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Inflation, prices, COLAs, retirement and the last 16 years

R Quinn | Jul 27, 2026

"You've made this statement before and it still confuses me. First, I thought you claimed at an FRA of 66, so the max benefit would be 32% higher, not 24%. That would be more like 2/3 instead of a half. More importantly, I can't see why you would compare the interest on a 17 year accumulation to the 32% larger SS benefit. If you had delayed from 66 to 70, wouldn't you have then saved the 32% larger benefit for 13 years? 13 years at 1.32 times your PIA is equal to 17 times your PIA. So by delaying, at this point you would have about the same $500K, the same interest on the $500K, plus a 32% higher primary benefit available for your survivor. What am I missing?"

- Rick Connor

Taking a Loss?

Mark Crothers | Jul 28, 2026

"Mark, In 2024 I switched from an intermediate to a short term bond fund in my taxable account. I decided it was not worth waiting for the intermediate bond fund to get back to equal. This money was originally put aside in 2019 to pay for new cars over the years, and a porch addition in 2028 so it seemed to make sense at the time. We got one vehicle paid for before the 2022 bond crash. The switch to short term bond fund was because we were much closer to utilizing the money. Now I told my wife she has to keep me alive for 5 more years to get the loss back in it’s entirety (this is another break for affluent investors in the US, we can get our loses back through a annual 3K tax deduction). Now my bonds are evenly split in our portfolio, 1/3 each in intermediate, short term, and short term TIPS."

- DavidHLancaster

Today in Financial History

Harold Tynes | Jul 28, 2026

"Mark Higgins in his 2024 book "Investing in U.S. Financial History" wrote the following about the development of mutual index funds - By 1963, (Benjamin) Graham concluded (in "The Future of Financial Analysis") that .. he (Graham) just knew with mathematical certainty that beating market averages was no longer a worthy endeavor for most analysts... More than a decade passed before several courageous innovators embraced Ben Graham's warning by creating funds that replicated indexes...These included people like Rex Sinquefield, Eugene Fama, and William Sharpe...In 1975, Jack Bogle commercialized the concept for the mass market when his firm, the Vanguard Group, introduced its first indexed mutual fund on December 31, 1975. Going a bit further back it should be noted that John Bogle's 1951 Princeton senior thesis was about the mutual fund industry. Graham taught investment and security analysis from 1928 to 1956 at Columbia University. Warren Buffett was a student of Benjamin Graham at Columbia University in the early 1950s."

- William Perry

Treasury Inflation Protected Securities (TIPS) are a Generational Bargain Right Now

Howard Schwartz | Jul 27, 2026

"Short Bio - Rob Berger is a former securities lawyer and former founding editor of Forbes Money Advisor. He hosts a live show he named "Financial Freedom Show" on YouTube which usually broadcasts every two weeks plus other broadcasts on hot topics in the news. I have subscribed to his free weekly newsletter which is usually full of links to articles and books he has read and found informative and links to his videos since his last newsletter. I think of Rob Berger as one of the white hat bunch."

- William Perry

FIFA Financials

R Quinn | Jul 19, 2026

"Speaking as someone from a less affluent country (which virtually everywhere is relative to the US). I could personally have afforded to fly to the US and even attend matches. But the extraordinary price gouging by FIFA, local hotels, even public transport was something I would have deemed to make it exceptionally poor value . Would I have got $10,000 of value from attending a couple of matches? Highly unlikely. In any event I have a "home" Euros in 2 years which will likely be much more affordable if I really want to see top level international football."

