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THE BIG TAX BREAK YOU MAY BE MISSING
P. 35
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YOUR
BEST
MOVES
NOW!
BOOKS TO
HELP YOU
RETIRE RICHER
SECRETS OF
SELF-MADE
MILLIONAIRES
5 THINGS INVESTORS
GOT WRONG THIS
YEAR—AND WHAT
TO DO ABOUT IT P. 40
MAKING SENSE OF
THE TRUMP BUMP:
5 TRENDS YOU CAN
BET ON NOW P. 48
. 9 2 ) . 9 0= 3 : 3 0 9 1 )2 9 1 & ) 6
F E AT U R E S
The year is almost halfway over. How’s your portfolio doing? PAGE 38
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Stocks are down; volatility
and inflation are up. Fix
your strategy to profit.
Trying to predict the
President’s impact on
markets is risky. Here’s
what you can do now.
The market is off to a
much different start this
year than in 2017. Seven
charts explain why.
These are the funds
you’re most likely to have
in your portfolio. Check
their performance.
B Y R YA N D E R O U S S E A U
BY PAUL J. LIM
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From free accounts to flexible ATM rules, here’s where
to find the best deals. B Y K A I T L I N M U L H E R E
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The latest Fed data offers some surprises.
BY KERRI ANNE RENZULLI
J U N E /J U L Y 2 0 1 8
M O N E Y. C O M
Active Matters:
Life isn’t a passive
activity. Investing
shouldn’t be either.
Whether you’re planning on retiring in the not-too-distant future or years from now,
being actively involved matters in achieving results.
When it comes to managing our funds, we share the same active philosophy. Our investment
teams seek to navigate down markets, find opportunities, and manage risk so you can stay on track
toward reaching your retirement goals.
100% of T. Rowe Price Retirement Funds beat their 10-year Lipper average as of 3/31/18.*
Put our active investment approach to work for your retirement.
We offer IRAs, Rollover IRAs, and retirement planning.
Call our retirement specialists at
877-872-5475 or go to troweprice.com/retirement
Consider the investment objectives, risks, and charges and expenses carefully before investing. For a prospectus
or, if available, a summary prospectus containing this and other information, call us. Read it carefully.
*36 of our 39 Retirement Funds (Investor, Advisor, and R class) had a 10 -year track record as of 3/31/18 (includes
all share classes). 36 of these 36 funds beat their Lipper average for the 10 -year period. 39 of 39, 39 of 39, and 35
of 36 of the Retirement Funds outper formed their Lipper average for the 1-, 3 -, and 5 -year periods ended 3/31/18,
respectively. Calculations are based on cumulative total return. Not all funds outper formed for all periods. (Source
for data: Lipper Inc.)
Past performance cannot guarantee future results. All funds are subject to market risk, including possible loss of principal.
T. Rowe Price Investment Services, Inc., Distributor.
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Editor’s Note
Letters & Comments
The MONEY 50/50
0-:)
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Hotels are usually cheaper. But
there are exceptions.
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There are plenty of costs that
you can (and should) cut.
Here’s where to spend more.
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It’s not just about money.
Successful parents also pass
on good habits.
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C H E S T E R H I G G I N S J R . —T H E N E W YO R K T I M E S / R E D U X
Iris Apfel’s long career serves
as a model for anyone who
can’t slow down.
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Trouble with deadlines?
Easily distracted? Turn to
Leonardo da Vinci for
inspiration.
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You don’t have to spend a
fortune to make a workspace
that inspires and looks stylish.
There’s a point where your
investment gains will start to
exceed what you sock away for
retirement each year. Here’s
how to get there.
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It’s not necessarily light,
but this summer reading list is
one you can bank on.
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Health savings accounts
deliver a triple tax advantage.
But not enough retirement
investors are cashing in.
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THE MONEY TALK WITH...
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Her accountants actually
begged her to stop saving
and start spending.
BY M I K E AY E R S
Cover illustration by
SERGI DELGADO
MONEY (ISSN 0149-4953) is published monthly (except combined issues in January/February and June/July) by Time Inc., a wholly owned subsidiary of Meredith Corporation. PRINCIPAL OFFICE: 225 Liberty Street, New York, N.Y. 10281-1008.
Periodicals postage paid at New York, N.Y. and additional mailing oices. POSTMASTER: Send all UAA to CFS. (See DMM 507.1.5.2). NON-POSTAL AND MILITARY FACILITIES: Send address corrections to MONEY Magazine, P.O. Box 62120, Tampa, FL
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Reproduction in whole or in part without written permission is prohibited. MONEY is a registered trademark of Time Inc. U.S. subscriptions: $15 for one year. BACK ISSUES: Back issues are available for $5.95 for the current year and $6.95 for prior
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Reprints reproduced by others are not authorized. SUBSCRIBERS: If the Postal Service alerts us that your magazine is undeliverable, we have no further obligation unless we receive a corrected address within two years. Your bank may
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J U N E /J U L Y 2 0 1 8
M O N E Y. C O M
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M O N E Y. C O M
J U N E /J U L Y 2 0 1 8
so-called Trump Bump showing signs of wear
(page 48), we knew this Midyear Investor’s Guide
would be a crucial check-in amid a swirl of uncertainty. That’s why it takes up 22 pages, up from just
five in 2017, when the market was still following
a smooth path upward.
But there’s another reason we decided to go big
this year: You asked for it! Reader surveys show
that our January/February Investor’s Guide was
one of your favorite issues of the past year, because
it was packed with useful investing advice. (“I felt it
was too much to absorb in one or two sittings,” one
reader wrote in a rare complaint—which of course
we took as a compliment.) And when senior writer
Elizabeth O’Brien recently asked subscribers of her
Retire With Money newsletter what kind of stories
they’d like to see, the answer was resounding: more
investing, please. You can sign up for Elizabeth’s
twice-weekly newsletter at money.com/newsletters.
So here it is. A huge thanks to deputy editor
Paul J. Lim, who has led MONEY’s market coverage
through this unprecedented instability with a
steady hand and clear-eyed perspective. As Paul
says, the key to long-term investing success is a
willingness to be counterintuitive. So don’t let a few
volatile months spook you away from the market.
Thanks for reading. Keep in touch!
Adam Auriemma
EDITOR-IN-CHIEF
@adamauriemma
Write the Editor: editor@moneymail.com
TAY L O R J E W E L L
JUST HOW CRAZY has the
market been in 2018?
Even Jack Bogle was
caught off guard.
“I have never seen a
market this volatile, to this
extent, in my career,” the
89-year-old Vanguard
founder said during an
appearance on CNBC in
April. “Now that’s only 66 years, so I shouldn’t
make too much about it,” Bogle quipped.
