Investing Archives

02May 2021 by Martin@FIgoals.com No Comments

A High-Yield Portfolio’s Worst Nightmare

Income, Investing

The ultimate 'Sequence of Return' stress test to start your retirement. How did a high-yield, high-distribution retirement portfolio hold up during the pandemic, market meltdown, and economic shutdown of 2020? Despite naysayers saying a 7% withdrawal rate will never succeed, it just did during the ultimate stress-test. A year ago, I wrote an article titled “EARLY RETIREMENT: YOU CAN RETIRE 31% EARLIER”. I then showed the math on how a 7% withdrawal rate would allow you to reach your financial independence number 31% faster than a typical 4% withdrawal rate. It was a shot across the bow of all the people claiming you had to withdraw less than 4% to be safe during a prolonged retirement. My argument: the source of the distributions is a major factor and they had left it…

08Nov 2020 by Martin@FIgoals.com

Inflation Will Crush Your Financial Plan

Income, Investing

How does inflation affect your financial plan? Inflation is something that's easy to understand but your financial plan could fall apart before you realize if you don't account for it. Don't let inflation crush you! Have you ever heard of the term purchasing power? It means you can buy the same basket of goods year after year even though inflation makes those goods more expensive over time. Your investment portfolio value must increase by the same amount as inflation to maintain your purchasing power. If you withdraw 5% each year and inflation is 2%, your portfolio should be returning around 7% each year to maintain your purchasing power. Let’s take a look at Frank. He put together a financial plan and is looking to retire early. He expects a 4% withdrawal rate…

22Oct 2020 by Martin@FIgoals.com

Closed-End Funds – The Ultimate Guide

Income, Investing, Top Posts

Closed-end funds can give your retirement income a boost through managed distributions in an environment where the fund managers can stick to long-term strategies. This ultimate guide to closed-end funds provides all of the knowledge and resources needed to start investing in CEFs. Article Outline: How closed-end funds differ from mutual funds and ETFsUnique attributes of closed-end fundsWhat is included in fund distributionsA deeper dive into return of capitalRules for buying closed-end fundsThe risks associated with closed-end funds Your introduction to closed-end funds Closed-end funds are the lesser-known cousins of the mutual funds you know and love. You see, there are two different categories of mutual funds: open-end funds and closed-end funds. Open-end funds are the typical mutual fund you are familiar with in your 401k. Closed-end funds are a tiny portion of the…

14Jun 2020 by Martin@FIgoals.com No Comments

ETF or Mutual Fund – Which is Better?

Investing

Most people are familiar with mutual funds because they’ve been around longer and are available in everyone’s 401K’s. Exchange Traded Funds (ETFs) are similar to mutual funds but have powerful advantages. Mutual funds and ETFs They both invest in an underlying group of securities that offer easy diversification. You only need to own a few funds for complete diversification because each fund owns dozens, or even hundreds, of individual holdings. They can be broad-based like a total stock index or specialized, only focusing on biotech, small cap growth, or even a specific country. All in all, mutual funds and ETFs serve the same purpose in your investment strategy. So why would you choose one over the other? ETFs have some advantages your average investor either takes for granted or doesn’t know about. An obvious…

26May 2020 by Martin@FIgoals.com No Comments

Target-Date Funds Aren’t Smart, They’re Lazy

Investing

Target-date funds may seem like a smart way to invest without having to think about it again but there are some serious drawbacks you should consider. Do you know of any good results that come from being lazy? I can’t really think of a single one. Hard work will yield some results. Working smart will yield even better results. But being lazy has never led to results you can be proud of. So why do advisors and financial “gurus” keep recommending target-date funds? They’re sub-optimal, and it’s very easy to get much better results. Do they really think that the average person trying to save is so stupid that they can’t pick three funds rather than one? A three-fund portfolio (link), while still not optimal, is far better. Target-date fund fees are all over the place. Why…

10May 2020 by Martin@FIgoals.com No Comments

“Sell in May and Go Away”? May-be not.

Investing

"Sell in May and go away" is an often repeated saying that most people assume has some truth to it. After diving deeper into the theory, it might be a dangerous saying for people to follow. Is this the path to alpha? I received a call the other day from a client that caught me off-guard and made me laugh. Amidst the current corona-virus climate, the vast majority of calls have been people panicking and needing to be talked some sense into, and those seeing a huge buying opportunity and tempering those looking to go 100% equity. This call was different, though. The client asked if he should sell everything now and get back in after the summer. "Sell in May and go away". I laughed. And then I realized he was serious. I explained to…

03May 2020 by Martin@FIgoals.com No Comments

Stock Investing Made Easy

Investing, Money Mindset

Remember that investing is taking ownership in a company. Let that drive your long-term strategy. Every investor has a strategy. In general terms, you could be a ‘growth’ or ‘value’ investor. You could read a book by Joel Greenblatt and swear by his analysis and logic. Your neighbor over the hedge can probably tell you some secret formula for picking amazing stocks. You might not even think you have a strategy; in that case, your strategy is to randomly pick your investments. Remember this one thing no matter what your strategy is - owning stock in a company is owning a tiny portion of that company. A lot of people lose sight of this since they focus on stock prices, momentum, technicals, fundamentals, ratios divided by other ratios, if the wind blows from the west…

02Apr 2020 by Martin@FIgoals.com No Comments

What are Dividends in Stocks?

Investing

Dividends are one way a company rewards its shareholders. They can also be the basis for powerful investment strategies. You see a lot of talk on this site about dividends. Well, what are dividends? I take it for granted that everyone knows the ins and outs of what dividends are. So let’s zero in on this fundamental concept of investing. It’s something I focus on a lot in my investing and want you to share the same depth of knowledge and love for dividends! What is a dividend? In its simplest form, dividends are how corporations share their profits with the owners of the company. That’s right - if you own a share of stock, you a part-owner of that company. It might not feel like it since you’re not making day-to-day decisions for the…

04Mar 2020 by Martin@FIgoals.com No Comments

The 4% Safe Withdrawal Rate Is Safer Than You Think

Income, Investing

Knowing the sources of your income makes a big difference in safe withdrawal rates. What's the 4% safe withdrawal rate rule? Various economists and financial analysts have studied what would be a safe withdrawal rate in retirement based on past data. They would look at the returns of stocks and bonds for each year from 1926 to 1994 (or whatever time period they had access to). They would plug in different return rates over a thirty-year time period (a typical retirement). The results showed there was no period that would deplete the portfolio with a 4% withdrawal rate. It became a very easy rule of thumb to go by. You could then calculate your retirement needs something like this: I need $40,000 a year to live on so I need…

04Mar 2020 by Martin@FIgoals.com No Comments

The Ideal Account Type For Each Investment

Income, Investing, Top Posts

Some investments are better in certain accounts because of different tax structures. Here's how to align those tax structures to minimize taxes. To maximize your financial independence goals, you need to increase income, minimize expenses, maximize investment gains, and minimize the taxes paid on those gains. This article will tackle that last item. I group different account types together based on their tax structure. With that mindset, we have: What types of accounts are there? What does each account type mean and when should you use each account type? Health Savings Accounts are one-of-a-kind and should be maxed out if a high deductible health insurance plan fits into your family’s needs. It is the only account type where it's possible to not pay any taxes on the money. Ever! The Roth IRA category includes Roth…