The Little Book of Main Street Money -- A Gem

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The Little Book of Main Street Money -- A Gem

Postby Taylor Larimore » Sat Feb 18, 2012 11:05 pm

Hi Bogleheads:
Jonathan Clements was the award winning financial columnist at The Wall Street Journal where he wrote over 1,000 columns helping Journal readers become better investors. He is now Director of Financial Guidance at Citicorp.

Quotes from Bill Bernstein’s Forward:
“When you invest you are squarely in Pascal’s Wager territory. You could be wrong.”

“Reaching for higher returns has sent many an investor to the poorhouse.”

“Remember, the name of the game isn’t to get rich; it’s to not become poor.”

Quotes from Jonathan Clements:
“Money is a means to an end. It isn’t an end in itself.”

“Let’s stop worrying about the things we can’t control and focus on the things we can.”

“Simpler is usually better, because it will often involve lower costs and less chance for foolishness.”

“Social Security, in its current form, is like owning a big inflation-indexed bond, delivering a stream of income that rises along with inflation.”

“You don’t have to own a big house and you don’t have to pay for the kids’ college, but one day you will have to retire.”

“If you don’t start saving for retirement by your thirties, it can be awfully tough to amass enough by age 65.”

“We often find ourselves running on the hedonic treadmill, desperately pursuing happiness, but never making much progress.”

“Research suggests that commuting is terrible for happiness, often ranking as the worst part of our day.”

“Volunteering isn’t just good for community. It also makes us feel good.”

“Looking for a good way to spend your money and your time? Try spending it with friends and family.”

“Give me a choice between some savvy investors and some diligent savers, and I’d bet on the savers every time.”

“Carrying a credit card balance, and paying the often onerous financing charges, ranks as one of the most foolish financial mistakes.”

“We are better off forgetting the budget and instead simply socking away money as soon as we get our paycheck.”

“The best day to start is today.”

“If we can get through those discouraging initial years and accumulate a modest portfolio, the rewards can be immense.”

“If you’re aiming to amass $1 million by age 65, you would need to sock away a hefty $2,423 a month if you start saving at age 45. But if you begin at age 25, the required monthly sum drops by roughly three quarters, to just $653 (assuming a 5% annual return).”

“Start with this brutal truth: No investment is free of all risk.”

“Unfathomable things happen in the financial markets with surprising frequency.”

“You can’t be sure how the various markets will perform—but you can control how much risk you take.”

“If investments offer high returns, they must involve high risk.”

“Be leery of alternatives, stick with the simplicity of plain-vanilla, low cost mutual funds.”

“Mentally divide your portfolio into growth money and safe money. Expect a rough ride from the former and comfort from the latter.”

“The basic asset-allocation decision—how we divide our money between stocks, bonds, and cash investments, and hard assets—is one of the most crucial financial choices we make.”

“Nobody should be all stocks.”

“You probably shouldn’t invest in the stock market unless you have a minimum of seven or eight years to invest.”

“It’s easy to be big and brave during rip-roaring bull markets. It is a lot harder during those relentless bear market declines.”

“You probably shouldn’t invest a high percentage of your money in stocks until you’ve lived through a 20 percent-plus stock market decline.”

“Why rebalance? It’s about controlling risk.”

“Every year or so, look to rebalance by bringing your stocks, bonds, hard assets, and cash investments back into line with your target percentages.”

“Expect world economies to continue growing? With any luck, stocks will go along for the ride.”

“While tumbling share prices typically cause investors to turn cautious, the rational response is to become more optimistic.”

“Rising interest rates can hurt your bond portfolio’s value in the short term, while simultaneously raising its expected long-run return.”

“Getting it (wealth) is one thing. Keeping it is another.”

“Many people pay precious little attention to investment costs and taxes. This partly reflects investors’ single-minded focus on performance.”

“Picking winners isn’t easy. Most fund managers don’t perform well enough to recoup the fees they charge.”

“Over a five-year stretch, each bond and money fund category’s top performers are almost always the funds with the lowest annual expenses.”

“Aiming for average is the only sure way to win. – If we try to beat the stock market, we also run the risk of lagging behind.”

“The more we spend trying to beat the market, the tougher it is to succeed.”

“Unlike investors who try to beat the market, index fund investors enjoy what’s called relative certainty.”

“Whenever you’re tempted to speculate on individual stocks, think about the folks on the other side of the trade and whether you really know more than they do.”