The numbers back him up. In the first three
months of 2018, the S&P 500 index experienced a
swing of 1% or greater on 23 separate days, according to DataTrek research—more than in any full
year since 2009. Wall Street’s “fear index,” which
tracks investor anxiety, closed above 23 in April and
for brief moments this year ticked up above 40,
matching levels not seen since the recession of
2007–09 and the tech wreck of 2000–02. “There is
surely a doozy just around the bend,” former White
House budget director David Stockman wrote in
a widely shared blog post. Clearly these are scary
times on Wall Street.
Fear not, though. Day-to-day fluctuations are
“not of interest” to investors with a long-term
strategy, Bogle said. That’s a view we share here at
MONEY. Those big swings are not “necessarily a
big deal, so long as you adapt your thinking and
strategy to reflect the new market reality,” contributor Ryan Derousseau writes in this issue.
Still, with so many basic assumptions already
proved wrong this year (see page 40) and the
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MONEY EDITORIAL
EDITOR-IN-CHIEF Adam Auriemma
DEPUTY EDITORS Rachel F. Elson, Paul J. Lim MANAGING EDITOR Tari Ayala SENIOR EDITORS Mike Ayers, Ian Salisbury
AUDIENCE ENGAGEMENT EDITOR Matt Bemer SENIOR WRITERS Elizabeth O’Brien, Brad Tuttle WRITERS Kristen Bahler, Jennifer Calfas,
Julia Glum, Alix Langone, Megan Leonhardt, Shaina Mishkin, Kaitlin Mulhere, Kerri Anne Renzulli
DIGITAL PRODUCER Allana Akhtar ASSOCIATE AUDIENCE EDITOR Masiel Torres COPY EDITORS Maria Carmicino, Lauren Goldstein, Kathleen Kent
EXECUTIVE CREATIVE DIRECTOR Paul Martinez DIRECTOR OF PHOTOGRAPHY Mia Diehl LEAD ART DIRECTOR Peter Herbert
ART DIRECTOR Josue Evilla SENIOR GRAPHIC DESIGNER Julia Bohan CONTRIBUTING DESIGNER Namita
PHOTO DEPARTMENT Kacy Burdette, Sarina Finkelstein, Armin Harris, Alexandra Scimecca,
Michele Taylor, Hildegarde P. Vilmenay (OFFICE MANAGER)
SENIOR VIDEO PRODUCER Kate Santichen VIDEO PRODUCER Katie Meyer ASSOCIATE VIDEO PRODUCER Claire Nolan
PRODUCTION ASSISTANTS Will Linendoll, Cristina Merone
CONTRIBUTORS Ryan Derousseau, Betsy Kornelis, Sarah Max, Zuhair Nasher, Suze Orman, Andrew Santella, Paul Schrodt, Walter Updegrave, Martha C. White
MEREDITH NATIONAL MEDIA GROUP
PRESIDENT Jon Werther MEREDITH MAGAZINES PRESIDENT Doug Olson PRESIDENT OF MEREDITH DIGITAL Stan Pavlovsky
PRESIDENT OF CONSUMER PRODUCTS Tom WitschI CHIEF REVENUE OFFICER Michael Brownstein
CHIEF MARKETING AND DATA OFFICER Alysia Borsa MARKETING AND INTEGRATED COMMUNICATIONS Nancy Weber
EXECUTIVE VICE PRESIDENT OF SALES Brad Elders
CHIEF CONTENT OFFICER Alan Murray DIGITAL DIRECTOR, NEWS GROUP Edward Felsenthal
EDITORIAL OPERATIONS AND FINANCE DIRECTOR George Kimmerling
MEREDITH CORPORATION
PRESIDENT AND CHIEF EXECUTIVE OFFICER Tom Harty CHIEF FINANCIAL OFFICER Joseph Ceryanec
CHIEF DEVELOPMENT OFFICER John Zieser PRESIDENT, MEREDITH LOCAL MEDIA GROUP Paul Karpowicz
EXECUTIVE CHAIRMAN Stephen M. Lacy VICE CHAIRMAN Mell Meredith Frazier
BRAND SALES
GROUP PUBLISHER Michael Schneider
MARKETING
CMO, NEWS AND BUSINESS BRAND MARKETING Michael Joseloff
INTEGRATED MARKETING
Sheyna Bruckner (EXECUTIVE DIRECTOR) ; Giselle Peled (DIRECTOR) ;
Hannah Hashmi (MANAGER) CREATIVE SERVICES Orville Clark (CREATIVE
DIRECTOR) ; Jess Harrison (SENIOR DESIGNER)
LIVE MEDIA
Lisa Cline (SENIOR VICE PRESIDENT) ; Delwyn Gray (VICE PRESIDENT) ;
Jennifer Current, Kim Lovett, Cindy Shieh, Virginia Slattery, Amy Winiker
CONSUMER MARKETING & REVENUE
Chris Gaydos (SENIOR VICE PRESIDENT) ; Ann Marie Doherty,Yvonne Gerald,
Melissa Mahoney, Karan Simoneau, Eric Szegda (VICE PRESIDENTS) ;
Eunice Chi (EXECUTIVE DIRECTOR) ; Holly Oakes (DIRECTOR) ; Nicole Felix
(SENIOR MANAGER) ; Nicole Padovano,Jessica Colon (MANAGERS) ; Ojan
Bahraini (ASSOCIATE MANAGER) ; Samantha Piotti (ASSISTANT MANAGER)
CONSUMER INSIGHT
Andrew Borinstein (VICE PRESIDENT) ; Joel Kaji (EXECUTIVE DIRECTOR) ;
Brian Koenig (SENIOR RESEARCH MANAGER)
MORE MONEY!
M O N E Y. C O M
COMMUNICATIONS
Raina Dembner, Kristin Matzen (SENIOR MANAGERS)
FINANCE
Maria Beckett (SENIOR VICE PRESIDENT) ; Keith Strohmeier
(VICE PRESIDENT) ; Arbena Bal (DIRECTOR) ; Paula Esposito, Catherine
Keenan (MANAGERS) ; Christopher Santigate (ASSOCIATE MANAGER) ;
Jessica Piro
BRANDED CONTENT SOLUTIONS
Carolina Stavrositu (EXECUTIVE DIRECTOR) ; Gregory Leeds,
Jamie Waugh Luke, Ron Moss, Cindy Murphy (DIRECTORS) ;
Joel Baboolal, Melissa Brice, Blair Stelle
DIGITAL DESIGN DIRECTOR
Sean Villafranca
PRODUCTION
Valerie Langston (DIRECTOR) ; Mieko S. Calugay (SENIOR MANAGER) ;
Sara Decker (ASSISTANT MANAGER) ; Vishal Prasad (SPECIALIST)
PREMEDIA
Richard K. Prue (EXECUTIVE DIRECTOR) ;
Angel Mass (SENIOR MANAGER)
Our email newsletters are rich with tips and tricks.
