Category: Investing

The Long-Term Cost of Investing in the Wrong Index Fund

RYSYX

Not all index funds are created equally. While they may follow similar indices in a similar manner, the costs involved can vary greatly. If you’ve invested in a simple three-fund portfolio or a variation with a quality, low-cost firm, you’ve probably got costs of well under a tenth of a percent. Would you believe there are companies chargin more than 1% per year for an S&P 500 fund? It’s true, and you can find them from big names like Wells Fargo (WFINX), BlackRock (BSPZX), and J.P. Morgan Chase (OEICX). Even worse is the Rydex S&P 500 fund (RYSYX) with an […]

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Create Your Own Comprehensive Financial Plan

If you’d like to create a comprehensive financial plan, I can think of three good options. One: Work with a vetted fiduciary, fee-only financial advisor. You should come out with a sound plan, some understanding of what goes into the plan, and it will probably set you back a few thousand dollars. Two: Go it alone. Read books and blogs to learn everything you can about investment management, debt management, appropriate insurance, asset protection, etc… It will likely take the better part of a year and hundreds of hours, but you’ll give yourself a great education in personal finance. Monetarily, […]

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529 Plans: What You Need to Know About College Savings Plans

529 Plan MN

Shortly after our children were born, we started 529 plans to get a head start on college savings. Before they could walk or talk, these lucky kids had thousands of dollars invested in a tax-advantaged account with many years for that money to compound before they might need it.   I say “lucky” because the vast majority of kids don’t have a 529 plan. Greater than 97% of families in the United States don’t use them, which is a shame, because these accounts are an excellent way to pre-fund at least a portion of a child’s future education. There are […]

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How to Avoid FOMO When Investing

FOMO road

With all this FOMO talk lately, you might mistake me for a millennial. FOMO! YOLO! See you at the Fyre Festival with all of my influencer friends! Or not. I’m a Gen-Xer, which is more of a ROLO generation. Not an acronym; it’s just the yummy chocolate and caramel candy that was among the far fewer options back when I was growing up. You could find a roll next to the Whatchamacallits. To be honest, I think of the rhyming acronyms as being popularized by the millennial generation, but the concept is nothing new. Investors have forever been concerned about […]

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7 Guidelines for Adding New Asset Classes to Your Portfolio

I know some intelligent people who invest in only one asset class. The VTSAX portfolio is well diversified, but is only diversified among the stocks of U.S.-based companies. Historically, the one-fund portfolio has performed well, with the occasional 30% to 50% drop. Don’t like the sound of that last part? You may want to consider adding an asseet class. The classic three fund portfolio gives you three asset classes, and a four fund portfolio (with the addition of Real Estate usually in the form of REITs) gives you four. I’ve got those four. I’m further diversified within real estate by […]

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When Your Income Becomes Your Enemy

Sedona Mansion

What’s the first thing that comes to mind when you hear the question “How do you get rich?” You might envision someone winning the lottery or receiving a large inheritance, but the most common and likely response is something along the lines of “make a lot of money.” If you want to be wealthy, and don’t have a rich uncle or 1 in 100 million luck, you’re best off working hard and earning a boatload of money. Of course, earning money is only half of the equation, but it’s the sexier half, so you probably didn’t immediately come up with […]

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Five Things That Need to be Said About Passive Income

Passive Income

Today’s Saturday Selection from Dr. Peter Kim is one of my favorites. It speaks to the truth about passive income, specifically the fact that “passive” can be a bit of a misnomer, particularly early on. My favorite form of passive income is the return I receive in both capital appreciation and dividends from my index fund investments. That’s about as passive as it gets. I also earn some passive income from investments in crowdfunded real estate deals. These are mostly passive, but require a little more education and due diligence. Investing in single family rental homes is not so passive, […]

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Rebalancing Your Portfolio: Why, When, and How

You’ve decided on the perfect asset allocation for you. It matches your risk tolerance, preference for domestic versus international equities, and the numbers, as expressed in percentages, are perfect multiples of ten. You’ve got a spreadsheet to automatically track and calculate those percentages. 60, 20, 10, 10. It all adds up. Then the market does what the market does and it’s all fouled up. 58, 21, 13, 8. No!!!! All is not lost. You can rebalance. Dr. Jim Dahle explains why you might want to do that (besides making the numbers look proper again), when you might want to do […]

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How to Build a Real Estate Crowdfunding Ladder

Students of personal finance are familiar the concept of a ladder. So are roofers and firefighters, but that’s another matter, altogether. The idea of a financial ladder is to have a repeating source of cashflow, either in perpetuity or for a number of years until you circumstances will no longer require it (i.e. when RMDs kick in). Common ladders include CD ladders, treasury bond ladders, and the Roth conversion ladder. Dr. Peter Kim has an idea for a different kind of ladder using real estate investments. His post was originally published on Passive Income MD.   How to Build a […]

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The Reality of Real Estate Investing: It’s Not as Easy as It Seems

