Cheap is good. Free might not be better.

Nick Foy, CFP®

Earlier this month, Charles Schwab reduced the cost of trading stocks and ETFs to the lowest possible level: $0.

Since their founding, Schwab has been disrupting the industry by taking advantage of the semiconductor to reduce the cost of investing for everyone. This is a good thing. Independently, Schwab and Vanguard changed the industry more than any other two companies, and average investors are better for it. 

No longer is it the norm for brokers to charge 1% (or more) of a transaction amount just to trade a stock. No longer is it standard for a mutual fund manager to charge in excess of 1% (or more) annually to attempt to beat the market, which they rarely do anyway.

Research and technology made things better, as did market competition. 

Continue reading “Cheap is good. Free might not be better.”

What if our stuff told the truth?

Nick Foy, CFP®

Your stuff lies to you, and to me, and to everyone else.

We use our stuff to tell lies to others, and they believe them, because we typically don’t let people see our balance sheet or our cash flow.

Our houses tell lies, and so do our cars. Our clothes, our trips, even our Instagram accounts do too. We use them to tell the story of our own financial success, which we know gets translated into success in life (for some weird reason). Sometimes, the success is real, and sometimes it’s fake. But as long as it’s documented well for our neighbors and our family, it doesn’t really make a difference.

I’m in a position to get to peak behind the curtain a bit, and ascertain whether the perceived success has any underpinning in reality, or if it’s all a facade. I get to see the truth. I wish our stuff would tell the truth, too, so everyone could be more honest with themselves and others about their current financial status. It would probably help to provide some better perspective about how meaningless stuff can actually be. 

Continue reading “What if our stuff told the truth?”

Why personal finance is like dieting: there are no shortcuts

Nick Foy, CFP®

Back at the 2008 Summer Olympic Games, Michael Phelps became known for more than just his historic gold medal accumulation: he also became known for his diet. During the training and the games, in order to keep up with the energy needed to perform at a world class level, he’d put down 12,000 calories a day.

Although he later admitted that the figure was somewhat exaggerated, the quantity of food he ate while training was still rather daunting:

Breakfast: Three fried-egg sandwiches with cheese, lettuce, tomatoes, fried onions and mayonnaise. Two cups of coffee. One five-egg omelette. One bowl of grain. Three slices of French toast topped. Three chocolate-chip pancakes.

Lunch: One pound of pasta. Two large ham and cheese sandwiches with mayonnaise on white bread, plus energy drinks.

Dinner: One pound of pasta, an entire pizza, and even more energy drinks.

Olympic level swimmers burn between 3,000 and 10,000 calories per day, so all that intake was put to good use.

Wouldn’t it be nice, though, to be able to eat whatever you want, not exercise, and still lose weight?

Continue reading “Why personal finance is like dieting: there are no shortcuts”

What I’m willing to splurge on (or why financial advisors are boring)

Nick Foy, CFP®

In addition to seeming like total fraudsters, lots of financial advisors must come off as boring putzes to most people who come in contact with them, like an effervescent nanny in a pin-striped suit firing off lists of do’s and don’ts to anyone who will listen.

What I try to encourage is a view of spending that lines up with what we know about the psychology of money, and what actually bring the most satisfaction. We’ll call it the High Value Splurge.

I’d like to consider myself a tightwad who understands value. Or, as the famous refrain goes: Price is what you pay. Value is what you get. I’m willing to spend on those things that will actually produce some long-term satisfaction, and unwilling to spend on things that won’t.

Continue reading “What I’m willing to splurge on (or why financial advisors are boring)”

It’s not what you know. It’s who you know, and what they know

Nick Foy, CFP®

Over on Twitter, Anthony Isola of Ritholtz Wealth has been uncovering the vile world of teachers’ retirement plans, which are typically high-cost annuities being sold as appropriate investment options. His findings have been eye-opening for many, though unsurprising for me.

Continue reading “It’s not what you know. It’s who you know, and what they know”

It’s not how much $$ you make (at a certain point), it’s what you do with what you make

Nick Foy, CFP®

Last week, I came across this chart and tweet:

Continue reading “It’s not how much $$ you make (at a certain point), it’s what you do with what you make”

When markets go haywire

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Nick Foy, CFP®

Every once in awhile, and sometimes more often than that, markets go nuts. Investors (over)react to some random news, in an attempt to predict an inherently unknowable future, and everyone pays.

We call the market gyrations “volatility,” especially when the market goes down. I’ve noticed that when the market goes up, we don’t call it anything; we just go on about our lives as if markets going up is normal and to be expected, like Mr. Market owes us something.

But, how should investors handle the trepidation associated with markets and headlines that cause discomfort? Here are a few tips: Continue reading “When markets go haywire”

We bought Crocs for all of our clients (sorta)

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Nick Foy, CFP®

Since 2002, Crocs (CROX) has sold over 300 million pairs of some of the ugliest shoes on the planet. Their strategy, it seems, is to embrace the ugliness, and design what many consider to be the most comfortable shoe they’ve ever worn, fashion sense be damned.

This approach has led to a bit of an online backlash over the years, as this (one of my personal favorites) Facebook group shows. The group has existed since long before Facebook became the web’s number one destination for middle aged women to sell essential oils and other various multi-level marketing products, and they do nothing to shield Crocs and Croc-wearers from their disdain.

Crocs - Shoe Continue reading “We bought Crocs for all of our clients (sorta)”

Ten years later – Three lessons from the front line

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Nick Foy, CFP®

Last week marked the tenth anniversary of the collapse of Lehman Brothers, which, along with the forced sale of Merrill Lynch to Bank of America, and the federal takeover of Fannie Mae and Freddie Mac, triggered the Dow Jones Industrial Average to plunge almost 4.5% that day. Two weeks later, an even bigger 7% drop signaled the spread of the financial crisis, as Lehman’s $613 billion in debt reverberated throughout the financial market. Their bankruptcy remains the largest in history.

Shortly thereafter, Washington Mutual was seized by the FDIC, and their assets were sold to JP Morgan Chase, and Wachovia was acquired by Wells Fargo.

Debt markets froze up, housing prices plunged, and individual investors faced countless sleepless nights as they watched the value of their portfolios deteriorate over then next five months, until the market bottomed out in early 2009. Continue reading “Ten years later – Three lessons from the front line”