An index fund is a passively managed mutual fund.

An index fund is a passively managed mutual fund. They don’t try to find undervalued securities or actively trade in and out of stocks (or bonds, for bond index funds). They buy a portfolio of securities that replicates an index, such as the S&P500 Index. Then, they hold that portfolio, trading only when necessary (e.g., because a company was acquired…

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Expert Insight on Choosing Credit Unions

Reasons for signing up for a credit union

What are some reasons people should sign up for a credit union? Many credit unions will offer you a higher rate of return on your checking account, liquid savings account, term certificates of deposit, and other savings products. Savings are insured just like your savings are insured when deposited in a bank. Many credit unions will offer you a lower…

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Index Funds and Expense Ratios

Throwing Money Away

We wrote that perhaps the primary advantage of investing in index funds and index ETFs is their low expenses. But there are some index funds that charge outrageously (in our opinion) high expense ratios. We don’t understand why any investor would ever invest in them. If it is because their financial advisor put them there, they need a different financial…

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Expert Insight on Retirement Savings

Why do you think it’s so hard for some people to save for retirement? There are many reasons. Some individuals are barely able to live on their after-tax income. They spend every dollar on food, shelter, transportation and other necessities. Given a choice, these individuals will almost by necessity delay saving for retirement, which may be 20, 30 or 40…

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Financial liquidity describes the ability to buy or sell something quickly at a fair price.

Financial liquidity describes the ability to buy or sell something quickly at a fair price. An illiquid asset cannot be so easily sold. For example, real estate is typically an illiquid asset. You may have to wait months to get the price you want. There are three components to the liquidity of securities in general, and stocks specifically: The first is the…

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Asset Allocation - Planning for long term success

Asset allocation, at its most basic level, is deciding how to spread (allocate) the risk across your investment portfolio: stocks vs. less-risky instruments such as bonds and certificates of deposit (CDs). These decisions will be the primary determinant of your investment performance; i.e., your portfolio’s rate of return. Beyond this seemingly simple decision, you must consider how much to invest in domestic stocks, international…

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FINANCIAL LITERACY AND THE TIME VALUE OF MONEY With interest rates near 14-year highs, we should revisit the phrase, “Time is Money.” You may have even used the phrase yourself.  It has special meaning when applied to investing and financial planning.  Lyle and I are happy to present our “Time Value of Money” lesson, taken directly from  Your Total Wealth. …

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OVERCONFIDENCE: A Behavioral Risk For Both Financial Advisors And Their Clients

Financial Overconfidence

David Dubofsky, PhD, CFA and Lyle Sussman, PhD The increasing interest in decision making biases affecting the financial world can best be documented with this metric: A Google search of the phrase “Behavioral Finance” yields over 5 million hits.  A cursory scan of a sample of those links highlights overconfidence as a significant bias affecting both investors and their advisors. Overconfidence…

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Federal Reserve

Clients of Financial Advisors and Wealth Managers hear a lot today about the Federal Reserve. Unfortunately many of those clients, and people in general, may not know what it does and how it affects their daily personal finances. Here’s a sample of “Central Bank,” one of the key terms we explain in our book, “Your Total Wealth,” to help you…

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Your Total Wealth is the ideal read. It is the most unique and accessible financial advice resource I’ve ever seen and goes well beyond how to make money - Kiplinger
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