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Go to money.com/newsletters to sign up now.
J U N E /J U L Y 2 0 1 8
LETTERS
& COMMENTS
2SX7S*EWX
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Thanks for a great magazine.
In response to the studies
mentioned in “The Millennial
Money Whisperer” [May] finding
early retirement may cause premature death, I think it might be
the other way around. People with
chronic disease or other health
problems are at higher risk for early
mortality, and may choose to retire
early because of their illness. One
has to be careful assigning reasons
for the diference in mortality rates.
PA U L I K E D A , Seattle
CHECKING BACK
IN ON VICKI ROBIN
[Re: “The Millennial Money
Whisperer,” May] My wife
and I read Your Money or
Your Life, and it changed our
lives long ago. We are not
FIRE [“financial independence, retire early”] people,
but aside from tracking
every penny, we found many
of the steps Vicki Robin
mentioned to be quite useful. It was wonderful to
check in on Robin and see
how she was doing. Great
article! Thank you for writing
about her and “life energy.”
B R U C E STA N TO N
Washougal, Wash.
A HIRING MANAGER WARY
OF JOB-TITLE CHANGES
I always enjoy the tidbits
of information I pick up
from your magazine. I was
alarmed, however, by the
suggestion in “What Your
Résumé Should Look Like in
2018” [March] to “change the
title on your résumé to match
how it’s presented in the job
listing.” As hiring managers,
we understand companies
use different titles for similar
jobs. However, if I discovered
a résumé had used an incorrect job title during reference
checks, that would have a
very negative impact on the
potential hire.
JOHN ILER
Massachusetts
OUR
FAVORITE
COMMENT
We’ve never gotten this magazine before, and it was actually addressed to our
24-year-old daughter, but this afternoon I read [the May issue] cover to cover
and thought, “I have to scan this page or that page and send it to my kids.” I was
inspired to inspire my children to rethink their life now for ease and happiness
in retirement later in life.
A M Y D E N M A N , Iron Station, N.C.
Write to MONEY: letters@moneymail.com
COMMENTS
ABOUT
RECENT
STORIES ON
MONEY.COM
Re: “Tammie Jo
Shults, Who Safely
Landed the Deadly
Southwest Flight,
Has Been Breaking
Glass Ceilings
for Years”
“I hope that she gets
recognition for saving
everyone on the airplane. I wouldn’t like
to hear that she is
being fired, or that the
insurance companies
are going after her.”
Re: “After Facebook’s
Privacy Scandal, Are
You Worried About
Your Personal Data
on Social Media?”
“I don’t put anything
on FB that I don’t want
the public to know.
If you have nothing to
hide, why worry?”
Re: “This Millennial
Couple Is Saving
$150,000 a Year and
Plans to Retire by
2029. Here’s How
They Do It”
“So focused on the
goal, maybe missing
the journey! Wouldn’t
want to be ‘trapped’
today by having
to save everything
so I could be ‘free’
in middle/old age!”
J U N E /J U L Y 2 0 1 8
M O N E Y. C O M
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Overall, hotels are cheaper. But there
are exceptions. BY M EG A N L EO N H A R DT
IT’S A QUESTION that
pops up with almost every
trip: where to stay? These days,
travelers are likely to be choosing between a traditional hotel
and a home or apartment rental.
As part of MONEY’s Best in
Travel series, we analyzed hotel
room and Airbnb apartment
rental rates in nearly 300 cities
to determine where it makes the
most sense to stay in each.
For budget travelers, hotels
deliver lower rates on average—
something that may come
as a surprise. Among the popular
travel destinations MONEY
analyzed, there were fewer than
40 cities where the average
rate for an apartment on Airbnb
was cheaper than a hotel.
In fact, Airbnb prices rose
5.4% over the past year, while
hotel rates rose less than 1%,
according to MONEY’s research.
“Everyone is looking for a
good deal, but in many markets
M O N E Y. C O M
Airbnbs can be pricier than a
basic hotel room,” says Scott
Shatford, founder of AirDNA—
a company that tracks Airbnb
pricing. For MONEY’s analysis,
AirDNA provided cost data
for entire-apartment rentals,
the closest possible comparison
to a typical hotel room,
while Hotels.com, Booking.com,
Hipmunk.com, and Trip by
Skyscanner provided hotel rates.
Of course, price isn’t
everything.
If location is key, it may make
sense to search for an Airbnb.
Typically, they tend to be
distributed more evenly across
cities, so there’s a better chance
of finding one where you’d like
to visit. Hotels can be easier for
short stays of a night or two,
however, because there’s often
less uncertainty about the
check-in process or extended
communication with hosts,
Shatford says.
J U N E /J U L Y 2 0 1 8
City/State
Average
hotel cost
per night
Average
Airbnb rate
per night
Discount
to stay
in Airbnb
vs. hotel
1
Charleston, W.Va .
$180.60
$112.53
38%
2
Santa Monica
$344.00
$222.89
35%
3
York, M a i n e
$101.44
$71.89
29%
4
New Haven
$189.77
$ 1 3 6. 2 0
28%
5
Buffalo
$168.00
$121.63
28%
6
Detroit
$200.00
$146.15
27%
7
Grand Canyon ( A r i z . )
$200.00
$148.51
26%
8
Philadelphia
$190.00
$151.60
20%
9
St. Louis
$162.00
$131.11
19%
10 New York City
$256.00
$ 2 0 9. 5 8
18%
J U N E /J U LY 2 0 1 8
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B E ST P L AC E S TO STAY
IN AN AIRBNB
6
B E ST P L AC E S TO STAY
I N A H OT E L
City/State
Average
hotel cost
per night
Average
Airbnb rate
per night
Discount
to stay
in hotel
vs. Airbnb
1
Augusta, G a .
$107.00
$350.25
69%
2
New Braunfels, Texa s
$115.00
$365.25
69%
3
Gulfport, M i s s .
$98.00
$310.19
68%
4
Green Bay
$126.00
$360.55
65%
5
Telluride, C o l o.
$256.47
$673.82
62%
6
Palm Springs
$172.00
$447.75
62%
7
Big Bear Lake, C a l i f.
$149.00
$385.59
61%
8
Pensacola, F l a .