- bbbobbins

Widow Tax

ArticleJohn Urban | Jul 25, 2026

THE WIDOW TAX is sold to the wrong households. It gets pitched to affluent couples as the reason to convert to a Roth or buy life insurance. The pitch says that when one spouse dies, the survivor files single, lands in a higher bracket, and gets clobbered. I ran the numbers for three couples at three incomes, and at the comfortable end the widow tax often costs nothing, or even less than nothing. The real cost lands lower down, on households nobody is selling anything to. What follows uses 2026 federal figures to show what the widow tax actually does in dollars, not in scary percentage points. The pattern runs opposite to the marketing. The higher your income, the smaller the hit, and the lower you go, the more it bites. Three Things Move When the first spouse dies, three things change, and they get bundled under one frightening label. One Social Security check stops, and a pension may shrink or end. That is lost income, and it is usually the largest of the three. It is not a tax. Spending shifts as well. The survivor pays one Medicare premium instead of two, but the mortgage still comes out of the same account. The third change is the only one the tax code causes: narrower single brackets, a smaller standard deduction and lower thresholds for the Medicare surcharge. The widow tax is that third piece alone, and the three households below measure how big it really is. The Affluent Couple Both spouses are over 65. Their income is about $360,000: $80,000 from Social Security, $210,000 from a pension and required minimum distributions, plus $30,000 in qualified dividends and $40,000 in long-term gains. They sit in the 24% bracket, and both already pay the Medicare surcharge. One spouse dies. The survivor keeps the larger Social Security check and most of the other income, landing at roughly $308,000. As a couple, they paid about $53,900 in federal income tax and a Medicare surcharge of about $9,240. As a single filer, the survivor pays about $55,000 in federal tax and a surcharge of about $6,355. The effective rate rises from 15.7% to 18.7%, which is the headline people remember. But the federal tax barely moves, up only about $1,100, because the survivor has less income to tax. The Medicare surcharge actually falls about $2,900, because two enrollees in the couple's joint tier cost more than one survivor a tier above. Net it all out, and the survivor pays about $1,800 a year less than the couple did. The rate went up, and the dollars went down. At the high end, the widow tax measured in money hands back a small refund. This is why the Roth conversion pitch aimed at comfortable couples misfires. If converting to Roth would cut the survivor's future taxable income without cutting the couple's lifestyle, the converted money was surplus. Surplus is money the survivor never needed to replace. Edward McQuarrie, a finance professor emeritus at Santa Clara University, made a version of this argument in a 2023 paper. He found the dollar hit inconsequential for affluent couples, and located any real cost lower down, where the Social Security torpedo bites. Where It Actually Bites Drop down to a couple with $180,000 of income: $60,000 from Social Security and $120,000 from a pension and required minimum distributions, all ordinary income. Both are over 65. The couple files jointly at $180,000; the survivor files single at about $150,000. As a couple, they paid about $17,148 in federal tax and no Medicare surcharge. The survivor pays about $22,737 in federal tax and a new surcharge of about $2,885. The federal tax rises about $5,600, and a surprising chunk of that comes from the collapse of the new $6,000 senior deduction, which phases out against a lower income threshold for singles. Then the survivor crosses into a Medicare surcharge tier the couple never paid. The total cost of widowhood here is roughly $8,500 a year, set against a $30,000 income loss. This is the one band where both the dollars and the rate move the wrong way. Now take a couple with $90,000 of income: $38,500 from Social Security, about the national average for two retired spouses, plus $51,500 from a pension and distributions. The survivor keeps the larger Social Security check and the full pension, landing at $73,500. As a couple, they paid about $3,433 in federal tax, at an effective rate of 3.8%. The survivor pays about $5,278, at an effective rate of 7.2%. There's no Medicare surcharge at this income, and there never will be. But the survivor's effective rate