Wall Street pundits are wonderfully persuasive storytellers who get the ending wrong half the time.

Old Story

PERHAPS YOU’VE HEARD the story of Ronald Read. A lifelong resident of Brattleboro, Vermont, Read was a quiet man. He preferred flannel shirts and spent much of his career as an attendant at a local gas station. Yet, when he died in 2014, even his closest friends were surprised to learn that Read had accumulated a fortune of more than $8 million.
Stories like this appear with some regularity. In 2010, Grace Groner,

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Beyond Stuff

WHEN I WAS a child, I remember my parents putting great store by antique furniture, silver cutlery, bone china, cut glass and fine rugs. My maternal grandparents had rare books and old prints. My paternal grandfather had built an extensive stamp collection.
When Clem—as we all called him—died in 1988, he left me his stamp collection. I rarely look at it these days, but I’ve been dutifully carting it around for 30 years, through six changes of residence.

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Excited Yet?

DO THIS YEAR’S meandering markets make you more excited about your portfolio’s prospectsor less so? My contention: How we react to 2018’s lackluster stock market and sliding bond prices says a lot about how we think about investing. Check out my latest article for Creative Planning, where I sit on the investment committee.

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Latest Blogs

Old Story

PERHAPS YOU’VE HEARD the story of Ronald Read. A lifelong resident of Brattleboro, Vermont, Read was a quiet man. He preferred flannel shirts and spent much of his career as an attendant at a local gas station. Yet, when he died in 2014, even his closest friends were surprised to learn that Read had accumulated a fortune of more than $8 million.
Stories like this appear with some regularity. In 2010, Grace Groner,

Read more »

Beyond Stuff

WHEN I WAS a child, I remember my parents putting great store by antique furniture, silver cutlery, bone china, cut glass and fine rugs. My maternal grandparents had rare books and old prints. My paternal grandfather had built an extensive stamp collection.
When Clem—as we all called him—died in 1988, he left me his stamp collection. I rarely look at it these days, but I’ve been dutifully carting it around for 30 years, through six changes of residence.

Read more »

Excited Yet?

DO THIS YEAR’S meandering markets make you more excited about your portfolio’s prospectsor less so? My contention: How we react to 2018’s lackluster stock market and sliding bond prices says a lot about how we think about investing. Check out my latest article for Creative Planning, where I sit on the investment committee.

Read more »

Blog archive »

Numbers

EXCHANGE-TRADED FUNDS that invest in U.S. stocks had net share issuance of $186 billion in 2017, while U.S. stock mutual funds had net redemptions of $236 billion, according to the Investment Company Institute’s 2018 Fact Book.

Act

SET UP A HOME EQUITY LINE OF CREDIT. These have lost some of their allure under the 2017 tax law, because you can only deduct the interest if it’s used to buy, build or substantially improve your home. Still, a HELOC is one of the cheaper ways to borrow, and it could come in handy if you have a financial emergency or as an alternative to education and car loans.

Think

MONEY ILLUSION. We have the illusion we’re doing better if we earn 5% on our savings rather than 1%, even if these yields simply match the inflation rate—and hence in both cases we aren’t making financial progress. In fact, earning 5% when inflation is 5% leaves us worse off, because we’ll lose more to taxes than in the lower-yielding scenario.

Home Call to Action

Free Newsletter

Where Money Grows Up

HUMBLEDOLLAR ISN’T THE FINANCIAL website for everybody. Instead, it’s the place that folks end up after they have made their fair share of youthful financial mistakes—and they’re ready to settle down and get serious about money. I even briefly toyed with adding a tagline to the site: “Where Money Grows Up.”
What does grown-up money look like? It’s less about the size of your nest egg—and more about attitude. Here are 21 signs you’re a HumbleDollar reader:

When your neighbors show off their remodeled kitchen,

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Jonathan Clements

About Jonathan

Jonathan Clements is the founder and editor of HumbleDollar. He spent almost two decades at The Wall Street Journal, where he was the personal finance columnist. His latest book: How to Think About Money.

