Plain Money ideas

Radio show on special needs financial planning

Media Note: Not too long ago, William Wood was the guest on “Your Money Matters Today” with Cornerstone Wealth Advisors. With hosts Steve Campbell and Ryan Miracle, Dr. Wood talked about mistakes that special needs parents should avoid. Here is the podcast if you’d like to listen, and here’s a link to an article that includes most of the show content: 13 Mistakes for Special  Needs Parents to Avoid.

Plain Money ideas

Trump-proofing your portfolio

VoteWith Donald Trump installed as president, what should you do with your portfolio? There are two answers:

  1. It’s too late; and
  2. Nothing

Here’s what I mean. Asset markets move very quickly on news. Whatever the latest dust-up is, by the time you hear about it, it’s too late to act on it. Buy more defense stocks because of additional military spending? Fine, but those stocks have already fully incorporated changes in defense policy. Sell technology shares because of immigration policy changes? Too late.

So that brings us to the second answer: do nothing. If you have a well-balanced portfolio, you haven’t placed a bet on any particular sector — and so it doesn’t matter which sectors gain and lose under Trump.

The best investment strategy to deal with political turmoil is (wait for it) buy and hold index funds.


Plain Money ideas

Luxury for less?

UntitledThere’s a paid ad in my Facebook feed from the New Yorker ( on “How to Live Luxuriously Right Now.” Here’s a sample: The New Yorker recommends used “Vintage Timepieces” like a classic Omega 3177 watch from the 1970s for only $4,695.

Right, that’s $4,695 as in almost $5,000. Notice that for this price, you don’t get better time-keeping than with say, a $90 Casio Wave Ceptor watch (my personal favorite). The Casio syncs with the mother clock once a day. Mine has never been more than two seconds off.

So what do you get for $4,695? A piece of jewelry, mostly. I do not know how to recognize such a fine watch, but I’m sure there are people who do, and who care, and who are impressed by someone who wears such a watch.

[I would not, as we say out here far from New York, “trade you even,”  that Omega for my Casio — because then I’d have to worry about losing or damaging the thing. And nobody’s going to mug me for my Casio watch. I actually like the Casio’s dial better, too.]

If you want to spend almost $5,000 on a watch like that, fine. But don’t pretend there’s any thrift involved. And if you have friends who will be impressed by your show of wealth — uh, what kind of people are you hanging out with? [Don’t get mad; I’m just asking.]

Plain Money ideas

Good debate, same outcome

Here are two really smart people talking about asset markets — are they rational and efficient? In either case, individual investors are better off to buy and hold index funds. I’ll post the video below:

or you can read the transcript here.

Plain Money ideas

Prepaid phone plans are still the best

. . . and here are the details.

Plain Money ideas

Pale, male and stale?

UntitledOver at, a writer has discovered that investment advisers are largely white males, with little diversity. I’m not surprised — but what should a woman or person of color do in response? First, recognize that there are thousands of investment advisers out there who are totally welcoming and affirming to their diverse client base.

But beyond that, if you don’t feel respected by the investment advisers you audition, consider this: Educate yourself, and buy and hold index funds. You’ll discover that you don’t need an investment adviser at all to get a good start on building lifetime wealth. If you follow simple passive strategies, before too many years go by, you’ll have enough money that the investment advisers will treat you with great deference. (Money talks in that business.) And it’s only then that you’ll need the tax advice and compliance help that investment advisers can provide.

But as to getting stock picks that will beat the market from an investment adviser? Forget it! The “advantage” of being comfortable with a stock-picking adviser will vanish in costs that make those picks almost certainly worse than buying and holding index funds. Whether you’re white, black, red or even purple, you can leave those  “pale, male and stale” advisers with their stock picks in the dust. Trust me, the best index funds don’t know or care about your race or gender. They just keep providing superior long-term returns.

Plain Money ideas

What’s next? (asks an investment firm)

Here’s an investment firm’s commercial — I have highlighted the key part:

Why do people invest?
They invest for what’s next.
That could be a college dream, a new priority, an active retirement.
Whatever next is, it takes smart investments managed by experts who actively spot risks and opportunities.
[Name of firm] has been doing that for over 65 years, helping millions of investors achieve what’s next.

