A Rich Life

The Old Ideas on Saving & Investing Don't Work -- Here's What Does

Podcast #115 — Internet Censorship Is An Investment Topic

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I’ve posted Podcast #115 to the “RobCasts” section of the site. It’s called Internet Censorship Is An Investment Topic.

Stock markets, like people, get on the wrong track from time to time. There are of course lots of things that lots of us can do to help get them back on track. When we censor discussion of the factors sending the market off track, we hinder efforts at fixing problems before they get out of hand. It’s human to want to ignore bad stuff we see going on around us. It’s usually a bad idea to give in to that human impulse.

The Bankers Did Not Do This To Us!

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I recently wrote a Guest Blog Entry for the  Weakonomics blog entitled The Bankers Did Not Do This to Us!

Juicy Excerpt: Did they stick all the money in suitcases and catch a plane to another time zone?

Some good comments.

Juicy Excerpt: I’m getting more and more tired of people shoving blame back and forth. I frankly, could care less whose fault it is. I’d rather spend time trying to find the best solution possible.

Podcast #113 — “We May Be On the Brink of the Greatest Explosion of Intellectual Capital…”

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I’ve posted Podcast #113 to the “RobCasts” section of the site. It’s called “We May Be On the Brink of the Greatest Explosion of Intellectual Capital That the World Has Ever Seen.”

We are going through growing pains. We are trying to rise to higher levels of knowledge and freedom and wealth. We are being held back by our attachment to failed ideas of the past. The ultimate purpose of the economic crisis is to persuade us to let go of the loser ideas and to permit lots of good stuff to come flooding in.

Podcast #112 — All Who Purchased Overpriced Stocks Caused the Stock Crash

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I’ve posted Podcast #112 to the “RobCasts” section of the site. It’s called If Government Regulation of the Finance Sector Were What It Would Need to Be to Stop Stock Crashes, Anyone Who Bought One Share of Stock from 1995 Through 2008 Would Be in Jail.

The government cannot regulate us if we cannot regulate ourselves. We need to look within and deal with the dark human impulses that caused us to do what it took to bring on the stock crash.

“One of the Neater Concepts [on] the Effect of Relative Stock Valuations Upon a Retiree’s SWR”

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The Political Calculations blog recently posted a review of The Retirement Risk Evaluator.

Juicy Excerpt: One of the neater concepts we’ve been intrigued by that addresses the effect of relative stock valuations upon a retiree’s safe withdrawal rate is a tool developed by Rob Bennett and John Walter Russell…. we see that a retiree’s safe withdrawal rate drops significantly at times when stocks have relatively high valuations, and increases significantly at times when valuations are low.

Podcast #111 — You’ve Concluded That the Stock Market Is Corrupt: Should You Get Out?

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I’ve posted Podcast #111 to the “RobCasts” section of the site. It’s called You’ve Concluded that the Stock Market Is Corrupt — Should You Get Out?

The market is comprised of people, some good, some bad. Each time one of the good ones gets out, it makes things worse, not better. I think we need to fix the market, not abandon it.

“I Was Hooked on [Passive] Indexing, But Something Inside Made Me Wonder…”

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I recently received an e-mail from Coleen saying:

“I have recently begun researching/learning about investing.  I was hooked on the idea of index investing, but something inside me made me wonder…”too good to be true?” and  “What’s the downside?”.  I happened onto your site and “Value-Informed Indexing” seems to make sense.  Here’s my question..I was looking into 3 index funds from Vanguard (an international, a total stock market and a bond index fund) and I’m wondering if “Value-Informed Indexing” could be applied within these 3?  Basically investing heavily in the international and total stock market funds now and when they go up to  transfer a percentage over to the bond fund?  Am I understanding or would I need to be in something other than the bond index funds?  Also, I was wondering how you are doing today and if you have posted since the market turned in the past few months?”

Set forth below is the text of my response:

Colleen:

Thanks for visiting the site and thanks for writing.

For my thoughts on the market crash, please click on the “A Rich Life” button at the left side of each page of the site. That’s where my blog is located. I’ve been posting every business day. My focus in recent months has been on recording podcasts. So you could also click on the “Robcasts” section and just listen to whatever titles seem of interest. I’ve commented extensively on the price crash in the first 50 podcasts.

I believe that what you are asking is — what should I be invested in as the alternative to stocks at times when stock prices are too high? The conventional recommendation is to go with bonds as the alternative to stocks. My preference is for Treasury Inflation-Protected Securities (TIPS) purchased at times when they are providing a solid long-term return. But I see this as being a judgment call. A case can be made for bonds in some circumstances. To work through the points pro and con TIPS or bonds would take an entire article (I’ll put that on my list for the future).

The analysis is — which option best counters stocks? I like TIPS better because what I am trying to counter is the unpredictability of stocks (TIPS are the most predictable asset class I can think of). However, I haven’t worked this particular question hard enough to have a strong opinion. I tentatively prefer TIPS as my stock counter. But I can see circumstances in which bonds might make sense. It might also be possible to use both as counters.

You’ve asked an interesting question that we have not explored in much depth. You might want to direct your question to John Walter Russell as well. John is my partner in development of the calculators. His site is www.Early-Retirement-Planning-Insights.com. He has a Letters to the Editor section. I know he would be glad to take on your question and I would like to hear what he says about it. My guess is that he might have a better informed take on this particular question tham I am able to offer. You’d be helping other community members by asking him about it as I am sure that there are others who are also wondering about this.

Welcome to the Financial Freedom Community!

Rob

Note: I subsequently recorded Podcast #79, What Should You Be Investing In When You Aren’t Investing in Stocks?