David E. Hultstrom

If you have a prudent financial plan, with no legacy desires, you very well might accidentally leave your heirs an estate large enough to have an estate-tax problem anyway! I’ll give the conclusion first (less technical) and then the detail of how it was derived (which is almost certainly more than you want to know). …

This is new, although I’ve written similar things before: Financial Success (2016) Broke Rich People and Loaded Poor People (2016) “Good With Money” (2019) Aristotle believed that our goal should be eudaimonia which is frequently translated as “happiness” but what he meant was much closer to well-being or human flourishing.  Before Financial Architects existed I …

My latest quarterly ramblings to my Financial Professionals list are out: Financial Professionals Summer 2021

I thought this paper was excellent. Our language influences what we see and think and having the term “Veblen Entrepreneur” available is very useful. (For example, in cultures without words for certain colors, they can’t easily see that color. We have trouble thinking about concepts without appropriate terminology; this is where jargon is useful to …

There are three ways to beat the market: Know something no one else knows Process known information better that the collective wisdom of the market Exploit a structural or psychological anomaly The first one is generally insider trading, but maybe on occasion you can learn something relevant unknown to the marketplace at large. (I had …

My latest quarterly ramblings to my Financial Professionals list are out: Financial Professionals Spring 2021

Continuing the theme from last month’s post, in a recent NYT magazine article, Madeline Albright said, “I’m an optimist who worries a lot.” We should be optimists because, in general, economies grow and life gets better (see Triumph of the Optimists). But we should worry about risks in the short run. The concept of “permanent …

I think I have touched on this before, but not at length and some of the things that happened in the world in 2020 are good illustrations of the point so I think it will resonate more right now. I want to explain the difference between being a specialist vs. a generalist or, what is …

My latest quarterly ramblings to my Financial Professionals list are out: Financial Professionals Winter 2021

I’ve talked about related topics before (most recently in Signs of a High-Quality Advisor), but I want to come at this from a different angle. This will start with substance and end with marketing. Both are important, I think. First, I was thinking about what attributes a high-quality (by which I mean they do an …

Purchasing life insurance on a child is almost always foolish.  It might feel like the “responsible” thing to do, but the responsible thing it to carry appropriate life insurance (and disability insurance) on the child’s parents (or whoever is financially supporting the child). Here is the math: The highest odds of death, from ages 1 …

My latest quarterly ramblings to my Financial Professionals list are out: Financial Professionals Fall 2020

We all go through four stages of competence as we learn something new: Unconscious Incompetence – we don’t know enough to even know we are incompetent (Dunning Kruger Effect) Conscious Incompetence – we know enough to recognize our incompetence (Socrates: “The only thing I know is that I know nothing.”) Conscious Competence – we know …

You may have heard of the strategy of “bunching” charitable contributions.  This is a tax optimization strategy for folks who are charitably inclined, but who might not itemize other than that (or even despite that). Obviously, the new tax law makes the strategy applicable to a much larger number of people. For example, suppose someone …

My latest quarterly ramblings to my Financial Professionals list are out: Financial Professionals Summer 2020

The market’s estimate of inflation can be derived simply from the spread of “regular” (nominal) treasuries and TIPS (treasury inflation-protected securities). As I write this, the 30-year treasury is at 1.4% and the 30-year TIPS is at -0.2% (per Bloomberg). So, very simplistically, inflation is expected to average 1.6% (the difference). That is slightly off …

There is a natural tendency for things to become increasingly adapted to their environments and with this adaptation to be more and more successful. These successful entities (organisms or companies) grow larger and larger – until. Until the environment changes. There is a trade-off between specialization and adaptability. The more successful an entity is in …

My latest quarterly ramblings to my Financial Professionals list are out: Financial Professionals Spring 2020

We periodically get queries about how to invest in the latest hot area (3D printing a few years ago, blockchain and cannabis more recently).  We believe that fads (from tulip bulbs to blockchain) are generally poor investments. To profit from new technology is harder than first appears. There are two ways to profit: First, you …

Following are three simple formulas that can help you know if you are saving and spending appropriately. These shouldn’t take the place of a comprehensive financial plan as these metrics can be inadequate (or even wrong) in some specific situations. These are based on well-known rules of thumb but I have improved (i.e. complicated) them …