index funds – The Key Point

How to Think About Money

by Jonathan Clements

Jonathan Clements, a personal-finance columnist at The Wall Street Journal for some 20 years, advises how to think about work, debt, investments, and insurance at various stages of life. He puts an emphasis on preparing for retirement, starting at a young age.

“Chronologically, retirement might be our final financial goal, but we should always put it first. Amassing enough for a comfortable retirement is our life’s great financial task.” Given longer life expectancy, “we need to get ourselves on the right financial track as early in our adult life as possible, so we quickly achieve some measure of financial freedom.” Continue reading “How to Think About Money” →

The Laws of Wealth: Psychology and the Secret to Investing Success

by Daniel Crosby

Psychologist Daniel Crosby works in the field of behavioral finance. “Given that you, as a member of the human family, have tendencies toward impatience, arrogance and a fetish for complexity, it is very likely that you will screw this up… At my last count, psychologists and economists had documented 117 biases capable of obscuring lucid financial decision-making.”

Crosby presents 10 rules of behavioral self-management.

Rule #1 – You Control What Matters Most. “The behavior gap measures the loss that the average investor incurs as a result of emotional responses to market conditions.” As an example, the author notes that the best performing mutual fund during the period 2000-2010 was CGM Focus, with an 18.2% annualized return; however the average investor in the fund had a negative return! The reason is that they tended to buy when the fund was soaring and sell in a panic when the price dipped. More on volatility later… Continue reading “The Laws of Wealth” →