$108.00
$271.45
60%
9
Park City, U t a h
$221.00
$553.98
60%
10 Pigeon Forge, Te n n .
$118.00
$293.30
60%
3
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5
10
6
9
8
9
5
7
7
2
1
10
6
1
3
8
4
2
J U N E /J U L Y 2 0 1 7
M O N E Y. C O M
S A N TA M O N I C A : C O U R T E S Y O F A I R B N B ; T E L L U R I D E : D O N O VA N R E E S E — G E T T Y I M A G E S ; PA R K E R PA L M S P R I N G S : A N G I E S M I T H — R E D U X
5
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There will be plenty of expenses to scrimp on—
but the ceremony itself isn’t one of them.
BY Z U H A I R N A S H E R
M O N E Y. C O M
J U N E /J U L Y 2 0 1 8
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W E D D I N G : C O U R T ESY O F Z U H A I R N AS H E R ; F R A M E : E L N U R — S H U T T E R STO C K
“PLEASE BE SEATED.” The chatter that
accompanied your march down the
aisle fades to an almost palpable silence. One
hundred of your closest friends and family
sit together, rapt. It’s your wedding day, and
the ceremony is about to begin. How many
times in your life will you command this kind
of attention?
Yet after only a few minutes, the aura is
pierced. Eyes wander, seats are shuled,
yawns are barely stifled. What gives?
Hard truth coming: They’ve heard it all
before. Love is great … in sickness and in
health … so long as you both shall live.
If you’re someone who’s chosen a secular
ceremony rather than a religious one,
chances are you want it to reflect who you
really are. The problem is, if you aren’t
careful, those age-old sayings can sound
clichéd.
You spent thousands to make everything
perfect, but the actual ceremony—the
part that the rest of the wedding is meant
to celebrate—is the part you invested in
the least.
Who could blame you? Weddings are
crazy expensive: $35,000, on average,
according to the Knot. Once you’ve paid for
the stuf everyone expects—music, food, the
photo booth (it’s just too fun)—the ceremony
itself presents an easy out.
Often the services of the officiant are
included in the price of the venue. Some
couples ask a friend. But there are better
options.
There’s never been a love exactly like
yours, and that makes you incomparable.
As a licensed officiant based in New York
City, I make a point to remind the couple,
and the entire congregation, that a wedding
doesn’t make a marriage. Marriage is a
celebration of love that lasts far longer than
even the most extravagant party. A couple
should thoughtfully consider how to
celebrate this commitment and whom they
can trust to get it right.
An experienced officiant can help with
everything from writing your vows and
selecting the readings to incorporating parts
of your religious and cultural heritage that
are meaningful to you. You don’t have to
spend more; you just have to rethink how
you slice the pie.
A bespoke ceremony by a licensed
officiant usually starts at around $500,
although a rehearsal or travel costs can push
the price upward. While many couples still
find an officiant through word of mouth,
listings on weddingwire.com or Yelp can
help expand your reach.
It’s worth it. People will remember how
they felt a lot longer than what they saw,
or what they ate. And judging by most
wedding food, that’s a blessing in itself.
Income
meets
performance.
AVER AGE ANNUAL TOTAL RETURNS
1 YEAR
3 YEAR
5 YEAR
10 YEAR
as of 3/31/2018
LIFE OF FUND
10/15/2002
Fidelity® Total Bond Fund
(FTBFX)
1.63% 2.12%
Bloomberg Barclays
U.S. Aggregate Bond2
1.20% 1.20% 1.82% 3.63%
2.51% 4.68%
4.80%
Gross
Expense
Ratio
0.45%
1
4.11%
Performance data shown represents past performance and is no guarantee of future results.
Investment return and principal value will fluctuate, so investors may have a gain or loss when
shares are sold. Current performance may be higher or lower than what is quoted, and investors
should visit Fidelity.com/performance for most recent month-end performance.
Fidelity Total Bond Fund has distributed dividend income to investors and outperformed
the benchmark 2 over time.
Actively managed and supported by Fidelity’s premier research, Fidelity ® Total Bond Fund
outperformed its benchmark over a variety of market conditions. If you’re looking for income
and a measure of protection from stock market volatility, this fund presents a great opportunity.
Invest today at Fidelity.com/totalbond
FIDELITY TOTAL BOND FUND
FIDELITY TOTAL BOND ETF
FTBFX
FBND
Fidelity.com/totalbond
800.FIDELITY or call your advisor.
In general, the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This efect is
usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk, liquidity risk, call risk, and credit and default risks for both issuers
and counterparties. Lower-quality fixed income securities involve greater risk of default or price changes due to potential changes in the credit quality of the issuer. Unlike
individual bonds, most bond funds do not have a maturity date, so holding them until maturity to avoid losses caused by price volatility is not possible.
ETFs are subject to market fluctuation and the risks of their underlying investments. ETFs are subject to management fees and other expenses. Unlike mutual funds, ETF
shares are bought and sold at market price, which may be higher or lower than their NAV, and are not individually redeemed from the fund.
1
Expense ratio is the total annual fund operating expense ratio from the fund’s most recent prospectus. Expense ratio as of 3/31/2018.
2
The Bloomberg Barclays U.S. Aggregate Bond Index is an unmanaged market value–weighted index for U.S. dollar–denominated investment-grade fixed-rate debt
issues, including government, corporate, asset-backed, and mortgage-backed securities with maturities of at least one year. It is not possible to invest directly in an index.
Total returns are historical and include change in share value and reinvestment of dividends and capital gains, if any. Life-of-fund figures are reported as of the
commencement date to the period indicated.
Before investing in any mutual fund or exchange-traded fund, you should consider its investment objectives, risks, charges, and expenses.
Contact Fidelity for a prospectus, ofering circular, or, if available, a summary prospectus containing this information. Read it carefully.
Fidelity Brokerage Services LLC, Member NYSE, SIPC. © 2018 FMR LLC. All rights reserved. 833628.2.0
7IGVIXW7IPJ1EHI
1MPPMSREMVIW
8IEGL8LIMV/MHW
It’s not just about money. Successful parents also pass on
good habits. BY J U L I A G LU M
M O N E Y. C O M
J U N E /J U L Y 2 0 1 8
Siebold instructs readers to pay
close attention to what’s happening in markets of all sizes by both
reading the Wall Street Journal
and chatting with store owners in
their towns.
“Keep an eye on the big picture
and the local picture,” Siebold
says. “We really should be watching
everything for opportunities
because they’re everywhere.”
AVOID “MICROWAVE THINKING”
Siebold discourages people from
indulging in “microwave thinking,”
the belief that results will show
up instantly instead of gradually.
