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Build a More Powerful Portfolio Using Bond Duration
One of the largest disconnects between financial experts and typical investors centers around the question of bond duration. Duration is one of the most important characteristics of a bond or a bond fund because it describes how sensitive a bond’s price is to changes in yields. Bond yields and bond prices move in opposite directions: when the yield goes down the price goes up, and vice versa. Short-term bonds have a low duration, which means their prices…
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A Proven Risk Framework: Need, Preference, and Capacity
Financial planning is a process for dealing with financial risks. Although investors mostly have access to the same investment assets, every investor faces different combinations of risks. And every investor encounters those risks differently. As a result, we need a risk framework which facilitates useful discussion. This is because I find that portfolio risk is…
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Are Two College Savings Plans Better Than One? A New Way to Save Enough.
A 529 college savings plan is a program sponsored by your state, or another state, in which you save money for a beneficiary and pay for education expenses. The Maryland 529 college savings plans are the only 529 plans that offer an annual Maryland State income deduction, and any earnings and contributions can be used…
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Your bond fund strategy, in 30 words
The complete guide to bond index funds for retirement in just 30 words: Age <50: Treasury bonds for diversification [e.g. SPDR Portfolio Long Term Treasury ETF (SPTL)]Age 50 to 70: add TIPS for inflation risk [e.g. DFA LTIP Portfolio (DRXIX)]Age > 70: add short-term bonds to lower volatility [e.g. iShares Core 1-5 Year USD Bond…
Anxious About Your Investments? Control Your Mutual Fund Costs
When it comes to investing, it pays to keep your mutual fund costs low. We’ve built our firm around a big idea: you shouldn’t have to pay high fees in order to get good financial advice. And when it comes to the investments we recommend to clients, one of the most important numbers we look…
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Could A Highly Concentrated Stock Market Be Dangerous to Your Wealth?
Right now, the US has a highly concentrated stock market. The top 10 stocks in the S&P 500 index account for nearly 28% of the total market cap of that index. That’s a little down from last fall, but it’s still near a 40-year record high level. Why might this be a problem? Well, historically…
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The Secret to a Happy Life? Lower Expectations.
Behavioral psychologists have long understood that the happiness of individuals is not much related whether things are going going objectively well. Instead, it’s much more important that things go surprisingly well. In short, lower expectations are the key to happiness. As Robb B. Rutledge wrote in a 2014 research article published at PNAS : …momentary…
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The 2020 “I’m Getting A Bonus or Raise” Flowchart
Are you expecting a bonus or raise this year? Here are some tips on how to spend your bonus wisely. Plus, we’re standing by to chat if you want to get a quick “second opinion” on any money matters.
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Why Actors, Musicians, & Singers Need A Bigger Emergency Fund
You’ve heard the standard financial advice, that everyone should build up an emergency fund of 3-6 months of expenses. But how true is this? For my clients who have steady, 9-to-5 jobs, this rule of thumb often works out to be reasonably accurate. Many of my clients don’t fit that description, though. My focus on…
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Relax in Retirement By Replacing Bonds With Annuities
For decades, the venerable 60/40 portfolio (that is, 60% stocks and 40% bonds) has gained something along the lines of a default status as a suitable asset allocation for retirement. This has produced good returns, but it exposes your portfolio to longevity risk. But what if you replace some of your bonds with income annuities?…
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