For a minute, consider what I recommend — the opposite of that firm’s alleged strategy:

  • Smart investments? No, I recommend stupid investments, just index funds that hold  essentially every stock.
  • Managed by experts? No, I recommend funds that instead aren’t managed at all, since they hold everything and only do minor adjustments to stay in balance.
  •  Who actively spot risks and opportunities? No, I recommend not even trying to spot opportunities, neither trying to sell bad stocks on the way down or to buy into promising stocks on the way up.

And the result: My recommended stupid passive management strategy brought a ten-year return of 8.10 percent (in my favorite total stock market index fund). Go over to that other firm’s site — the one with the active experts — and you’ll see: They found it hard to beat a stupid passive strategy. But don’t be too hard on that firm. Its competitors fell short of the indexes more than half of the time, too.

The bottom line? Buy and hold index funds.

Plain Money ideas

Flash crash immunity

The Washington Post repeats a common theme: that small investors were the hardest hit in a stock market selloff.  The story has an appealing logic. When there is a big market move and small investors are trying to get their trades executed, they may well get locked out by the fat cats who dominate trading on Wall Street.

Here’s how the Post describes the problem:

Popular trading platforms run by TD Ameritrade, Scottrade and others ran slow or not at all as panic grabbed hold. It took just six minutes for the Dow Jones industrial average to suffer its biggest drop in history. And these investors could only watch.

What the Post misses is that smart small investors were not hurt at all. Why? Because smart small investors assume in advance that they cannot play the game of timing the market or beating the market. Instead, they buy and hold index funds.  That’s a hard strategy to beat over the long haul.

Dumb small investors were undoubtedly hurt. They were trying to pull their money out after widespread predictions that Monday would be a bad day on Wall Street — and they just couldn’t sell because the system was jammed. However, had they succeeded in selling on that Monday, for most of the day they’d have gotten a far worse deal than if they had waited until later in the week.

So: Get your budget in order as I describe in my book, only invest money in the stock market that you can afford to keep invested, and don’t worry about flash crashes.

Plain Money ideas

Easy money exploiting the index funds?

You’ll occasionally see articles like this one claiming that it’s relatively easy to exploit index funds with the following strategy:

  1. Figure out which stocks will be added to a widely tracked index, such as the Standard & Poors 500.
  2. Buy them before they are added.
  3. And then sell them when they’re added to the index, at a time when index funds are required to add them also, pushing their prices up.

So, does that mean “buy and hold index funds” is a bad strategy? Hardly. The index funds know about this (surprise!) and so they begin building their holdings of likely index additions well in advance. The loss to index fund investors is minimal, leaving index fund returns still well above the averages and the alternatives.

In that same article you’ll notice the recommendation of two analysts to buy total market index funds to get around the problem:

Petajisto and Morningstar’s Rawson also suggest passive funds that buy the entire market can minimize the damage of front-running. By owning almost every stock, there’s barely anything for arbitragers to buy first.

The fund they cite is the exact one I recommend, the Vanguard Total Stock Market Index fund. The conclusion — you’re not surprised, are you? — is: Buy and hold index funds.

Plain Money ideas

Brilliant vacation home strategy

Several times when I was growing up, my family visited others’ vacation homes — Uncle Claude’s beachfront house at Gulf Shores, a business friend’s cabin on the Savannah River, Jim and Mary Louise’s place on Lake Martin. I thought how neat it would be to have a vacation home when I grew up.

Later in life, I came to a different perspective as some of my wealthier friends began to buy vacation homes. They were always worrying about something. Did that last storm damage the lake house? Or, by the fireside at home in December: Did we remember to drain the plumbing, or are the pipes freezing even now, setting off a disaster? When vacation time came, there was only one place they could go — because they had so much money in it.

Being an economist, I started to reflect: What did I like so much about vacation homes? My short list of answers: the casual interiors, the open floor plans, the use of natural finishes and the wood stoves and fireplaces.

Then is when it hit me: I have a vacation home. Our (only) home has everything I would want in a vacation home (such as those natural wood finishes and wood stove). This all came about through various decorating and interior decisions over the years. We get to live causally at our place year round. We don’t have to worry about the maintenance or cost of another home. When we go on vacation, we usually go for a lakeside cabin rental. When our vacation ends, we pack up and go, happily leave the off-season maintenance to others. And then we return to our year-round vacation home. How’s that for a brilliant vacation home strategy?