“Everything is going to take
M A RT I N S C H O E L L E R —AU G UST
FOR HIS RECENTLY RELEASED Secrets Self-Made Millionaires Teach Their
Kids, tennis-player-turned-author Steve Siebold spoke with more than
1,200 fellow millionaires, distilling their advice into 160 short chapters for
parents to read with their children. Alongside tips like “speak publicly,”
“be curious,” and “treat people well,” Siebold highlights actions kids should
take if they want to set themselves up for financial success. Often pulling
examples from his own life, Siebold writes about how to turn failures into
victories, think creatively, and cope with criticism.
WATCH WALL STREET—
AND MAIN STREET
PARENTING
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WRITE DOWN YOUR VISION
C H R I STO P H E R P O L K— G E T T Y I M AG ES
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XLI8IWPE(IWMKR0EF
time,” he says. “The instant
gratification mindset is not where
they’re going to become a selfmade millionaire—it doesn’t
usually happen like that. This
is going to take real time and
real work, and it’s not going to
be something that happens
overnight.”
In other words, selling
LuLaRoe leggings on Facebook
or hawking SugarBearHair
supplements on Instagram may
score you fast cash, but getting
true, long-term financial stability
is a deliberate process.
PLAY SPORTS
Learning to play country club
staples like golf or tennis—if you
are lucky enough to have the
opportunity—can give you a leg
up in the workforce, says Siebold.
Baseball and basketball may be
1YWMGMERW.E]>ERH&I]SRG¬
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more popular, but mastering
sports traditionally favored by
powerful people can lead to
networking opportunities later
in life.
“This gets under some people’s
skin, and I understand why, but
the facts are the facts,” Siebold
says. “Those sports are dominated by wealthy families, and so
the connections they can make
in those sports are substantial.
The idea is not to force [kids] into
[activities] they don’t like, but at
least expose them to those sports
in terms of connections.”
Hate tennis? In truth, any sport
will help you develop the discipline, cooperation, and communication skills that can help you
succeed later on. And you never
know which of your teammates
will become key players in your
professional network.
You’ve heard of a vision board,
right? Siebold suggests something similar with a long-term
planning exercise in which kids
write a letter to a friend pretending it’s the future and they’ve
accomplished all their goals. It
motivates kids to work hard by
giving them a taste of how it will
feel once they’re done.
“We want to test-drive their
emotions,” Siebold says. “The
premise of it is that people don’t
really get things that they want
because of the thing. They don’t
buy the big house, the fancy car,
or get the certain job because of
the actual thing, they get it
because of the way they think it’s
going to make them feel.”
REMEMBER TO LAUGH
Throughout all this, Siebold
says kids should be encouraged to
take time to relax and laugh—
which, in turn, will make them
feel more open to creativity and
new experiences. He personally
unwinds by watching Will Ferrell
movies and Bob Hope clips.
“Reduce stress, have more fun,
and enjoy the process, because
it’s not just a matter of getting to
become a self-made millionaire—
it’s the journey along the way. It’s
the path to it,” Siebold adds. “If
it’s not fun, you’re not going to
enjoy it as much.”
Secrets Self-Made
Millionaires Teach
Their Kids is available
on Amazon and comes
with a free workbook
downloadable at
secretsworkbook.com.
J U N E /J U L Y 2 0 1 8
M O N E Y. C O M
;SVO
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Iris Apfel’s long career is a model
for anyone who can’t slow down.
BY K R I ST E N BA H L E R
doesn’t own a
computer, so if you want to
reach her, you have to pick up the
phone and call. Several times.
And don’t mistake that for
some sort of crotchety aloofness.
Apfel might be 96, but she’s not
out of touch. She’s just busy.
Really, really busy.
Apfel is supposed to be
resting, by the way. Works
too hard. Doctor’s orders.
“I don’t have any time to
waste,” she says, speaking from
her always-buzzing cell phone in
Palm Beach—ostensibly on a
“break” from noisy New York.
Apfel’s new book, Accidental
Icon, hit shelves in March, and the
rollout hasn’t slowed down. Now,
when she isn’t working on her line
of apparel, jewelry, and shoes for
the Home Shopping Network
(HSN), she has a book signing to
run to or a press call to hop on.
This spring she partnered with
Bergdorf Goodman on a clothing
pop-up—a floral and feather afair,
trumpeted by a brigade of
Apfel-inspired mannequins in the
store’s famed window displays.
IRIS APFEL
M O N E Y. C O M
J U N E /J U L Y 2 0 1 8
CAREER LONGEVITY
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I LYA S . S AV E N O K — G E T T Y I M A G E S
—IRIS APFEL, ON HANGING IT UP ONE DAY
Next up is a collection of jeweltoned linens and tableware for the
home furnishings company
Grandin Road and some porcelain
jewelry for the French luxury
store Bernardaud. The list
goes on.
She refers to herself as a
“geriatric starlet” and rightfully
so. Her look is like a walking
kaleidoscope or a Picasso painting
dipped in a barrel of costume
jewelry. But a relentless work
ethic is as much an Iris Apfel
trademark as her oh-so-oversize
glasses.
Apfel started her career in the
1940s as a “copy girl” at Women’s
Wear Daily, a $15-a-week job where
her only task was to carry stacks
of paper from one person’s desk
to another’s.
Shortly after, she landed a gig
as an assistant to the interior
designer Elinor Johnson. In 1948
she married Carl Apfel, and the
two launched their own luxury
fabric and design business, Old
World Weavers, in 1950. The
company was a massive success;
nine U.S. First Ladies tapped the
couple for White House interior
design projects. After the company’s sale in 1992, Apfel continued working for herself, picking up
apparel, jewelry, and home
furnishings commissions at what
most people would consider a
breakneck pace.
But Apfel isn’t like most people.
She stumbled into fame in her
golden years and seems genuinely
mystified by her late-in-life
celebrity. It found her just the
same: When Apfel was 85, the
Metropolitan Museum of Art
dedicated an entire exhibit in its
costume wing to her personal
apparel and jewelry collection. In
2014 the documentary Iris by the
late director Albert Maysles was
released. And earlier this year,
Apfel became the oldest person to
have a Barbie doll fashioned in
her likeness.
After nearly 80 years in the
workforce, her tenacity defies
most twilight-year ideals. But as
worries of an impending retirement crisis threaten to plague the
workforce, Apfel’s way of life is
something any worker has to think
about these days. Just 23% of baby
boomers think their savings will
last through retirement or that
they’ve adequately prepared for it,
according to a 2017 survey from
the Insured Retirement Institute.
She’s still in a league of her
own—about half of Americans
retire between the ages of 61 and
65, according to the Census
Bureau. Studies show that the
average age of retirement is rising,
though, mostly owing to longer life
expectancies, changes in Social
Security benefits, and rising
health care costs. Some people are
working longer because they want
to—they love their job, or they like
it more than a life-of-leisure
alternative. And a few years shy of
her 100th birthday, Apfel is their
poster child.
