Going Robo: What’s Schwab’s Move Means for You

With giant discount brokerage Charles Schwab launching its Intelligent Portfolios service this past week, the fledgling industry of automated investment advice is going mainstream.

Like the startup “robo-advisers” that preceded it, including Betterment of New York and Wealthfront of Palo Alto, Calif., Schwab can provide its service at low cost because the money isn’t touched by human hands.

A traditional broker or investment adviser would meet with you face-to-face and put your money in individual stocks, bonds, mutual funds or other securities. Robo-advisers, on the other hand, prompt you to fill out an online questionnaire. They then use software to generate and monitor a portfolio of exchange-traded funds, those low-cost investment bundles that are built to mimic the return of a market index rather than to try beating it.

Robo-advisers will automatically rebalance your portfolio if a rise or fall in the market skews how much money you have in any of the funds relative to the targets originally set for you.

They will also fine-tune the tax efficiency of the portfolio by selling some shares that have gone down during the tax year to offset gains elsewhere, for example.

via Going Robo: What’s Schwab’s Move Means for You | Jason Zweig.

Buffett: These investments are a ‘fool’s game’

Warren Buffet is always good for a few sound bits of investing advice.  We all should pay attention.



Warren Buffett has a message for public pensions, colleges and the like: Stop pouring money into expensive, high-end money managers.

“The commission of the investment sins listed above is not limited to ‘the little guy.’ Huge institutional investors, viewed as a group, have long underperformed the unsophisticated index-fund investor who simply sits tight for decades,” Buffett wrote in his latest letter to Berkshire Hathaway shareholders.

Buffett has long been a critic of so-called alternative investing, a category that includes hedge and private equity funds, among others. The reason is the cut they take for their services, which can make billions of dollars for the managers but far less for clients, according to the man sometimes called “The Oracle of Omaha.”

“A major reason has been fees: Many institutions pay substantial sums to consultants who, in turn, recommend high-fee managers. And that is a fool’s game,” Buffett wrote on underperformance.

via Buffett: These investments are a ‘fool’s game’.

An investing guru who wants to rescue your retirement

Charles Ellis, one of the most revered figures in American investing, hates to waste time.

Especially when it comes to an issue over which the clock is ticking: America’s retirement crisis. “I didn’t know until I sat down and looked at the numbers how serious it could be,” he said. “Unless we act soon, millions of retirees will find that they are too old to return to work and have too little in savings. It is a terrible trifecta: old, poor and alone.”Greenwich Associates founder Charles Ellis speaks with a reporter prior to an event in New York..

Ellis has a new book out, “Falling Short: The Coming Retirement Crisis and What To Do About It,” which has been reviewed everywhere from The Economist to The New York Review of Books. His Wall Street résumé is a reason why people are taking his leadership on—and dire predictions about—retirement, seriously. Ellis wants to change the frightening trajectory many Americans are on.

via An investing guru who wants to rescue your retirement.

Another Good Reason to Delay Social Security Benefits

I agree with Jim Blankenship’s premise in this article.



As you likely know from reading many of my articles on the subject, I have long advocated the concept of delaying your Social Security benefit as long as possible. This shouldn’t be a surprise – many financial advisors have espoused this concept for maximizing retirement income.

Lately there has been a white paper making the rounds, from a Prudential veep, Mr. James Mahaney, entitled Innovative Strategies to Help Maximize Social Security Benefits.  The white paper supports the very theme that I wrote about a couple of years ago in the post Should I Use IRA Funds or Social Security at Age 62?.  This paper seems to have struck a chord with a lot of folks, as I’ve received it no less than a dozen times from various folks wondering if the strategies Mr. Mahaney writes about would be useful to them.

via Another Good Reason to Delay Social Security Benefits – Getting Your Financial Ducks In A Row.

The Richest Man in Babylon: Pt. 1 – Getting Your Financial Ducks In A Row

This is a great book with some timeless lessons about money and this article, by Jim Blankenship, does a great job of explaining the lessons.

This, and the articles that follow it, are well worth reading.



his week I’m re-re-reading a classic, George S. Clason’s The Richest Man in Babylon. It made me think about a project that I’d been wanting to do, which was to give a review of the lessons in the book – not a book review, mind you, but going through each of the lessons in the book in it’s entirety. I’m sure I won’t get all of this completed in the week, but will get a start on it here.

What’s very interesting about this book is that the lessons aren’t anything new. Perhaps it’s fanciful to assume that these very conversations were being had in ancient Babylon, but the basic lessons have been around for ages. Yes, there may be new tax legislation all the time, and from time to time a groundbreaking product may take the stage, but all in all the way to gather and maintain wealth is unchanged throughout the centuries…

via The Richest Man in Babylon: Pt. 1 – Getting Your Financial Ducks In A Row.

How Many Mutual Funds Routinely Rout the Market? Zero!

Not a surprise to me!



The bull market in stocks turned six last Monday, and despite some rocky stretches — like last week, when the market fell — it has generally been a very pleasant time for money managers, who have often posted good numbers.

Look more closely at those gaudy returns, however, and you may see something startling. The truth is that very few professional investors have actually managed to outperform the rising market consistently over those years.

In fact, based on the updated findings and definitions of a particular study, it appears that no mutual fund managers have.

I wrote about the initial findings of that study last summer. It is called “Does Past Performance Matter? The Persistence Scorecard,” and it is conducted by S.&P. Dow Jones Indices twice a year. The edition of the study that I focused on began in March 2009, the start of the bull market.


A collection of “Strategies” columns published in The New York Times.

Warren Buffett’s Awesome Feat at Berkshire Hathaway, Revisited MAR 7

Plenty of Noise, but Not Much Guidance From Fed or Company Reports FEB 28

Debt’s Two Sides: Riches and Misery FEB 21

The Great American Dream, Still Deferred FEB 7

The Strong Dollar Is Always Good, Except When It Isn’t JAN 24

See More »

It included 2,862 broad, actively managed domestic stock mutual funds that were in operation for the 12 months through 2010. The S.&P. Dow Jones team winnowed the funds based on performance. It selected the 25 percent of funds with the best returns over those 12 months — and then asked how many of those funds actually remained in the top quarter in each of the four succeeding 12-month periods through March 2014.

The answer was remarkably low: two.

via How Many Mutual Funds Routinely Rout the Market? Zero – NYTimes.com.

Debt’s Two Sides: Riches and Misery

An excellent, and balanced, discussion of debt from the New York Times.  My belief is that debt, if used judiciously, can be a powerful tool, and if used incorrectly can be very dangerous.



Debt is a double-edged sword. Charles Dickens’s character Wilkins Micawber warned eloquently of debt’s downside: “Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pound ought and six, result misery.”

He was certainly right: Debt can blight your life. But what Mr. Micawber didn’t say is that debt can make you much wealthier. Then it’s called leverage, and it can supercharge your investment returns if you use it wisely.

To a startling degree, the two sides of debt — its destructive and its beneficial powers — have been responsible for the shifting fortunes of vast numbers of Americans since the turn of the century. Data collected by the Federal Reserve and analyzed in a recent paper by Edward N. Wolff, an economics professor at New York University, makes it clear that many American households of moderate means got much richer, on paper, anyway, from 2001 to 2007, largely because of rising home prices combined with mortgage debt.

via Debt’s Two Sides: Riches and Misery – NYTimes.com.