It’s a brand-new year, and I am looking forward to a lot of exciting things going on. In fact, I need to try and keep this short so I can work on a few other things before closing the night with my LeCarre spy novel.
I just started teaching again this week, which is always inspiring for me. I teach a night finance class for adult learners in an accelerated bachelors program at Rockford University. These students are busy people, most with families and full time jobs, coming back to school to get their college degrees. It always makes me feel good to see people putting in such effort to raise their game. No offense to the young people out there, but I love teaching this demographic because they are usually more engaged (probably because most are paying it themselves), and they have more life experience in order to contribute to the discussions. So, that is where I will be spending a great deal of my “free” time in January.
I do have a post in the works that I will hopefully get out next week. This will be in response to a question I get fairly regularly – “Have I saved enough?” or “How much should I have put away by this point in my life?” I have been tired of using other companies rules-of-thumb, so I broke out a spreadsheet and crunched some numbers. Stay Tuned!
In the meantime here are the most interesting things I read this week. Let me know what you think!
It’s now apparently scientifically proven that books help you live longer –
And just as if I did not have anything at all going on this weekend, some jerk publishes 350 pages of Charlie Munger speeches. – hat-tip to @MorganHousel on this one. I’m not sure how much is also in Poor Charlie’s Almanac but this link deserves to be saved and revisited on a regular basis.
The always fantastic Christine Benz, from Morningstar, with your 2017 financial fitness regime
Larry Siegel gives his prediction about the future of active management, which I think is pretty right on. Costs will come in, the industry of stock pickers selling mutual funds will not grow like it used to, but there will always be a market for investing with the goal of beating the market, because greed and hubris will never go away.
More from Morningstar: Sometimes things that look compelling on paper, are less so in practice. Once again, investing parallels life. “Academic Research Doesn’t Always Make the Grade”
This is a popular article from the Wall Street Journal that made the rounds this week about the people who started the 401(k). It may be pay-walled, so if you are not a subscriber you may not be able to pull it up, but basically it caught attention because they said they felt partly responsible for the pension going away and that individuals, left to their own decisions (like investing in a 401(k)), often make bad choices (like not investing, or pulling money out despite penalties and taxes). My next post will have more to say on the subject but in the mean-time here are some quotes from the article:
“Financial experts recommend people amass at least eight times their annual salary to retire”
“Economist Teresa Ghilarducci, director of the Schwartz Center for Economic Policy Analysis, says she offered assurances at union board meetings and congressional hearings that employees would have enough to retire if they set aside just 3% of their paychecks in a 401(k). That assumed investments would rise by 7% a year.
Ghilarducci says she came to realize the 401(k) math she used in the 1980s and 1990s no longer works. The 7% annual compounded investing returns, a pillar of the concept, now seems too rosy. She now believes setting aside 3% of salary isn’t enough.”
“The downturns showed Mr. Benna of Johnson Companies that individual savers have too many opportunities to make mistakes, such as yanking money out during market downturns or selecting unsuitable investment mixes for their ages. He also notes that money managers can charge fees that eat away at savings.”
It should not be salacious or surprising that people are saying global risks have gone up based on the Trump victory, however, this clip from Bloomberg had a lot of folks talking. It shows Larry Summers and Ian Bremmer talking about what they worry about with this new administration.
Finally, it appears that there is no longer any use in fighting it – The Robots are coming to get your wealth! And it seems that your human advisor is getting more likely to let it happen. Another update on the robo-advisor trend and where the industry is heading. H/t @jennydoforno
Again, please feel free to reach out. I have a new email address to field questions and comments for the site, keith@krakencapitalwatch.com so get in touch and tell me what you want to know more about.