“For me, retirement is a fate
worse than death,” she says. “I’ve
seen so many people, especially
in a place like Palm Beach, who
worked so hard in their lives, and
they come down here cold turkey,
and then one day wake up and
realize how vacuous their lives are
now. I mean, it isn’t funny. I’ve
seen it with my own eyes!”
There are tons of photos in
Accidental Icon—mostly shots of
Apfel, sometimes at work,
huddled over antique textiles (and
always in her couture best). But
the most powerful images are of
her and Carl together: sepia-toned
photos of the two dancing at
black-tie events, traveling in the
Middle East, London, and Italy,
and sifting through flea market
fabric. It’s a document of a
beautiful partnership, both inside
and outside the office.
After Carl died in 2015, Apfel
says her work took on new
meaning.
“He really pushed me into this,”
she says. “So I decided I wouldn’t
just stay at home and cry all day.
I’m working harder than I ever did
in my life.”
Sometimes, well-intentioned
people tell Apfel she should try to
relax a little more—maybe put her
feet up, or consider living in Palm
Beach full-time.
Her response?
“I learned a long time ago that
I can’t live in somebody else’s
image,” she says. “If I want to live
my life my way, why shouldn’t I?
I don’t give a damn. They can go
peddle their papers.”
J U N E /J U L Y 2 0 1 8
M O N E Y. C O M
FREELANCE LIFE
8LI*MRI%VXSJ
4VSGVEWXMREXMSR
Trouble with deadlines? Easily distracted? Try turning to
Leonardo da Vinci for inspiration. BY A N D R E W S A N T E L L A
0ISREVHSHE:MRGM
EFSZILEHELMHHIR
XEPIRXQMWWMRKHIEHPMRIW
,MWTEMRXMRK
1EHSRRESJXLI
6SGOW PIJX
waiting on a coworker to finish an overdue
assignment is a modern phenomenon, consider what happened
535 years ago in Milan. That was where the good friars of the Confraternity
of the Immaculate Conception asked Leonardo da Vinci to produce a
painting of the Virgin Mary and Christ Child for the altar of their chapel.
With a naive optimism familiar to anyone who has ever made a living
as a freelancer, Leonardo agreed to finish the project in seven months.
Twenty-five years would pass before the painting was installed.
Maybe you think of Leonardo as the ultimate Renaissance man,
a genius of engineering, art, and design. He was all these things, but he
seems also to have been an accomplished procrastinator. Like a lot of
freelancers I know, Leonardo had trouble staying focused on projects and
IN CASE YOU THINK
M O N E Y. C O M
J U N E /J U L Y 2 0 1 8
finishing them. He was in fact
notorious in his own time for
making big plans, then not getting
around to realizing them.
Understanding Leonardo’s
procrastination might help us
understand how work gets done—
or doesn’t get done—in today’s gig
economy.
I belong to a tribe of independent workers—writers, editors,
coders, graphic designers, tens of
millions of us in the United States
alone—who can claim kinship to
Leonardo. We may not share his
intellectual and creative powers,
but like him, we allow ourselves to
be distracted. Given the freedom
to work at home, or at the corner
cofeehouse, or at that fancy new
coworking space, we can choose to
do what we want with our time.
And often we do.
There is no denying that all this
task avoidance comes with a price.
It drives coworkers crazy, for one
thing, and it may set us back in our
climb up the greased pole of
career success.
On the other hand, Leonardo’s
example also reminds us that the
path to accomplishment is not
always a perfectly efficient one.
What Leonardo learned from his
“detours” into anatomy, for
example, probably informed his
work on the Mona Lisa. So can
Leonardo’s procrastination really
be separated from his genius? Isn’t
it possible that a rigid Leonardo,
one who cared only about pleasing
his patrons and meeting deadlines,
would have done nothing worth
remembering? Maybe the ultimate
lesson that Leonardo teaches is
that there is no single way to get
things done. Some successes,
it seems, are worth the wait.
L EO N A R D O DA V I N C I ( 14 5 2 –1 5 1 9 ) , M A D O N N A O F T H E RO C KS 14 8 3, O I L O N CA N VAS, 1 9 9 X 1 2 2 C M , M US É E DU LOU V R E , PA R I S, F R A N C E : E R I C H L ES S I N G/A RT R ESOU RC E , N Y; S E L F- P O RT RA I T: L E E M AG E / U N I V E RSA L I M AG ES G ROU P/G E T T Y I M AG ES
;SVO
Answer the call with the Earnings Tool.
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analysts. TD Ameritrade does not represent or warrant the information to be accurate, complete, reliable, or current.
See tdameritrade.com/600offer for offer details and restrictions. This is not an offer or solicitation in any jurisdiction where we are not authorized to
do business. TD Ameritrade, Inc., member FINRA/SIPC. © 2017 TD Ameritrade.
;SVO
HOME OFFICE HACKS
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You don’t have to spend
a fortune to make a
workspace that inspires
and looks stylish.
BY B E TSY KO R N E L I S
8,)496+)-76)%0
M O N E Y. C O M
J U N E /J U L Y 2 0 1 8
6 STEPS TO
A BETTER
HOME OFFICE
It’s free and necessary.
Having a clutter-free workspace will do more for your
home oice than any design upgrade. Take everything out of your oice
and bring back in only the
things that you absolutely
need. If you are unsure how
long you should be holding
on to certain documents,
check out retention sched-
ules for papers related to
your business, household,
and taxes at IRS.gov.
COST: $0
36+%2->);-8,
',%6%'8)6
Keep often referenced files
in a desktop sorter with
smart, colorful folders: The
Poppin Fin File Sorter ($16)
pairs nicely with plaid file
folders by Hearth & Hand
R O O M : P H OTO G R A P H E E . E U — S H U T T E R STO C K
has
never been easier than it
is today. So having a home office
that feels organized and looks
like an extension of the rest of
your living space won’t just
make your day brighter—it can
even boost your productivity.
And it doesn’t have to be
expensive. With a little creativity and some DIY ingenuity,
here’s how you can set yourself
up for less than $300.
WORKING FROM HOME
+)8%:-28%+)()7/
It’s hard to believe,
but vintage oice furniture
can be affordable and adds
character. In addition to
your standby secondhand
stores, try a nearby
university. Most state
universities offer up their
used, retro oice furniture
at insanely low prices.
For example, the University
of Wisconsin at Madison’s
SWAP sells various oldschool desks for $5 to $50.
