MY NEW BOOK was mentioned in two recent articles. In the Chicago Tribune, Carolyn Bigda discusses the Money Guide’s suggestion that folks look back at 2014, recall what spending brought them the most pleasure, and then use that to guide their spending in 2015. My hunch: Most people will find they got the most happiness not from new possessions, but from money spent on experiences—things like vacations, dinners out and going to concerts.
Meanwhile, in the Sarasota Herald-Tribune, Elliot Raphaelson gave the Jonathan Clements Money Guide a thorough review. The book, he says, is “informative, concise, up-to-date and easy-to-understand.”
In designing the Money Guide, I was heavily focused on the e-book edition. I divvied up the financial world into short, 250-to-350 word sections, which I figured would be more appealing to those reading the Money Guide on a tablet, phone or e-book reader. I embedded a slew of hyperlinks, not only to related sections within the book, but also to useful websites and online calculators. I inserted a detailed, interactive table of contents at the back of the book, which works similar to an index. Result? To my surprise, the paperback has easily outsold the e-book.
MANY FOLKS CAN’T WAIT to retire. I hope to avoid it—at least in the traditional sense. I can’t imagine having endless days with no clear purpose, other than to “relax” and “have fun.” I much prefer devoting at least part of every day to work, whether it’s banging out my next column or writing my next book.
If you’re retired, this daily sense of purpose doesn’t have to generate income, but it’s sure helpful if it does. As I point out in this week’s column, if retirees can find part-time work that simply covers the bills, and lets them delay Social Security benefits and avoid drawing down their portfolio, it can make a huge financial difference. An added bonus: It can give retirees a reason to get out of bed in the morning—something, I believe, that we all need.
DINOSAURS AREN’T MAKING A COMEBACK, but one of the last survivors is trying to avoid extinction. After prodding from readers, I’ve set up a Facebook page for my various writings and created a Twitter account, so you can follow me @ClementsMoney. My blog posts also now appear on my Amazon author’s page and on Goodreads.com.
WALL STREET HAS CHANGED remarkably during my three decades of writing and thinking about money—mostly for the better. For instance, financial advisors now earn an estimated 64% of their compensation from asset-based fees, rather than from commissions. That eliminates many of the worst conflicts-of-interest, including the incentive to churn a client’s account and sell products that pay the highest commission. Today, you also see many advisors making heavy use of index funds, a topic I discuss in my column this week.
Along the way, I’ve stopped hearing some of the nonsense that financial advisors used to spout. This nonsense went far beyond the unsubstantiated boasts that, with their help, their clients regularly beat the market.
Examples? In the late 1980s, advisors used to claim that load mutual funds (those that charge a commission) were inherently superior to no-load funds. They’d argue that you got what you pay for—and that low mutual-fund annual expenses were a sign of a second-rate product. I even remember advisors claiming that the load on a mutual fund created an incentive for the fund’s manager to perform better. Three decades later, I’m still puzzling over that one.
REAL-ESTATE BROKERS COMPLAIN when I write about housing, and proclaim that there’s no better investment than a home. Insurance agents whine when I discuss insurance issues, and trumpet cash-value life insurance and tax-deferred annuities as the best things since slice bread. Financial advisors fire off fiery emails when I write about the advice business, and insist that the building blocks of financial success are stocks, bonds and an advisor’s wise counsel.
Maybe one of these groups is correct—but they can’t all be. As Upton Sinclair wrote, “It is difficult to get a man to understand something when his salary depends on his not understanding it.” Let’s face it: Would salesmen really be so enamored of equity-indexed annuities if they couldn’t earn double-digit commissions?
AS I TRY TO DRUM UP interest in the Jonathan Clements Money Guide 2015, I spoke today to theStreet.com's Gregg Greenberg for a video interview, recently answered questions from Vanguard and talked to a writer for the AARP blog.
WHAT COUNTS AS GOOD financial advice doesn’t change much from one year to the next. In 2014, you should have owned a globally diversified portfolio, kept investment costs low, avoided credit-card debt, maxed your 401(k) and avoided annuity salesmen. Ditto for 2015.
So why do folks read the business section every day, buy personal-finance books and subscribe to business magazines? There’s an entertainment aspect: We like feeling engaged with the wider world.
But there’s also a practical reason: Even if good financial advice doesn’t change much from one year to the next, our personal situation often changes a lot—and reading widely can remind us to tweak our finances to reflect our new circumstances.
THE FUN PART--writing the book--is over. Now, it's time to generate sales. This is the part that authors hate, which is hardly a surprise: Why would folks who spends their days staring at a screen and tapping at a keyboard be any good at standing in the middle of the road, pounding their chests and declaring their own virtue?
Fortunately, a bunch of longtime friends have saved the Jonathan Clements Money Guide 2015 from obscurity. Back in early December, Consuelo Mack, anchor of Consuelo Mack WealthTrack, interviewed me for her weekly podcast. Ron Lieber of the New York Times mentioned the Money Guide in his most recent column. An excerpt from the book is running this weekend in both Wall Street Journal Sunday and on MarketWatch.com. Chuck Jaffe interviewed me for his radio show. The Oblivious Investor's Mike Piper, who has authored a great collection of relatively short books on financial topics, put in a good word for the Money Guide.
