One of the core tenets of the Boglehead philosophy is to minimize fees whenever possible. That sounds reasonable enough on the surface, but here I'll explain why it's not so simple and why fees aren't as big of a deal as they're made out to be. Fees Are Relative If you've read any of my stuff on factor investing or specific small cap value funds, for example, … [Read more...] about Fees, Trees, & Forests – Stop Obsessing Over Expense Ratios
Investing 101
Employee Stock Purchase Plan (ESPP) Explained – Should You Buy?
An Employee Stock Purchase Plan (ESPP) is a program by which employees can purchase their employer's stock at a discount, but there are a lot of nuances to consider. Here I review the pros, cons, and some lesser known risks and strategies of ESPP's. What Is an Employee Stock Purchase Plan? As the name suggests, an Employee Stock Purchase Plan - or ESPP for short … [Read more...] about Employee Stock Purchase Plan (ESPP) Explained – Should You Buy?
Rule of 72 Explained – How It Works, How To Use, & Examples
The Rule of 72 in finance refers to a mathematical formula to illustrate compounding. Here we'll explore what it is, how it works, how to use it, and examples. What Is the Rule of 72? The Rule of 72 is simply a mathematical formula to estimate the number of years for an investment to double based on its rate of return. For a fixed income security like a … [Read more...] about Rule of 72 Explained – How It Works, How To Use, & Examples
Backdoor Roth IRA Explained – What, Where, Why, & How (2023)
A backdoor Roth IRA is a way for high income earners to indirectly contribute to a Roth IRA who would otherwise be ineligible. Here we'll look at what it is and where, why, and how to open one. What Is a Backdoor Roth IRA? A backdoor Roth IRA is a way for high income earners to still be able to contribute to the account from which they'd otherwise be ineligible … [Read more...] about Backdoor Roth IRA Explained – What, Where, Why, & How (2023)
Portfolio Rebalancing Explained – What, When, Why, and How
Portfolio rebalancing refers to adjusting the allocations of different assets to maintain a desired risk profile. Here we'll look at what rebalancing is and when, why, and how to do it. What Is Portfolio Rebalancing? Portfolio rebalancing refers to bringing the assets in one's portfolio back to the target asset allocation, which refers to the specific ratio … [Read more...] about Portfolio Rebalancing Explained – What, When, Why, and How
Can Teenagers Open a Roth IRA? Here’s Why They Should
Yes, teenagers can open a Roth IRA. In this post we'll explore how and why investing in a Roth IRA can be extremely powerful for kids. What Is a Roth IRA? First let's do a brief recap of what exactly a Roth IRA is. A Roth IRA is simply a retirement savings vehicle that was established in 1997 to help U.S. citizens save for retirement. It is an individual … [Read more...] about Can Teenagers Open a Roth IRA? Here’s Why They Should
Traditional IRA Explained – What, Who, When, Where, & How (2023)
The Traditional IRA explained. This is a guide for the U.S. tax-deferred individual retirement account. Here we'll explore what a Traditional IRA is, who they're for, when to contribute, and where, why, and how to open one. What Is a Traditional IRA? A Traditional IRA is simply a U.S. retirement savings vehicle by which investors contribute pre-tax income, that … [Read more...] about Traditional IRA Explained – What, Who, When, Where, & How (2023)
Roth IRA Explained – What, Who, When, Where, Why, & How (2023)
The Roth IRA explained. This post is a guide for the U.S. tax-exempt individual retirement account. In it we'll explore what a Roth IRA is, who they're for, when to contribute, and where, why, and how to open one. What Is a Roth IRA? A Roth IRA is simply a U.S. retirement savings vehicle by which investors contribute after-tax money, that money grows tax-free, … [Read more...] about Roth IRA Explained – What, Who, When, Where, Why, & How (2023)
401k vs. Roth IRA – Which Is Better for You?
A 401k and a Roth IRA are two very different types of retirement accounts for U.S. investors. Is one better than the other? Let's dive in. 401k and Roth IRA Similarities First we'll briefly go over the few similarities between a 401k and a Roth IRA. They don't have much in common. 401k and Roth IRA Differences The bulk of the discussion about a … [Read more...] about 401k vs. Roth IRA – Which Is Better for You?
Roth IRA vs. Traditional IRA – Which Is Better for You? (2023)
Roth IRAs and Traditional IRAs are two types of retirement accounts for U.S. investors. Is one better than the other? Let's dive in. Roth IRA and Traditional IRA Similarities First we'll briefly go over similarities between a Roth IRA and a Traditional IRA. Also note that you can open either or both of these types of IRA's in addition to an … [Read more...] about Roth IRA vs. Traditional IRA – Which Is Better for You? (2023)
ETFs vs. Mutual Funds – Which Is Better for You?