nearly doubles, because more of the Social Security benefit becomes taxable, up to the 85% ceiling, when the single thresholds replace the joint ones. The added tax is about $1,845, and the lost income is $16,500. Real money for a household least able to absorb it. It doubles the effective rate, and it hurts. Read the three together and the widow tax points the wrong way from the marketing. At $360,000 it costs less than nothing, roughly a $1,800 annual saving. At $180,000 it costs about $8,500. At $90,000 it costs about $1,850, but the effective rate doubles. The affluent couples being sold protection don't need it. The middle couples who feel the sting are not being sold anything, and they're the ones for whom a few thousand dollars a year actually constrains a life. The tax code has three different mechanisms, and which one finds you depends almost entirely on your income. At the top, the Medicare surcharge does the work, and it falls. In the middle, the surcharge appears from zero. At the bottom, the Social Security torpedo raises the taxability of the benefit from 75% to 85%. The mechanism changes with the income, and so does the household's ability to absorb the hit. Plan Ahead This is where the widow tax conversation usually stops, and where I think it should start. The moves most likely to leave a survivor better off are the ones you make years before, and they help whether or not the widow tax ever bites. Converting traditional IRA money to Roth over several years before retirement smooths your taxable income. It lowers the required minimum distributions that will later push a single filer into higher brackets. It can also keep a survivor under a Medicare surcharge tier the couple never worried about. Drawing accounts in a sensible order, spending down the right buckets first, reduces the future tax base that a single bracket structure will tax more steeply. Managing required distributions as they grow, rather than letting them balloon off a rising balance, limits the single bracket exposure that builds across a long widowhood. A more tax-efficient bequest helps the people who inherit what is left. None of that is widow rescue. It is good multi-year planning that happens to compound in the survivor's favor. The widow tax is one input to that planning, not the reason for it. The reason is that the year your spouse dies is the worst possible year to be making financial decisions, and the more of those decisions you have already made, the fewer you hand to someone who is grieving. You can do a rough version of this at your own kitchen table, and you should, ideally long before you need to. Estimate the survivor's income after the smaller Social Security check and any pension change, then estimate the survivor's spending from your actual budget, not a generic rule of thumb. Subtract. If reliable after-tax income still supports the life the survivor wants, with margin, the tax rate was never the thing to worry about. Then project the survivor's federal tax, the net investment income tax where it applies and the Medicare surcharge as a single filer, and compare it to the couple. Keep the tax separate from the lost income, so you can see what the tax code actually did. Sometimes, as the affluent couple shows, it does you a small favor. Only then does a planning move earn a look, and only if you can answer what it costs today, what it might save later, who benefits and what has to come true for it to work. The widow tax is real, but it isn't the catastrophe it's sold as. At higher incomes it's not a cost at all. Lower down it is a real cost, and the lower you go, the more it's worth measuring, because the households it constrains have the least margin to spare. The planning that matters most is the kind you do years ahead, smoothing income, holding down future distributions, managing the surcharge tiers and putting the estate in order. Do that, and you've done right by your survivor, for reasons that have little to do with fear and a great deal to do with care. You'll have done it in the years when you still had the time, and the clarity, to do it well. ________________________________________________________________________________ John Urban is the founder of RetireSmartIRA, a retirement tax-planning app. Earlier, he founded GT Nexus, a supply-chain software company acquired by Infor in 2015. He lives in Northern California with his wife, Kathy, and enjoys time with family, travel, reading, Bay Area sports, and the occasional deep dive into the fine print of the tax code.