IT HAS BEEN A WILD 48 HOURS--but the Jonathan Clements Money Guide 2015 is available for sale, with all data updated as of the Dec. 31 market close. To be sure, it wasn't the most exciting New Year's Eve. Around 4:30 p.m., I started pulling market data and updating numbers throughout the book. By shortly after 7, I had submitted copy for the Kindle, Nook and paperback editions.
Then the waiting began. The Kindle version was live by early morning on Jan. 1 and the Nook version was available at lunchtime. But it wasn't until 4 p.m. that I got the email from Amazon, saying the paperback edition was ready to go. With that final piece of the puzzle in place, I hit the send button at 5 p.m. and inflicted a promotional email on 4,500 lucky recipients (22 of whom immediately declared it spam).
Now comes the hope for publicity. This morning's pleasant surprise: The book got a mention in the latest column by top-notch New York Times personal-finance columnist Ron Lieber.
HERE'S ANOTHER REASON TO LOVE retirement: You get the chance to save big money by managing your annual tax bill. I recently discussed this notion with the folks at Bottom Line/Personal. For more, check out the full article.
NEAR THE PEAK of the real-estate bubble, I wrote a column about how I had fared financially with the house I then owned in New Jersey. It wasn’t the first time I argued that a home shouldn’t be considered an investment. But that 2005 column triggered the biggest reaction by far.
In addition to a deluge of scornful emails, I came across an online forum where the article was discussed. The first person who posted had read my column. The next 200 folks clearly hadn’t, but that didn’t stop them from opining not only about the article, but also about my intelligence, or lack thereof.
I revisit the topic in this weekend’s column, once again discussing my own experience. Real-estate prices are still 9% below their mid-2006 peak, so one assumes the real-estate junkies remain somewhat chastened—and the online comments will be a tad less vociferous.
WE MIGHT OVERINDUGLE this holiday season—but we probably won’t be honest about it. For my Money Guide, I took a look at how America spends. There are two key sources: the Commerce Department and the Labor Department. The Commerce Department relies on top-down economic data, while the Labor Department surveys consumers.
It turns out that consumers aren’t entirely honest. The Commerce Department found that, in 2013, U.S. households spent an average $900 on tobacco, $1,100 on beer, wine and spirits, and another $700 on alcohol when eating out. But households that were surveyed by the Labor Department admitted to spending just $330 on tobacco and $445 on alcohol.
IN OCTOBER, LUCINDA and I spent a week in Venice. We rented an apartment with no Wi-Fi, so every day for 30 minutes we’d settle into a café with Internet access. While my wife dealt with work issues, I’d catch up on the news, check email, see how the markets were performing and look at the Amazon rankings for my various books.
There was nothing extraordinary about this—except that I was doing it just once a day. By contrast, when I’m home in New York, I’m constantly checking the news, markets, email and my book sales.
But there’s a difference between information and insight. Here at home, I may be getting a lot more information. But it also chews up a heap of time and I doubt it’s making me any wiser. In fact, I suspect the constant flow of financial information is bad for investors, prompting them to fret too much over their investments and make too many trades.
YESTERDAY'S WORK DAY started shortly after 4 a.m. and ended just before 9 p.m. Admittedly, I did take time off for lunch (30 minutes), the gym (40 minutes) and to talk to my mother (50 minutes). But the rest of the time was devoted to updating my Money Guide with all manner of financial data, including yesterday's stock- and bond-market close.
Result? You can now order a print edition from Amazon. In addition, the Kindle edition, which also has data through Dec. 15, can be pre-ordered. That version will be distributed to buyers on Friday. I created the early edition, in part, because some folks had asked whether they could buy the Money Guide in time for the holidays.
On New Year's Eve, I'll be creating a second edition with data through Dec. 31. That version should be available Jan. 1. But beyond small tweaks to the numbers, the Dec. 31 edition will be the same as the Dec. 15 version. And, yes, there will be a version for the Nook--but not until next week.
PAST PERFORMANCE IS NO GUARANTEE of future results—and that’s especially true once an investment goes from backwater to broad acceptance. Take real-estate investment trusts. Over the past 15 years, they have been embraced by investors, leading to great returns as folks loaded up on REITs. But that widespread acceptance was a onetime event—and returns from here will likely be more modest, especially with equity REITs yielding just 3.4%, versus almost 9% at year-end 1999.
Or consider inflation-indexed Treasury bonds. When they were first sold in 1997, the yield above inflation was a handsome 3.45 percentage points. But that yield fell as the bonds gained broad acceptance, and today the 10-year note yields a slim 0.5% above inflation. Emerging-market bonds and commodities tell the same story: The early adopters enjoyed great performance, but results from here will probably be far less stellar.
Hedge funds are an investment vehicle, not a market sector. Still, I suspect a similar phenomenon is at work. There are now so many hedge-fund managers hunting for an investment advantage that returns will almost inevitably be lower—and lower still once you figure in the hefty costs that the funds charge.
That raises an intriguing question: Are there investments that haven’t yet entered the mainstream and where early adopters could reap outsized returns? One obvious possibility: so-called frontier markets like Kenya, Kuwait, Nigeria and Pakistan. But this is dicey stuff. Even if you were going to invest—and I haven’t—you’d probably want to allocate no more than 2% or 3% of your stock portfolio.