Money Guide

Start Here

Junk Bonds

HIGH-YIELD JUNK BONDS can offer impressive interest payments. The question is, how big a price will you pay in defaults? Junk bonds receive a rating of Ba1 or lower from Moody's Investors Service, or BB+ or lower from Fitch Ratings and Standard & Poor's. That means these bonds are considered below "investment grade"—and there's a serious risk you won’t get your money back. Historically, some 5% of junk bonds have defaulted each year, though defaults in recent years have been running at more like 2% or 3%. To compensate for the risk of defaults, junk bonds have, on average, yielded some 6 percentage points more than comparable Treasury bonds. But the spread over Treasurys has fluctuated widely. In June 2007, it was at an all-time low of 2.4 percentage points. Less than a year and a half later, in November 2008, the spread widened to almost 20 percentage points amid the panic selling of the financial crisis. During 2017, the spread over Treasurys tightened from 4.1 to 3.5 percentage points, well below the historical average, as investors wagered that a buoyant economy would reduce defaults. The spread widened slightly in 2018's first quarter, to 3.7 percentage points. Still, junk-bond investors currently have a modest margin for error, should the default rate pick up. Junk bonds also tend to trade more like stocks than bonds, so a tumbling stock market could drag down junk-bond prices. While there are some exchange-traded index funds that focus on junk bonds, most junk-bond funds are actively managed mutual funds. As you pick among them, pay attention not only to fund costs, but also to the credit quality of the portfolio. You can get the necessary information at Morningstar.com. A fund that focuses on lower-quality junk bonds will often sport a higher yield. But that higher yield may prove to be scant compensation if there’s a flurry of defaults. Our Humble Opinion: Junk bonds seem like an unhappy compromise between stocks and bonds. How so? The time to buy junk is during economic downturns, when concerns about defaults drive up yields. Problem is, that’s also the time when you want to buy stocks—and stocks are likely to deliver better returns as markets rebound in anticipation of an economic recovery. Next: Floating Rate Loans Previous: Preferred Stock
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Money Guide

Start Here

Junk Bonds

HIGH-YIELD JUNK BONDS can offer impressive interest payments. The question is, how big a price will you pay in defaults? Junk bonds receive a rating of Ba1 or lower from Moody's Investors Service, or BB+ or lower from Fitch Ratings and Standard & Poor's. That means these bonds are considered below "investment grade"—and there's a serious risk you won’t get your money back. Historically, some 5% of junk bonds have defaulted each year, though defaults in recent years have been running at more like 2% or 3%. To compensate for the risk of defaults, junk bonds have, on average, yielded some 6 percentage points more than comparable Treasury bonds. But the spread over Treasurys has fluctuated widely. In June 2007, it was at an all-time low of 2.4 percentage points. Less than a year and a half later, in November 2008, the spread widened to almost 20 percentage points amid the panic selling of the financial crisis. During 2017, the spread over Treasurys tightened from 4.1 to 3.5 percentage points, well below the historical average, as investors wagered that a buoyant economy would reduce defaults. The spread widened slightly in 2018's first quarter, to 3.7 percentage points. Still, junk-bond investors currently have a modest margin for error, should the default rate pick up. Junk bonds also tend to trade more like stocks than bonds, so a tumbling stock market could drag down junk-bond prices. While there are some exchange-traded index funds that focus on junk bonds, most junk-bond funds are actively managed mutual funds. As you pick among them, pay attention not only to fund costs, but also to the credit quality of the portfolio. You can get the necessary information at Morningstar.com. A fund that focuses on lower-quality junk bonds will often sport a higher yield. But that higher yield may prove to be scant compensation if there’s a flurry of defaults. Our Humble Opinion: Junk bonds seem like an unhappy compromise between stocks and bonds. How so? The time to buy junk is during economic downturns, when concerns about defaults drive up yields. Problem is, that’s also the time when you want to buy stocks—and stocks are likely to deliver better returns as markets rebound in anticipation of an economic recovery. Next: Floating Rate Loans Previous: Preferred Stock
Read more »
Home Call to Action
Jonathan Clements

About Jonathan

Jonathan Clements is the founder and editor of HumbleDollar. He spent almost two decades at The Wall Street Journal, where he was the personal finance columnist. His latest book: How to Think About Money.

Free Newsletter

Where Money Grows Up

HUMBLEDOLLAR ISN’T THE FINANCIAL website for everybody. Instead, it’s the place that folks end up after they have made their fair share of youthful financial mistakes—and they’re ready to settle down and get serious about money. I even briefly toyed with adding a tagline to the site: “Where Money Grows Up.”
What does grown-up money look like? It’s less about the size of your nest egg—and more about attitude. Here are 21 signs you’re a HumbleDollar reader:

When your neighbors show off their remodeled kitchen,

Read More »