Fear of the Unknown…

gnussen623 | Jul 22, 2026

"exercise, keep moving. enjoy liberation. theoretically all the saving of money is so's we can have time. it's like buying time. it does and can compound."

- John Kaczka

Market Indicators

ArticleAdam M. Grossman | Jul 25, 2026

WHEN IT COMES to financial decisions, many investors subscribe to an approach known as evidence-based investing. The idea, as the name suggests, is to base decisions, whenever possible, on data rather than on intuition or other informal methods. This sounds logical. It isn’t perfect, though. Economic and financial indicators have weaknesses which are important to be aware of. Consider, for example, the Cyclically-Adjusted Price-to-Earnings, or CAPE, ratio, developed by Robert Shiller, a Yale professor and Nobel laureate, along with a colleague. Owing to its pedigree, the CAPE is highly respected. And a study by the Vanguard Group found that the CAPE had the strongest ability to predict market returns among fifteen different metrics it tested. For these reasons, many view it as the gold standard for stock market valuation. But how accurate has it been? For years, the CAPE ratio has been flashing red. Since 2018, in fact, it’s been more elevated than it was at the peak in 1929, just before the crash. It seems to be indicating extreme risk. And yet, the market has continued to move higher with only temporary setbacks, defying the CAPE’s warnings. Even Shiller himself has acknowledged that the CAPE’s predictive abilities can fall short. In 2021, he made this seemingly contradictory statement in an opinion piece: “The stock market is already quite expensive,” he wrote, “But it is also true that stock prices are fairly reasonable right now.” Here’s how he explained this seeming contradiction: While the stock market at the time was expensive by historical standards, he noted that investors should never look at any one metric in a vacuum. Investments need to be considered in comparison to other available options. On that basis, he said, stocks were not expensive, because bonds at the time were also expensive. Recognizing how the CAPE can register misleading readings under certain conditions, Shiller and a colleague have since developed a modified version of the CAPE called the Excess CAPE Yield. This new metric helps investors compare the prospective relative returns of stocks and bonds. Shiller’s message, in other words: The original CAPE ratio on its own shouldn’t be seen as conclusive. Another well-respected metric that’s stumbled in recent years is the Sahm rule. In general terms, this rule says that when the unemployment rate begins to increase at a particular rate, a recession is likely. In back-testing, it’s been shown to be remarkably accurate. Since 1959, it would have generated just two false positives. A few years ago, however, the Sahm rule threshold was breached, theoretically indicating a recession. But Claudia Sahm, the rule’s creator, was quick to explain why investors shouldn’t be nervous. “The Sahm rule is likely overstating the labor market's weakening due to unusual shifts in labor supply caused by the pandemic and immigration,” she wrote. And in the years since, as Sahm guessed, the economy and the stock market have indeed avoided recession. The upshot: Economic indicators may work—and even work reliably—for a period of time, but then break down when something about the economy changes in a fundamental or unique way, as occurred in the wake of Covid. Economic indicators carry another fundamental flaw: In some cases, an indicator might be correct in its prediction but less than accurate in its timing. It might tell us what’s likely to happen, in other words, but won’t tell us when that event is expected to occur. Probably the most famous occurrence along these lines was in 1996, when Alan Greenspan, then the chair of the Federal Reserve, proclaimed that the stock market was exhibiting “irrational exuberance.” Greenspan turned out to be absolutely right: A bubble was forming in the market, valuations were irrational and a crash was coming. But he didn’t get the timing right. The crash that ultimately occurred didn’t arrive until early 2000—more than three years after he issued his warning. And in those intervening three years, the market more than doubled. Investors who got more cautious in response to the initial warning would have missed out on significant gains. Along the same lines, consider what occurred with the pandemic. When Covid appeared in 2020, it seemed to arrive completely out of left field with no warning. The reality, though, is that certain experts did have pandemic risk on their radar. A 2019 risk assessment by the Federal Emergency Management Agency (FEMA) highlighted the risk of a pandemic among a short list of concerns. The problem, though, was that the report was vague, describing a risk but without any indication when it might occur. It was like a clock with no hands. It was because of examples like this that the fund manager Peter Lynch has said, “It’s futile to predict the economy, interest rates, and the stock market...If you spend 13 minutes a year on economics, you’ve wasted 10 minutes.” That’s humorous, but where does that leave us? On the one hand, we know better than to consult storefront psychics. But economic indicators aren’t terribly reliable either. Investor Howard Marks offers a helpful answer. In his book Mastering the Market Cycle, Marks offers this suggestion: Imagine, he says, a jar filled with a mix of balls of various different colors. No one can tell with the naked eye how many there are of each. But if you can at least have a sense of the mix, that can be helpful. By the same token, no economic indicator should be seen as conclusive, but taken together, they may provide a sense of where things stand. What does this mean in practical terms? Suppose, for example, you’re considering rebalancing your portfolio and wondering how aggressive to be in reducing risk. You could use Marks’s guideline in this case. If the market seems high, you might be a little quicker to reduce risk. But at the same time, we should always keep in mind the “irrational exuberance” episode as a cautionary tale. It’s a reminder to never veer too far in any one direction. As I’ve suggested before, a center-lane approach often represents the best path forward. Adam M. Grossman is the founder of Mayport, a fixed-fee wealth management firm. Sign up for Adam's Daily Ideas email, follow him on X @AdamMGrossman and check out his earlier articles.

