid- and Small-Cap

Today’s Chart of the Day from S&P Dow Jones shows the percentage of time the top 25%, or top quartile, of active investment managers stayed in the top 25% after five years.  A higher-than-average figure will tell us if the active managers have genuine skill or merely experienced good luck. 

If you flipped a coin, randomness would assume 25% of them would stay in the top 25%; however, the evidence does not support this. Yes, 27% of large-cap managers do, which shows that by and large their performance is merely good luck. However, the chilling figures are only 1.5% mid- and 0.9% of small- do. These are terrible odds. To add insult to injury, 15% and 23% of mid- and small-cap managers end up at the bottom 25%, meaning that even in the unlikely event you picked a good one, odds suggest you should sell it right afterward.

There are many theories to why this is, and we’ve discussed them in previous blogs including Why Indexing Works.

In the end, the significantly worse than average probability of active managers constantly beating the market in mid- and small-cap stocks is why we only use passive index funds. 

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Investing in a Recession? “D@*! the torpedoes, full speed ahead”

According to Mighty History, “maybe one of the Navy’s finest moments came at the 1864 Battle of Mobile Bay, where Adm. David Farragut forced his way through a Confederate minefield and fought the Confederate Navy to a standstill.

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Median Sale Prices in US

Today’s Chart of the Day comes from @WallStreetSilv on Twitter, with data provided by Redfin, covering the median sale price for a single-family residence in the United States.

Often the price of a house is constrained by the cost to build the structure which limits a wide range. For instance, why pay more for an existing house than you can build a new one for? So, the $200,000 to $600,000 range is quite alarming. Although the size of the home will impact the price, I suspect a large part of the wide range is in the cost of the underlying land, which is influenced by places with better weather, proximity to better employment opportunities, and scarcity of useful land to build on. For instance, places near the water, mountains and lakes could be influenced by these factors.

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