You can often find chairs,
too, for around $25 to pair
with your desk. If you live
far from a university, build
your own desk using two
secondhand metal file
cabinets (prices typically
start under $5) and top
them with a primed
hardboard door slab ($29)
from Home Depot. Spraypaint the file cabinets and
paint the desktop to match
your decor for $10 to $15.
COST: about $75
FO L D E R S : C O U R T E SY O F TA R G E T; D E S K :
D E AG O ST I N I /A . PAG A N I — G E T T Y I M AG ES ;
L I G H T: I A M Z E R E U S — G E T T Y I M AG E S
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With Magnolia (12 for $6 at
Target). Use glass canning
jars—which can be found at
secondhand shops for as
little as $1, or buy a fourpack of Ball 16-ounce Amber
Glass mason jars ($7 from
the website of retailer
Blain’s Farm & Fleet)—to
store pens, paper clips, page
flags, and thumbtacks.
To arrange books, you can
make wall shelves using
a couple of brackets and
a single board, which most
hardware stores will cut to
your specifications. At Home
Depot, a 12-foot-long board
measuring one-by-10-inches
($22), cut into thirds, gets
you three shelves that are
four feet long. Use six Everbilt 10-by-eight-inch metal
brackets ($5 each), to support them.
COST: $81
)1&6%')8,)
43;)63*4%-28
Freshen up your walls
with a coat of Behr
Premium Plus Ultra interior
paint ($33 a gallon).
It includes a primer, so
unless you are painting
over super dark walls with a
light color, one coat of this
paint should do the trick.
You won’t regret sticking to
a warm but full-bodied neutral like Toasty Gray. If
you’re looking to add a little
drama, try a deep, earthy
green like Terrarium. You
can also paint the back of
your oice door with RustOleum chalkboard paint
($10 a quart), or any surface with the clear version,
to create space for to-do
lists or ideas.
COST: $43
4634)60-+,8-2+
-7):)6=8,-2+
Overhead lighting is
just not enough. Add lamps
right where you need them
to create a comfortable,
inviting atmosphere.
Clamping a couple of
Bayco Incandescent
Portable Work Lights
($8 each from Lowe’s) to a
wall shelf above your desk
will spread light on your
work surface. Spray-paint
them black for a sharp
look. A modern tabletop
lamp, like the 21-inch
Wrought Studio Little Neck
($28), brings in yet another layer of ambiance.
COST: $44
%((4)6732%0-8=
;-8,4%4)6
Hanging sheets of inexpensive specialty paper
is a simple way to bring in
personality and visual interest. Go bold with Brush
Stroke Gold on Sea Green
handmade paper ($7 at
Paper Source). Or express
your personality through
a vintage-style Cavallini
offering like Phases of
the Moon ($5 at Paper
Source). Sized at about
20-by-30 inches, these fine
papers look great framed;
Ikea and JoAnn Fabrics
have nice, cheap frames
for under $24. Unframed
works too.
COST: $31
TOTAL COST: $274
J U N E /J U L Y 2 0 1 8
M O N E Y. C O M
is a confounding
topic—and there’s no shortage of books that
say they’ll show you how to handle it. (In fact,
there are nearly 5,700, according to Amazon.)
Sussing out which of those titles are going to
help you most is a task better left to the pros. So
MONEY asked certified financial planners with
diferent areas of specialization for their recommendations. Here’s their top 10 list, no matter
what stage you’re at in planning for retirement.
RETIREMENT PLANNING
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It’s not necessarily light, but this summer reading
list is one you can bank on. BY M A RT H A C . W H I T E
M O N E Y. C O M
J U N E /J U L Y 2 0 1 8
As we’re living longer,
retirement can look a lot
different, last a lot longer,
and cost a lot more than
it did even a generation
ago. This has implications
not only for your financial
well-being but for your
physical health as well.
Stuart Armstrong, a planner at Centinel Financial
Group, says a good book
to help navigate expectations for a more active
retirement is AgeProof:
Living Longer Without
Running Out of Money or
Breaking a Hip, by Jean
Chatzky, Michael Roizen,
MD, and Ted Spiker.
“AgeProof does a good
job of correlating physical
and financial health and
why it’s important,” Armstrong says. (He notes
that this and the next
book are his own recommendations and not those
of Centinel’s national
firm, Signator Investors.)
*SV8ETTMRK
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7IGYVMX]
Learning when and how to
draw your Social Security
benefits—and maximize
your monthly payments—
can be challenging.
Armstrong suggests
reading Get What’s
Yours: The Secrets to
Maxing Out Your Social
Security. The book, coauthored by Laurence
Kotlikoff, Philip Moeller,
and Paul Solman, “helps
simplify the sometimes
very complex decisions
around collecting Social
Security benefits,”
he says.
SUMMER READING LIST
I L L U S T R AT I O N S B Y O K S A N A L AT Y S H E VA ( T H E N O U N P R O J E C T )
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You probably know that
building your nest egg
early—decades before
retirement is even on
the horizon—is the best
way to ensure a comfortable financial future.
But understanding how
and where to start your
retirement savings plan
can be daunting and
overwhelming.
“Most people know
that they’re supposed to
be doing something.
They need it broken
down to tasks that they
can do easily and habits
they can incorporate into
their regular lives,” says
planner Dana J. Levit,
owner of Paragon Financial Advisors.
Her recommendation: The Young Couple’s
Guide to Growing Rich
Together, by Jill Gianola.
The book is “written in
language that is accessible, and the concepts are
doable,” she says.
*SV4ISTPI
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Are you hoping to retire
early? Then you need to
have a plan not just for
your finances but also
for personal fulfillment,
says Scott Cole, president of ColeFP and
Wealth Management. After all, retirement could
end up lasting more than
one-third of your life.
Cole recommends
The New Retirementality: Planning Your Life
and Living Your Dreams
… at Any Age You Want,
by Mitch Anthony. “This
is not a how-to book but
rather a how-to-think
book about retirement,”
he says.
The latest version
has been updated to
reflect newer research
about the nature and
complexities of 21stcentury retirement, Cole
says. “It asks the reader
to think about what it
means to retire and how
you can craft a fulfilling
retirement.”
*SV;SQIR
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The number of households headed by single
women is on the rise.
Since women often
face unique challenges
(for instance, living longer on average than
men and having more
intermittent career
patterns), the best
books for them, when it
comes to retirement
planning, take those
hurdles into account.
Zaneilia Harris,
president of Harris &
Harris Wealth Management Group,
recommends Women’s
Worth: Finding Your
Financial Confidence,
by Eleanor Blayney.
“I feel this book is
a great resource for
women taking control of
their finances and making decisions that will
affect their lifestyle and
livelihoods,” Harris says.