Degrees of Doubt: When Higher Education Misses the Mark

Mark Crothers | Jul 16, 2025

"As a retired career-long educator from the early 1980's to 2020, I observed the American education system transition to a focus on ever-increasing testing, largely coming from federal initiatives such as "A Nation at Risk" and "No Child Left Behind". As a result, increased amounts of time that students spend in a classroom are devoted to preparing to do well on the next standardized test and significantly less time is available for teachers to work with students to develop critical thinking and problem-solving skills. Preparing for a test is not the same as learning new concepts. Our state commissioner of education, commenting probably 25 years ago about increased testing, said something to the effect of: "I grew up on a farm. We didn't weigh our cattle more to see if they were gaining weight; we fed them more". I believe that is a very fitting analogy."

- Dave Melick

One Person’s Luxury, Another’s Necessity

Mark Crothers | Jul 21, 2026

"Wendy, sorry to hear of your loss. Sport, and the social side that comes with it, has been a constant thread through my life since childhood. I'd say the social aspect matters as much for the mind as the exercise does for the body. And as you say, it doesn't happen on its own — we have to make the effort. My sporting journey has evolved with age: rough contact sports like rugby and football when I was young, faster competitive sports like tennis and badminton as I moved on from contact, and now easing into gentler ones like pickleball and padel. Through it all, the constant has been the social connection."

- Mark Crothers

Can we be completely safe?

Ben Rodriguez | Dec 17, 2025

"The main problem would be picking out the millionaire next door, and distinguishing him from the guy who really is a couple hundred dollars away from being a homeless vagrant. Criminals don't even think this way; if they had money, they would flaunt it, so they are looking for people who are flaunting money."

- Ormode

Jonathan’s Parting Thoughts: No. 9

Jonathan Clements | Jul 3, 2026

"May you rest in Peace Jonathan. Right on with that advice, pretty much what Buffett says also. And for me, I am 85% Index Stocks, and 15% cash, no bonds needed."

- William Dorner

Inflation, prices, COLAs, retirement and the last 16 years

R Quinn | Jul 27, 2026

- Rick Connor

Taking a Loss?

Mark Crothers | Jul 28, 2026

- DavidHLancaster

Today in Financial History

Harold Tynes | Jul 28, 2026

- William Perry

Treasury Inflation Protected Securities (TIPS) are a Generational Bargain Right Now

Howard Schwartz | Jul 27, 2026

- William Perry

FIFA Financials

R Quinn | Jul 19, 2026

- bbbobbins

Widow Tax

ArticleJohn Urban | Jul 25, 2026

Fear of the Unknown…

gnussen623 | Jul 22, 2026

"exercise, keep moving. enjoy liberation. theoretically all the saving of money is so's we can have time. it's like buying time. it does and can compound."

- John Kaczka

Market Indicators

ArticleAdam M. Grossman | Jul 25, 2026

Degrees of Doubt: When Higher Education Misses the Mark

Mark Crothers | Jul 16, 2025

- Dave Melick

Manifesto

Jul 26, 2026

NO. 22: IF WE’RE saving enough each month for retirement and other goals, it doesn’t much matter how we spend our remaining money—and there’s likely no need to budget.

Truths

Jul 28, 2026

NO. 44: GOOD companies can be bad stocks. Why? Investors bid up the share prices of widely admired, fast-growing companies—but the stocks often falter when the companies fall short of investors' lofty expectations. Meanwhile, investors shun troubled, slower-growing companies, so even so-so corporate performance can result in strong market returns.

humans

Jul 27, 2026

NO. 19: WE GET great pleasure from anticipation. The best part of any event—vacation, buying a car, the family reunion—is often the period beforehand. As we look forward to such events, we can daydream about how much fun we’ll have. Want to get the most out of anticipation? Ponder purchases far in advance—and consider all manner of possibilities.

think

Jul 27, 2026

HOUSE MONEY effect. In a rising stock market, we may attribute gains to our own brilliance, bolstering our self-confidence and leading us to make even riskier bets. This is further aggravated by the “house money” effect. Like casino gamblers who get lucky early in the evening, we may feel we’re ahead of the game—and can afford to take yet more risk.

