Many brokers recommend investing in municipal bonds. Municipal bonds, a.k.a. munis, are a debt security issued by a state, municipality or county to finance its capital expenditures. Most are exempt from federal taxes and even state taxes if you live and file taxes in the issuing state. They are often pitched as being very safe with a long history of low default rates.
When you walk into my office, you may notice a beautiful granite and glass plaque gracing my bookcase that displays the honor of being one of “America’s Top Financial Planners.” It was awarded by the Consumers’ Research Council of America, whose address on Pennsylvania Avenue is less than a half mile from the White House.
In a recent column I exposed my own portfolio and its daring dullness. It is that very dullness which, I believe, is the key to its success. Still, beneath this dull exterior beats the heart of “The Gambler.” Even yours truly gets the occasional urge to buy that risky stock, offering the possibility of a 1,000 percent return, and sometimes I just can’t resist acting on that thrill-seeking urge.
As a financial adviser, I’ve seen a lot of clutter in people’s financial lives. I know people who have dozens of financial accounts. Problem is, the more accounts one has, the harder — and more time-consuming and stressful — it is to keep track of everything.
People are often surprised when I describe my personal portfolio to them. Using an analyzing tool from Chicago-based Morningstar, I’ve put together a brief description of my own daringly dull portfolio and, far more important, why it looks like it does.
I’m a fan of the so-called “ robo-advisers.” These are online wealth management services that provide automated software-based portfolio management advice without the use of human advisers. Two of the larger robo-advisers are Betterment and Wealthfront. In addition, Schwab recently launched its version, branded Intelligent Portfolios, and Vanguard has a product called Personal Advisor Services.
Twice last week, the Dow Jones industrial average suffered triple-digit losses. Friday’s loss of 115 points was pinned on economic worries as GDP declined. The previous Tuesday, the Dow lost 190 points, which the media blamed on Fed rate hike fears. The broader Standard & Poor’s 500 index also had bad days.
For some time now, actively managed mutual funds have been underperforming index funds that essentially own shares of all the stocks in the market. That’s because the lower costs of index funds give them huge advantages over the high-priced active funds. Though I’ve been investing in index funds for decades, I’m rather surprised by their more recent popularity. My indexing approach was once rare, but now a full 37 percent of the money in U.S. stock funds is in index funds. With more and more money flowing out of managed funds and into index funds, can indexing become too big?
More and more investors are telling me that their portfolios have now fully recovered from the 2008 stock market crash. I respond in my typical tactless way by telling them their performance has been awful. That’s because stocks are now 64 percent above their pre-crash high.
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