Being wealthy doesn't mean having all the money in the world, just not having to worry about it.

Why Pay an Adviser a Quarterly Fee Just to Invest in Index Funds?

Question: As an investor, I have always tried to invest in very low-cost index funds, since costs are one of the few things in my control other than the asset mix. Paying a percentage of my assets every quarter for management (even very good management) somehow feels “wrong” to me. What am I missing? Answer: Read more »

What’s the Best Global Allocation?

Question: About ten years ago, you recommended the following asset allocation: 40% US Total Stock Market Index Fund 30% European Stock Index Fund 20% Pacific Index Fund 10% Emerging Markets Index Fund I see the 10-year average return for the Pacific fund is somewhat below the others. Do you still recommend this asset allocation? Answer: Read more »

Do You Recommend Using a Credit Card to Pay Regular Monthly Bills Rather than a Bank’s Bill-Pay System?

Question: Do you recommend using a credit card to pay regular monthly bills rather than using a bank’s bill pay system? Answer: For people who always, without exception, pay their entire credit card bill each month, the benefits of airline miles, hotel points, and other perks can be substantial. For people who are inclined to Read more »

How Much Can You Safely Withdraw from Your Portfolio Each Year in Retirement?

For around 20 years, financial advisers and academics have been actively wrestling with the question of the safe withdrawal rate from a portfolio. The seminal article in the field is by William Bengen, entitled “Determining Withdrawal Rates Using Historical Data.” It was published by the Journal of Financial Planning in October 1994 and later chosen Read more »

Lesson 25: How Much Life Insurance?

Once you’ve decided to obtain term life-insurance coverage to protect those dependent on you, you need to determine the amount of coverage needed. There are plenty of calculators online, but my quick-and-dirty approach is as follows: Determine the expected annual spending of those you’ll be leaving behind. A detailed analysis would be nice, but you Read more »

Lesson 24 – Life Insurance

We’ll begin our disaster-of-the-week sessions with the most straightforward: life insurance. A few principles will guide us: The purpose of insurance is to protect against financial losses you cannot afford to suffer. Insurance policies generally make lousy investments. This is as it should be, since we want the insurer to be financially healthy and able Read more »