Money Guide

Manifesto

Jul 26, 2026

NO. 22: IF WE’RE saving enough each month for retirement and other goals, it doesn’t much matter how we spend our remaining money—and there’s likely no need to budget.

Spotlight: Borrowing

A Hardship Indeed

Greg Spears | Sep 9, 2022

BORROWING FROM MY 401(k) helped my wife and me buy our home in 1997. I’m grateful I was able to reach inside my retirement plan for the money we needed for the house down payment.
Experts often warn against 401(k) loans because, even if the loan is repaid, the money borrowed can miss out on investment gains. That’s certainly a risk. Still, there’s a second way of taking money out of a 401(k)—and it’s far more harmful to retirement savings.

Credit Card Debt.

Michael l Berard | Nov 23, 2024

American credit card debt just broke the trillion dollar level. Taking on debt, “ bad” debt, credit cards , auto loans and similar, is a like attending a raucous party , taking in too much alcohol , etc.
The aftermath , paying off high interest loans, is like the worst hangover, ever. It can take decades to recover from it.
Often, too much alcohol can kill you, quickly or long term, * alas , debt can kill you,

Home Rich Cash Poor

Mike Drak | Jul 1, 2022

ACCORDING TO MY local newspaper, the average home price in my town rose 450% over the past 25 years. That made me ponder how I could use my home equity to fund my desired retirement lifestyle. I’m certainly not alone in thinking this way.
There are three ways you can access home equity. You can sell your home and downsize, you can take out a home equity line of credit or you can take out a reverse mortgage.

Pain Postponed

Phil Kernen | Dec 21, 2021

BUY NOW PAY LATER is an online payment method that’s growing in popularity. Money and investors have moved toward participating companies big and small, as they seek to stake their claim in this growing market. What’s the big deal and why is everyone excited?
Buy Now Pay Later (BNPL) allows consumers to purchase goods and pay for them in the future. Approval happens in seconds. You make a down payment, such as 25% of the total purchase,

Reverse Engineering

Mike Roberts | Jul 12, 2022

WHAT IF I SAID YOU could borrow to buy a home and have no mortgage payment? Would you think I was nuts?
Trust me, I’m not. If you’re age 62 or older, it’s possible to finance a home purchase and have no ongoing mortgage payments. How? By taking advantage of a home equity conversion mortgage, or HECM. The federally insured HECM is the most popular reverse mortgage in America today.
Now, I know what you’re thinking.

No Interest

Ken Cutler | Jul 24, 2023

THE HOUSE I GREW UP in was built in 1950 by my father, with some assistance from his best friend Joe, who was a master homebuilder by profession. After his work day as an accountant for a local hardware and lumber chain, my dad would head over to the job site and labor into the night.
My mom also provided some sweat equity, painting and even swinging a hammer at times. I was born in 1962,

Against the Odds

Steve Abramowitz | Mar 31, 2024

MARCH MADNESS HAS descended on my family. I’m not just referring to the hoopla surrounding the annual NCAA college basketball tournament that runs from late March through early April. I mean the reckoning for our 36-year-old son, and his decision to switch careers and pursue his dream of becoming a professional sports bettor. For the 10 years after college graduation, Ryan taught high school math and coached basketball. But in between planning lectures, going over homework and grading exams, he was cultivating a very different kind of pastime. After achieving some success while working what was in essence a job and a half, he felt ready to break the tie to his secure teaching job and venture full-time into an occupation that promised turbulence, more money and self-fulfillment. Skeptical and concerned, but with faith in our son’s judgment, my wife Alberta and I agreed to support Ryan, chipping in some start-up money for two years. You may see us as pathetically manipulable. You can call us dangerous and shameful enablers. You might even think Alberta and I should be surrendering our psychology licenses. But we want our son to have a shot at a career that’s meaningful to him. If many of his friends and those in our professional circle are contemptuous, so be it. What in a nutshell does sports betting entail? The demands are daunting: 60-hour weeks for sure, including much of the weekend. Ryan bets on baseball, along with college and pro football and basketball. The Monday-through-Friday stretch requires intricate probability research to gain an edge over the house. Fridays during basketball season are particularly frenzied, as Saturdays are host to more than 100 college games. Sprinkled into the routine are online conversations searching for clues from fellow bettors, along with the occasional call to a…

Same Time Next Year?

