I recently encountered a social media discussion in which a financial professional made the claim that [I’m paraphrasing here], the people you know with a multi-million net worth didn’t get there just by buying mutual funds. (He was making the case the entrepreneurship is necessary.) It made me laugh because I see households with a ..read more

Just a few years ago, if you read financial news at all, it was impossible to avoid headlines about Cathy Wood’s ARK Innovation fund. The fund’s performance was off the charts. What happened next is a story we’ve seen before, over and over: dollars pour into the fund, as investors don’t want to miss out ..read more

Over the last year, one thing I have noticed is far greater money market balances than I used to see in people’s portfolios. I’m encountering lots of people who are using money market funds for the entire fixed-income side of their portfolio — or nearly so. And it’s easy to understand the line of thinking ..read more

Morningstar recently released the latest edition of their Mind the Gap research. Once again, “allocation” funds (e.g., balanced funds, target-date funds, LifeStrategy funds) had the smallest gap (i.e., best investor returns relative to reported performance figures). Investors tend to just buy them and leave them alone, which is generally the best strategy. And again “sector ..read more

In finance, the risk from owning stocks is divided into two categories: Diversifiable risk is the risk of a specific stock earning poor returns. Undiversifiable risk (also known as systematic risk) is the risk that the stock market as a whole earns poor returns. The reason for the name “diversifiable risk” is that, if you ..read more

In 2017, a paper by Hendrik Bessembinder produced what, to me, was (and still is) the most surprising investing factoid I’d ever read: the best-performing 4% percent of stocks explain the entire equity risk premium since 1926, as other stocks collectively earned no more than Treasury bills. And more than half of stocks delivered negative ..read more

A reader writes in, asking: “Every year, I contribute to my Roth IRA as early in the year as I can and I invest the money right away. But I always wonder about waiting until the price goes down a bit before buying. I think I could even use a limit order to make it ..read more

Morningstar’s 3×3 “style box” for stock mutual funds has always been a useful tool for showing what portion of the fund is allocated to each category of stocks (e.g., large-cap growth, small-cap value, etc.). When the style box was originally created, the allocation of the overall stock market was by definition one-third growth, one-third blend, and one-third value. However, due to the explosive returns of large-cap growth stocks over the last several years, now even a “total stock market” index fund is categorized as a large-cap growth fund. Allan Roth discusses the topic, as well as an updat ..read more

One of the most common questions I see in my email inbox, on the Bogleheads forum, and on Bogleheads reddit is something along these lines: “I bought Vanguard Total Bond Market Index Fund (or ETF) as my core bond holding several years ago. Its performance has been enthusiastically lackluster. Is this fund still suitable for use as the bond part of my portfolio?” Vanguard Total Bond Market ETF (BND) has had a roughly 16% cumulative return over the last 10 years (annualized return of 1.5%). Given 32% cumulative inflation (2.82% annualized) over the same period, that’s not great. And compared t ..read more

Just a quick announcement for today, since people often ask about timing for new editions of my books. The 2024 editions for my two small business tax books are now available on Amazon: Independent Contractor, Sole Proprietor, and LLC Taxes: Explained in 100 Pages or Less LLC vs. S-Corp vs. C-Corp: Explained in 100 Pages or Less Other Recommended Reading Your Social Security Questions Answered (Brad Barrett interviews me for the Choose FI podcast) Michael Kitces Interviews Mark Berg about the Economics of Hourly Financial Planning Looking Different from Jonathan Clements SSA to Remove 114 O ..read more