ETFs and mutual funds are two different types of investment products. But is one better than the other? Let's dive in. Video Prefer video? Watch it here: ETFs vs. Mutual Funds - Similarities ETF stands for Exchange Traded Fund. As the name suggests, this is simply a fund that trades on an exchange like a stock. The fund holds individual securities like … [Read more...] about ETFs vs. Mutual Funds – Which Is Better for You?
Jack Bogle Was Wrong About These 3 Things
Jack Bogle founded Vanguard and was considered the "father of index investing," but he did have a few takes on things that weren't quite right. Video Prefer video? Watch it here: Introduction - Jack Bogle Humans have a tendency to latch onto specific people and believe everything they say is true without assessing the content of each piece of … [Read more...] about Jack Bogle Was Wrong About These 3 Things
How To Write an Investment Policy Statement – Template & Example
An investment policy statement is a formal document that defines one's investing objectives and strategy. Here we'll look at how to write one, the benefits of having one, a template, and an example. Introduction - What Is an Investment Policy Statement? An investment policy statement is a document that outlines the parameters for how a portfolio will be managed … [Read more...] about How To Write an Investment Policy Statement – Template & Example
Tax Loss Harvesting To Defer Taxes – The Ultimate Guide
Tax loss harvesting may sound fancy and complicated, but I promise it's super simple, and you'll have a better understanding of it after reading this guide. Here we'll explore what tax loss harvesting is, why and how you'd want to do it, the rules, limits, and deadlines involved, examples, and how to avoid the infamous "wash sale" in your portfolio. Video Prefer … [Read more...] about Tax Loss Harvesting To Defer Taxes – The Ultimate Guide
Tail Risk – What It Is and How To Hedge Against It
Tail risk refers to the probability of an extreme outcome from a rare event. Here we'll look at what it is, how it affects portfolio construction, and hedging strategies for it. Introduction - What Is Tail Risk? Tail risk describes the likelihood of rare events at the ends of a probability distribution. Specifically, greater tail risk would suggest that the … [Read more...] about Tail Risk – What It Is and How To Hedge Against It
I Bonds Explained (US Savings Bonds) – Ultimate Guide (2023)
I bonds are low-risk, inflation-linked savings bonds from the U.S. government. Here we'll review why, when, where, and how to buy them. Update - January 2023: I bonds are now paying a composite rate of 6.89% for savings bonds issued between November 1, 2022 and April 30, 2023. I Bonds Video Prefer video? Watch it here: Introduction - Inflation and the … [Read more...] about I Bonds Explained (US Savings Bonds) – Ultimate Guide (2023)
Sharpe Ratio vs. Sortino vs. Calmar – Risk Adjusted Return
In this post I explore what risk-adjusted return is and some different ways to measure it, including Sharpe, Sortino, and Calmar ratios. Introduction - What Is Risk Adjusted Return? So we explored the concept of portfolio risk here recently. A good armchair definition of risk is the permanent loss of capital, though many erroneously conflate volatility - the … [Read more...] about Sharpe Ratio vs. Sortino vs. Calmar – Risk Adjusted Return
Portfolio Risk Explained – How To Think About Risk and Volatility
In using the term "risk," different investors and advisors mean different things. There are several different types and definitions of portfolio risk. Some are more useful than others. Here we'll explore how to think about risk and volatility when it comes to investing. Portfolio Risk Defined So I think it's important to qualify and define what exactly we're … [Read more...] about Portfolio Risk Explained – How To Think About Risk and Volatility
ETF vs. ETN vs. ETP – Differences, Similarities, Risks, Etc.
ETF. ETN. ETP. So many initialisms. Here we'll explore what these things are and what differences exist among them. Video Prefer video? Watch it here: ETF vs. ETN vs. ETP - What Do the Letters Mean? First, here's what these initialisms stand for: ETF - Exchange Traded FundETN - Exchange Traded NoteETP - Exchange Traded Product Secondly, I created … [Read more...] about ETF vs. ETN vs. ETP – Differences, Similarities, Risks, Etc.
23 Investing Biases and How To Avoid Them
Humans are inherently susceptible to irrational preferences called biases. Since investors are human, there are a number of investing biases to be aware of and try to avoid. Introduction - What Are Investing Biases? Investing biases are these irrational preferences that affect investing decisions and subsequent outcomes. They are errors in logical thinking. Not … [Read more...] about 23 Investing Biases and How To Avoid Them
