A number of years ago, I researched low-beta stocks and I was convinced that low-beta stocks increased portfolio risk-adjusted returns. A number of different researchers and portfolio managers also concluded that low-beta stocks boosted portfolio performance. See here and here for examples. There were several theories about why low-beta stocks outperformed higher-beta stocks. One theory … Continue reading How index investing may be killing the low-beta advantage
For all of excitement around the idea that cryptocurrencies will replace traditional government-issued money, there is an interesting potential roadblock: capital gains taxes. If you buy lunch using dollars, the only taxes you incur are sales taxes. If you buy that same lunch using cryptocurrency, you will also owe taxes on any capital gains on … Continue reading Tax considerations when using cryptocurrency to pay for things
Two of the most important calculations in retirement planning are (1) how much you need to save up in order to be ready to retire and (2) how much you can afford to draw from your savings each year in retirement. There are many different calculators available online, and each has its own assumptions. There … Continue reading A simple approach to retirement income planning
A number of years ago, while being interviewed, University of Chicago professor Harold Pollack asserted that everything you need to know about personal finance can fit on an index card. The idea got massive media coverage and went viral because so many people think that personal finance is complicated. The interviewer, Helaine Olen, and Dr. … Continue reading Can financial planning be this simple?
The high cost of post-secondary education is getting a lot of attention because of the growing burden of college debt. The reality, however, is that the average levels of debt are not going to be a major challenge for most people who complete an undergraduate degree from a public university or college. About 78 percent … Continue reading Making better decisions about higher education
One of the abiding asset allocation challenges in recent years has been how much to invest in non-U.S. vs. U.S. equities. In theory, globally-weighted market capitalization is the best choice for a general asset allocation. It is not unreasonable to think that global capital should be smart enough to reflect the relative value propositions across … Continue reading International allocation should be underweight in 2021
While the best practices of personal finance remain constant, the mechanics of banking, investing, borrowing, and decision making have made a massive leap forward. Technology enables these improvements. Brokerage fees have gone to zero. Mutual fund fees have declined sharply. Online tools facilitate all aspects of personal financial management, from banking to retirement planning. What's … Continue reading The transformation of personal finance
Now that Joe Biden is the president elect, a number of politicians are demanding large-scale forgiveness of college debt as one of Biden's first initiatives. Also see here and here. There are massive ethical problems with a one-time debt forgiveness and I am stunned that senators and members of congress are so fervently pushing this. … Continue reading Ethics of forgiving college debt
Many academic studies find that value stocks, those which have low prices relative to their earnings or book value, tend to out-perform growth stocks (those with high prices relative to earnings or book value). This concept also makes intuitive sense. Investors who are prepared to buy stocks that are cheap, because these companies have hit … Continue reading The road ahead for value investing
A commonly-cited metric of economic progress is how many children are better off than their parents. In 2017, Raj Chetty and coauthors published a paper titled The Fading American Dream in which they argue that working Americans are far less likely to earn more than their parents than in previous generations. I recently saw the … Continue reading The ‘Fading American Dream’?