Monday Night Finance- Volume 112

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Why Stocks Are the Greatest Asset Class

What does your investment portfolio look like? Do you own all stocks, or do you own real estate and other assets as well? Have you looked closely at all of the different asset classes, or do you mostly just invest in what you’re most comfortable with or invest in what people you trust invest in? If so, you might run into a blind spot– for example, while some people are convinced that being a landlord is the only way to build wealth, others have lost significant amounts of money investing in real estate. Understanding the intricacies of different asset classes and the hidden costs involved can dramatically affect your investment returns. If you want to know why stocks could be the superior option for your portfolio, this article provides valuable insights.

My reasoning for liking stocks over other asset classes has evolved. The issue has nothing to do with what stocks get you, but what they don’t get you. What I’m talking about is high fees and predatory investment practices. Unlike other asset classes where high fees and lack of transparency are the norm, this is far less common when it comes to buying stocks.

~Nick Maggiulli, Of Dollars and Data

In “Why Stocks Are the Greatest Asset Class,” Nick Maggiulli argues that stocks, particularly through index funds and ETFs, offer unparalleled benefits compared to other asset classes. With a practical and evidence-based tone, Maggiulli highlights the impact of low fees and transparency in stock investments, thanks in large part to Jack Bogle’s influence on the industry. He explains how lower fees lead to higher net returns and how the stability of fixed interest rates and manageable debt levels can be advantageous. Maggiulli also discusses the inherent risks and volatility of stocks, but emphasizes that their liquidity and price discovery make them more reliable in the long term (for example contrast the liquidity of an index fund and a single family house). By focusing on these elements, the article makes a compelling case for why stocks should comprise the majority of your investment portfolio.

Many Unhappy Returns

Have you ever felt overwhelmed by the complexities of filing your taxes? For many, tax season brings a mix of confusion and anxiety, especially when faced with unexpected issues or changes in financial circumstances. Understanding the nuances of tax preparation and navigating through the intricacies can make a significant difference in achieving the best outcomes. If you’re reading this article, you’re probably a lot better off than many of your peers when it comes to tax season. To put things in perspective, you may want to hear stories from someone who volunteered at a free tax help clinic.

The second client was a woman in her mid-60s, never married and who was planning to retire in 2024. She had a good job and a sizable 403(b) balance. She asked how to prepare for next year’s taxes, given that her work would end and her pension would start in July. It became apparent that she didn’t understand her options for delaying Social Security, and the risks and benefits of doing so.

~Howard Rohleder, Humble Dollar

In “Many Unhappy Returns,” Howard Rohleder shares his experiences as a volunteer for the AARP’s Tax-Aide program, highlighting the challenges and surprises encountered while assisting clients with their taxes. With a reflective and empathetic tone, Rohleder recounts stories of individuals struggling with financial complexities, such as a widow with extensive capital losses and a retiree unsure of how to manage her pension and Social Security. Through these narratives, Rohleder illustrates the importance of understanding one’s finances, the potential pitfalls of relying on financial advisors without adequate knowledge, and the critical role of education in financial decision-making. This article underscores the need for better financial literacy and offers valuable lessons for anyone navigating the tax system.

Good Debt Vs Bad Debt: Learn How To Borrow Money Wisely

When it comes to managing your finances, not all debt is created equal. While many people view debt as something to avoid at all costs (hello, Dave Ramsey), the reality is that certain types of debt can actually work in your favor. Distinguishing between good debt and bad debt is crucial for building a healthy financial future. If you’re interested in learning how to leverage debt to your advantage and avoid common pitfalls, this article provides the insights you need.

Good debt can be a powerful tool that helps you build wealth and achieve your financial goals, while bad debt can act as a drain, pulling you further away from your dreams. But it’s not so cut and dry. In some cases, good debt can turn bad and bad debt into good.

~Jon Dulin, Money Smart Guides

In “Good Debt Vs Bad Debt: Learn How To Borrow Money Wisely,” Jon Dulin explores the nuanced differences between beneficial and detrimental types of debt. With a practical and informative tone, Dulin explains how good debt, such as mortgages, student loans, and business loans, can help build wealth and enhance earning potential. He contrasts this with bad debt, like high-interest credit cards and payday loans, which can lead to financial strain. The article offers strategies for effective debt management, including paying down high-interest debts first and using strategic borrowing to improve financial health. By understanding these principles, readers can make informed decisions about borrowing and set themselves up for long-term success.