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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 …

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

I wrote this a few years ago with my fellow financial professionals as the intended audience.  I thought it would make a good post here as well. I was thinking about what goes into quality wealth management. The goal, in our view, is to use wealth management to maximize long-run client happiness in the face …

Humans are captivated by stories, but largely oblivious to data. In addition, we really want certainty and conclusions when generally all that is available is uncertainty and probabilities. For example, people frequently want a prediction of what the market will do this year, and I think there are two reasonable answers based on history: Most …

My latest quarterly ramblings to my Financial Professionals list are out: Financial Professionals Fall 2019

If you have a good portfolio – i.e. did the “right” things and diversified internationally, tilted to value, etc. it hasn’t worked well recently.  This is where the mettle of quality advisors is tested. Can we keep clients on-board and on-track, continuing to do the right things even when it hasn’t worked for a while? …

Recently Anitha and I were talking about whether someone we knew was “good with money” and we disagreed. We were momentarily confused until we realized our definitions of that phrase were different. When I said “good with money,” I meant behaviorally. For example, we know a couple who are a perfect example of the point …

My latest quarterly ramblings to my Financial Professionals list are out: Financial Professionals Summer 2019

ESG investing (avoiding investments with “bad” Environmental, Social, or Governance aspects) is becoming more popular but has been around a long time. The approach was previously known as SRI (Socially Responsible Investing) or colloquially as avoiding “sin stocks”. A quick note on terminology first. If I talk about a “good” or “bad” investment, it isn’t …