“A globally diversified portfolio often provides scant comfort during major market meltdowns, when all assets tend to sink simultaneously.”

“Any strategy that involves predicting returns, especially short-term returns, is likely to be a dud.”

“If you lose 50%, to make yourself whole, you need 100%."

“Unless you are in poor health when you retire, you should probably err on the side of caution and plan for a retirement that extends to age 90 and maybe beyond.”

“Forget the traditional approach favored by retirees, which is to buy bonds and live off the income.”

“If you want to lock up additional lifetime income, look into immediate fixed annuities.”

“Investing is simple, and yet it sure isn’t easy.”

“Sensible money management is pretty straightforward: We need to save regularly, control risk, buy a few funds, hold down costs, and keep half an eye on taxes.”

“If an investment is highly popular, there is a good chance it is overpriced.”

“If you agonize over each investment you own, consider mutual funds that provide one-stop investment shopping (target/life -cycle) funds.

“Be sure to buy a house that is the right size for you and your family—and no larger.”

“Sometimes paying down debt is the best investment we can make.”

“Ignore the naysayers and make the most of 401(k) and other retirement accounts.”

“How can you postpone paying taxes? First, you could fund tax-deferred retirement accounts. – Second, you can hold off selling the winning investments you own in your taxable account.”

“You want diversified, tax-efficient, low-cost funds whose fortunes don’t hinge on the success of one or two fund managers. That, of course, is pretty much the definition of an index fund.”

“Forget the extended warranty that the salesperson tries to get you to buy, right after he or she has told you how wonderful the product is.”

“If you don’t have financial dependents, you probably don’t need life insurance.”

“If you never updated the beneficiaries on your life insurance (and IRA), and it still lists your ex-husband, there’s a good chance he’ll get the last laugh.”

“Make sure your financial affairs are well organized and talk to your family about what they can expect from your estate.”

“According the U.S. Department of Agriculture, it cost more than $200,000 for a middle-income family to raise a child through to his eighteenth birthday. Parents then have college costs on top of that.”

“The richest family in the neighborhood may live in the smallest house with the oldest cars.”

“Neither spendthrifts nor misers deserve our admiration.”

“Look after your health, so you last almost as long as your savings.”

“If we’re thoughtful about how we manage our money, we could grow wealthy over time—and maybe more important, we’ll have some financial peace of mind along the way.”

Thank you Jonathan Clements!

More Investment Gems

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle
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Re: The Little Book of Main Street Money -- A Gem

Postby norookie » Sat Feb 18, 2012 11:41 pm

Thanks TL, :D Not imitating any showman, all hear is buy, buy, buy, it's going higher. I'd rather chance the trough. .0r have a ips. 8-)
" Wealth usually leads to excess " Cicero 55 b.c
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Re: The Little Book of Main Street Money -- A Gem

Postby staythecourse » Sat Feb 18, 2012 11:55 pm

Thanks Taylor.

I've always been a big fan of his. I would recommend his books to anyone. Have always loved this one that you reviewed. Simple, sweet, and to the point.

Good luck.
...we all think we're above average investors just like we all think we're above average dressers... -Jack Bogle
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Re: The Little Book of Main Street Money -- A Gem

Postby M B » Sun Feb 19, 2012 4:33 am

Jonathan Clements wrote:Mentally divide your portfolio into growth money and safe money. Expect a rough ride from the former and comfort from the latter.
I would advise the opposite: a portfolio is a whole, the asset allocation is to be chosen for overall risk and overall expected return.

Jonathan Clements wrote:You probably shouldn’t invest in the stock market unless you have a minimum of seven or eight years to invest.
You can have some allocation to stocks over shorter periods. A majority in stocks requires about 15-20 years (historically it took 15 years for the S&P 500 to have a 95% probability to make money in real terms). How long depends on how much. One-length-fits-all is absurd.
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Re: The Little Book of Main Street Money -- A Gem

Postby Fallible » Sun Feb 19, 2012 9:22 pm

Thanks, Taylor and I'm glad you included Bill Bernstein's gems from his Foreword. I went back and reread it and had forgotten that he referred to Jonathan as "one of the best listeners in the business" because he, "more than almost all of his colleagues, has learned from the experiences of his readers" (italics mine). I wonder if that's why Jonathan often felt like a wise friend, or just one of us ordinary investors, albeit a far more knowledgeable one.
“Knowing yourself is the beginning of all wisdom.” ~Aristotle
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