Steve Abramowitz | Jan 9, 2024

"WE GOT A THING going on, we both know that it’s wrong, but it’s much too strong to let it go now” are blues lyrics about a man and his lover. But they might as well be referring to my affair with the January effect. Last year, I wrote about my favorite seasonal anomaly, the tendency for small-cap stocks to outperform large stocks during the first month of the year. In December 2022, I’d set out to see if the phenomenon was still alive. After analyzing market data from December and January, I concluded it was still on the loose, but might not be dependable. At the start of many years, small-cap stocks appear to have the wind at their back. The hypothesis most often advanced: What we’re seeing is year-end tax-loss selling followed by the subsequent purchase of stocks believed to have been driven below their fundamental value. But how strong a force can this be when tax-advantaged accounts are now so large? January’s small-cap performance has also been attributed to window dressing by money managers, who dump poorly performing stocks at year-end, so these holdings don’t appear in their next fund report. But wait a minute. Wouldn’t those large financial institutions be more likely to replace those small-cap shares with safer and more liquid large-cap stocks, thus spurring returns among these larger companies? Many observers have also noted the possible role played by new money. Corporate bonuses need a home, and 401(k)s and IRAs require funding. And, as the new year begins, don’t ignore the potential boost from feelings of good cheer. I imagine all this rigmarole is blasphemy to most HumbleDollar loyalists. Index fund investing is now regarded as the no-brainer choice for independent thinkers looking to build a retirement nest egg. Still, I think we have…

Active vs. Passive Funds in 2024: It’s Deja Vu (All Over Again)

steve abramowitz | Mar 8, 2025

“It’s déjà vu (all over again),” is a quip often attributed to beloved baseball philosopher Yogi Berra. He might as well have been referring to the highly regarded and much awaited 2024 S&P Global Report on the comparative performance of actively managed and passive mutual funds. Its conclusions will come as no surprise to readers of Humble Dollar: Index funds drubbed those run by portfolio managers. Here’s a quick read. Most actively managed stock funds underperformed their relevant benchmarks. Fully 65% of managed large cap stock funds failed to beat the S&P 500, a worse showing than in 2023 and about average for over two decades. To be fair, differential performance was slightly more favorable to active bond funds and notably more so among small caps. Consistent with voluminous previous research, the further out the time horizon, the greater the advantage of passive funds. Now get this. Over the 15-year period ending in December, actively managed funds could not outperform their passive counterparts in any category, including small stock funds. Will these latest data move the needle much? Almost certainly not, given the inability of mountains of prior evidence to do so. The egregious monetary rewards of nonproductive financial advising and asset-based mutual fund management pose formidable hurdles. Commissions are down or nonexistent and expense ratios have contracted, but the era of propaganda and outright skullduggery of financial professionals yet endures. Here’s a case in point. ETF Trends is a popular haven for advisors and purveyors of ETFs and mutual fund companies promoting active management to their adoring disciples, The title of a recent article goes like this: “2024 SPIVA Report Reveals 2 Areas Active Outperforms.” How’s that for a “balanced” introduction to the report’s results?