Destin_Real_Estate

Real Estate is often touted as an optimal path to wealth. Many people have done very, very well by investing in real estate. Of course, there are countless ways to invest in real estate. Today’s guest post comes from the spouse of a physician, Rachel Hernandez of Adventures in Mobile Homes. As you might guess, her trailer park adventures come not from living in mobile homes, but as an experienced real estate investor. The focus today is on single-family homes or small multi-family homes. Certainly, that’s one way to earn good income from real estate, but the endeavor requires hands-on […]

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EquityMultiple: An Interview With CEO Charles Clinton

I’ve personally invested in a handful of crowdfunded real estate deals. I wouldn’t want to recommend investments to my readers that I wouldn’t be open to investing in, myself. One of those investments, which happens to be my first and largest to date, was with EquityMultiple. I like that they offer a variety of investment types (equity, debt, mezzanine debt), and as you’ll learn, perform extensive due diligence, passing on 90% of investments floated their way. I’m also a fan of their extensive Introduction to Commercial Real Estate Investing and other articles on their Resources tab. CEO Charles Clinton was […]

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Calculating the Value of Your Backdoor Roth Contributions

I recently published a detailed article questioning the Marginal Value of the Backdoor Roth. I wanted to answer a simple question. “Is it worth doing?” The answer I came up with? Probably, yes. Unless you’ve got significant obstacles, namely a tax-deferred IRA in your name that you can’t easily roll over into an employer’s 401(k) or individual 401(k). Then, it’s not that big of a deal if you don’t. The thing is, in the first year that you do the Backdoor Roth, your tax savings is probably going to be somewhere in the range of $10 to $40. We’re comparing […]

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Seven Money Matters I’m Horrible with and How I Deal with Them

Money Money Money

Today’s post comes from my WCI Network partner Passive Income MD. I think he’s pretty good with money, but he begs to differ. At least in some respects. He makes a great point in that just because we’ve seen success with money, it doesn’t mean we have all the answers or do everything right. I’ve weighed in on five money mistakes I choose to make and I’m sure there are more I have yet to discover. Dr. Peter Kim’s not perfect, either. As I read through this article again, a scene from Forgetting Sarah Marshall popped into my head. If you […]

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Backdoor Roth IRA 2019: a Step by Step Guide with Vanguard

This year, I made my seventh pair of “Backdoor Roth” contributions with Vanguard. If you’ve heard of the Backdoor Roth IRA, that’s great! You’ve been paying attention. If not, I’ll give you a brief overview, and a number of links to additional articles with more complete descriptions of the history and important caveats. This post has been updated with fresh screenshots from my 2019 contribution and conversion, which were completed on January 3rd and 4th, 2019. I like to contribute early in the year to start the tax-free earnings as soon as possible, but you have until Tax Day in […]

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Top 10 Financial New Year’s Resolutions to Make (and Keep) in 2019

Happy New Year! Have you made your New Year’s Resolutions yet? If you said yes, have you broken your New Year’s Resolutions yet? I usually wait until mid-to-late January to break mine, but I I’d like to give you some achievable New Year’s Resolutions that you can keep. Each of these ten items will help you improve your financial situation, and most of them are something you can do, check off the list, and move on. I’m not asking you to make any drastic changes in habits, like my good-beer-loving friend across the pond who’s giving up beer for a […]

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Tax Loss Harvesting with Fidelity: A Step by Step Guide

When the stock market gives you lemons, make lemonade. In December of 2018, the markets have been delivering lemons by the truckload. We’ve seen a drop of about 7% in one week and most major indices for the US stock market are at or near bear market territory. While I don’t enjoy seeing six-figure sums disappear from my portfolio, I try to do the best I can with what I have. When I have an abundance of lots with losses, I squeeze those lemons with a technique known as Tax Loss Harvesting (TLH). I’ve previously shared a guide to TLH […]

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Is It Better to Invest for Cash Flow or Appreciation?

Cashflow or Appreciation

When investing, it’s important to think about your objective. It’s tough to answer the question “Where should I invest my money” without knowing what you hope to achieve. Today, Passive Income MD reviews two of the most common objectives: investing to receive ongoing cash flow and investing in assets that will increase in value. As a W-2 wage earner in the upper tax brackets, I’ve had a strong preference for the latter. Cash flow increases my tax flow, whereas unrealized capital gains from capital appreciation are not taxed now (and may never be taxed). For the time being, I’m in […]

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The 10 Worst Places To Get Investing Advice

Paris Church

Investing advice is not difficult to come by. It’s everywhere. Sound investment advice? Now, that can be a little more difficult to come by, but if you know where to look (and The White Coat Investor shares some ideas below), it’s out there. The difficult part, particularly for those who are new to investing or have always let someone else manage their money, is differentiating the good from the bad. One criterion you may use is where the advice is coming from. If you’re getting it from any of the following sources, be sure to apply extra scrutiny when analyzing […]

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