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

Dollar Cost Averaging vs. Lump Sum

Question: I’ve been a dollar-cost averager for many years; however, I’ve read recently a Vanguard study which shows lump-sum investing [has] outperform[ed] DCA [dollar-cost averaging] around two-thirds of the time throughout history. Wanted to get your thoughts on which one is better long term. Thanks. Answer: My opinion is that you should invest the money when you Read more »

Liability Insurance

Question: Our nightly local news is mostly funded by ambulance-chasing lawyer ads looking for clients who want to get rich by claiming an injury from fender benders to serious collisions. It would seem at first glance that having lots of liability insurance and umbrella policies would be a wise decision for anyone with significant assets. (Full Read more »

Roth IRA as Emergency Reserve?

Question: I was wondering what you think about using a Roth IRA as a “true” emergency reserve (job loss, etc.) vs. a cash reserve for “stuff that just comes up” (water heater breaks, fender bender, etc.). You could draw down the principal of the Roth tax-free, and if you invest in TIPs [Treasury Inflation Protected Securities], there Read more »

What about REITs?

Question: I have dropped commodities for the “well rounded portfolio” and embrace pretty much what you have advised here in this November post. But you don’t mention REITs [Real Estate Investment Trusts]. I still have about 8% in REITs but am thinking of selling those as well. Thoughts? Answer: REITs are businesses, so they fit into Read more »

Taxes on Trust Accounts

Question: A friend has trust funds for each of her children’s college education. Each trust is currently about $200k. The elder child is a high school sophomore and the trust is currently 70% equities. Should that number be reduced even though the capital-gains taxes may be quite high? Answer: The taxation of income retained by trusts is Read more »

Hedging Against Volatility

Question: 1) Does it make sense to split the global equities allocation between the Minimum Volatility Fund and whole-world allocation (e.g., Vanguard’s Total World Fund [VTWSX]) to increase long-term return in exchange for a little more volatility? 2) Can your current recommendation for 10% in cash equivalents serve as your previous 2-3 years’ reserve against Read more »

Converting a Traditional IRA to a Roth IRA

Question: I am 68, average health, with a 63-year-old wife, healthy. Is there any wisdom to converting a current IRA to Roth? Answer: Traditional IRAs give a tax deduction up front, but distributions are fully taxable. Roth IRAs provide no tax benefit up front, but distributions are tax-free (so long as they aren’t premature). In theory Read more »

Indexed Universal Life

Question: Because I was the beneficiary of my husband’s life insurance policies, I find myself sitting on a bit of cash that I need to be prudent with. I am in my mid forties and work a part time job which means my annual income is negligible. My financial advisor is nudging me toward putting about Read more »

Has Your Position Changed on Balanced Portfolio?

Question: Several years ago, probably more years than I care to think about, you presented your thoughts on a balanced portfolio that included commodities. The commodities part was not an insignificant percentage, maybe 20%. I jumped right in at that time. At first the commodity part did very well. Here lately, of course, not so well. Read more »