AI or Black Eye: Choose Your Weapons Steve Abramowitz

steve abramowitz | Dec 30, 2025

"There’s been a lot of talk about an AI bubble. From our vantage point, we see something very different.” Jensen Huang, CEO Nvidia “No company is going to be immune (if the AI bubble bursts), including us.” Sundar Pichai, CEO Google (now known as Alphabet) Is the AI revolution a blessing or a curse, an enduring breakthrough or impending economic and cultural apocalypse? Many investors have taken a position and chosen their weapons, with some wielding funds dedicated to AI and others brandishing funds that minimize exposure to it. At this juncture, we don’t know if the prices of stocks heavily dependent on artificial intelligence are too high, about right or perhaps even underestimating its power. My aim here is neither to glorify nor vilify readers with large stakes in AI. And it’s certainly not to advocate an oversized role for AI in long-range financial planning for retirement or college education. Efficient broad market index funds—most now already tilted towards AI—are consensually regarded as the vehicle of choice for those objectives. We are talking here about investing for shorter-term purposes, such as helping to offset a brief encounter with sequence of returns risk. A caveat at the outset. I have elected to use exchange-traded funds (ETFs) rather than index funds for this analysis and discussion. Oh, I know that most AI readers prefer (even demand) passive investing within the tried-and-true mutual fund structure and that Humble Dollar espouses the Boglehead philosophy. But I am also aware the asset flows are fast turning towards the upstart ETF. Since 2011, almost 150 mutual funds have converted to corresponding ETFs and the pace of the desertions is accelerating. In 2024 mutual funds bled over 150 billion in investor money, when ETF assets soared to over 1.1 trillion. While the oft-demonstrated efficiency…

January Junkie

Steve Abramowitz | Feb 24, 2023

REMEMBER THAT PLANE ride when the woman next to you was consumed with the Times crossword puzzle? Every so often, she would grimace in frustration and rapidly tap the pencil against her forehead. But after a few deliberate sips of red wine, she returned to her obsession. I have my own fetish. It’s called the January effect. As December winds down, the tendency of stocks to rise in January becomes a favorite topic of market pundits. It has bedeviled the best and brightest ever since investment banker Sidney Wachtel stumbled on the phenomenon some 80 years ago. In subsequent years, many academic studies have pinpointed small-capitalization stocks as the primary beneficiary of this seasonal anomaly. So, what’s going on? Testifying to its elusiveness, many hypotheses have been advanced to explain the outperformance of small companies in January. By far the most popular of these is tax-loss selling. Investors take their losses in late December, driving down share prices, and then presumably buy the stocks back early in the new year. Another theory implicates window-dressing. Large institutions dump their losers at year-end, so they won’t appear in their annual reports, and then repurchase the shares after Dec. 31. Others have pointed to a “bonus bump,” whereby corporate heavy hitters commit their year-end bonuses to buying stocks in January. Other commentators have proposed a sentimentality factor—that investors, in good cheer in the aftermath of the holidays, throw money into the stock market. If January has historically been one of the best months of the calendar year, why has it been particularly good for small-company stocks? According to the venerable efficient market hypothesis, small stocks’ sensitivity to this seasonal anomaly is rooted in their greater volatility and risk. Thanks to the wide bid-ask spreads and low trading volume of small-cap stocks, the December…

The Price Isn’t Right

Steve Abramowitz | May 4, 2023

YOU’VE PROBABLY HAD the same experience I’ve had when shopping for clothes. Spring’s in the air—a great time to take advantage of the local clothing store’s annual winter clearance sale. You buy that Ralph Lauren cashmere sweater at 20% off and jaunt home basking in glory. But the next day, while out for a walk, you peek at the store’s window display and see the same sweater, but now marked down 30%. You return home bemoaning your impulsivity. Welcome to the befuddling world of closed-end funds. The proclamation that closed-end funds can be bought for a 10% or bigger discount is no less tempting than that handsome sweater. But it’s just a come-on. How so? All closed-end funds have two prices. There’s the market price at which you can buy and sell—and then there’s the net asset value, which is the value of the fund’s holdings expressed on a per-share basis. The good news: The market price might be below the net asset value, allowing you to buy the fund at a discount. The bad news: Unlike a regular mutual fund, there’s no guarantee you can sell your closed-end fund for its net asset value. Instead, you must trade at the market price, which bounces around with the mood of the market. Still, if a closed-end fund owns stocks you’d like to have in your portfolio, it might be a good candidate for purchase, but only if the current discount is greater than the usual discount over, say, the past five years. Timing—a dicey dalliance in its own right—holds the key. A closed-end fund’s discount is typically largest when its stock portfolio is most out-of-favor. To see how much premiums and discounts can fluctuate, let’s look at BlackRock Health Sciences Term Trust (symbol: BMEZ), a closed-end fund focused on smaller…

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