*SVXLI
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“The biggest challenge
for investors new and
experienced is managing their behavior in
markets good and bad,”
says Rich Arzaga, CEO
of Cornerstone Wealth
Management. “The average return rate for all
investors has historically been one-half of
market performance.”
That’s because people
try to time the market
and let their emotions
guide them.
To help nervous investors avoid falling into
this trap, Arzaga recommends The Behavior
Gap: Simple Ways to
Stop Doing Dumb
Things With Money, by
Carl Richards. “Helping
to manage a client’s behavior, or, for those on
their own, getting out
of their own way, is the
single biggest opportunity for success for
investors,” Arzaga says.
8,)&-++)78',%00)2+)*36-2:)78367 Ŧ
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—RICH ARZAGA, CORNERSTONE WEALTH MANAGEMENT, ON THE BEHAVIOR GAP
J U N E /J U L Y 2 0 1 8
M O N E Y. C O M
6IXMVI
SUMMER READING LIST
*SV
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(IITIV
“All too often we try
to do all of the retirement, tax, and estate
planning. But often,
beneficiaries are kept
in the dark about what
they will inherit and how
to properly deal with
their newfound wealth,”
says David Frisch,
founder and president
of Frisch Financial
Group.
He recommends the
book Preparing Heirs:
Five Steps to a Successful Transition of
Family Wealth and Values, by Roy Williams
and Vic Preisser. It
walks readers through
potentially tricky situations, such as dividing
up nonliquid assets and
carrying on a family
business. “The book is
an excellent way, using
step-by-step techniques, to facilitate
family communication
and hopefully reduce
family conflict after the
second parent dies,”
Frisch says.
*SV
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“For anyone who feels
they have a good sense
of the basics of investing but they aren’t quite
sure they have a philosophy of their own, I
recommend 7Twelve,
by Craig Israelsen,”
says Robert Schmansky,
president of Clear
Financial Advisors.
The title refers to a
strategy that calls for
dividing your portfolio
equally into 12 mutual or
exchange-traded funds
covering seven key investment categories
that provide full diversification. Those asset
classes are U.S. stocks,
foreign equities, real estate, natural resources,
U.S. bonds, foreign
bonds, and cash.
“The book describes
a balanced investment
philosophy and is a very
easy read,” he says.
“I love Your Money or
Your Life [by Vicki Robin
and Joe Dominguez],”
says Debra Neiman,
principal at Neiman &
Associates Financial
Services. “It focuses on
life energy—you only
have so much of it. So
how do you prioritize?”
Neiman says this
retirement book—at the
epicenter of the “financial independence,
retire early” (FIRE)
movement—is a good
resource for people who
want broad personalfinance guidance. “It
makes one think about
the long-term impact
that spending has on
one’s ability to make
money and have
money for retirement,”
Neiman says.
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—DEBRA NEIMAN, PRINCIPAL AT NEIMAN & ASSOCIATES FINANCIAL SERVICES
M O N E Y. C O M
J U N E /J U L Y 2 0 1 8
I L L U S T R AT I O N S B Y O K S A N A L AT Y S H E VA ( T H E N O U N P R O J E C T )
Financial planner Cole
says investors who want
to have more control
over their portfolios
should pick up All About
Asset Allocation, by
Richard Ferri.
More than picking
the right stocks or funds,
“the key to successful
retirement investing lies
in saving often and
understanding asset
allocation,” Cole says.
Asset allocation refers to
the mix of investments
you own—what percentage of your portfolio is
held in stocks vs. bonds
vs. other assets. “Ferri is
thorough and accessible
in helping an investor
learn how to apply this
to her or his portfolio,
including retirement,”
Cole adds.
*SV*YXYVI
,IMVWERH
*EQMPMIW
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6IXMVI
#GOALS
*MRHMRK8LEX7EZMRKW7[IIX7TSX
Save and invest sensibly, and you’ll eventually reach a point where your investment gains
exceed what you sock away for retirement. Here’s how to get there. BY WA LT E R U P D EG R AV E
is made up of two
parts: the contributions you diligently make
throughout your career and the investment returns
those contributions earn for you.
Not surprisingly, your contributions—and those of
your employer, if you receive company matches in
your 401(k) account—initially dwarf what your
investments earn in the market. But if you save
regularly and invest sensibly, you will eventually hit a
crossover point where your investment gains exceed
the contributions you make to your accounts.
At that point, you’ll be in the sweet position of
sitting back and watching your investments efectively
do the bulk of your savings for you.
This is what all retirement savers should be aiming
for. And that’s why a balanced, disciplined long-term
approach that will successfully get you to this crossover point beats a strategy that swings for the fences
and takes undue short-term risks.
YOUR RETIREMENT ACCOUNT
M O N E Y. C O M
J U N E /J U L Y 2 0 1 8
HOW LONG BEFORE YOUR INVESTMENTS DO THE HEAVY LIFTING?
Here’s how this works: Let’s say
you earn $45,000 a year, receive
2% annual raises, and contribute
10% of your paycheck each month
into a 401(k), where your investments earn a 6% annual return.
When you start out, your
investments earn a mere pittance
compared with the amount you’re
socking away. That first month, in
this example, you contribute $375
to your account, which racks up
less than $2 in investment gains for
the month. Even after you’ve
socked away a full year of savings
(or $4,500), your investments are
kicking in only a bit more than $20
ILLUSTRATION BY CHRIS GASH
#GOALS
a month, or only 5% of the total
amount you’ve saved that first year.
As your gains begin to compound,
however, they become an increasingly important source of growth.
Consider the following:
• At the end of five years, your
gains will amount to roughly a
third of the monthly amount
you’re saving in our example.
• By year eight, your investment earnings will equal more
than half of your contributions.
• Then, a little more than 13
years into this regimen, you will
hit that crossover point, when
your gains start to exceed the
amount you’re stashing away.
Your investments will at that
point be generating gains of more
than $500 a month, surpassing the
$485 a month you’d be funneling
into your 401(k) account.
But you shouldn’t just shoot for
a 13-year time horizon. It’s only
after you hit this threshold that
things really begin to snowball. So
make sure you have the discipline
to stick with your savings strategy
well beyond this marker to enjoy
the fruits of compounding.
• Less than 10 years after
arriving at this crossover point,
for example, your investments
would be kicking in more than
double the amount you’re saving.
• Seven years after that, your
investments would be contributing
triple what you’re socking away.
• And five years after that—or
nearly 35 years into this strategy—
your investments would be
generating more than four times
the amount you’re saving.
I’m not saying you’ll duplicate
these results exactly. The amount
of time it takes to get to this stage
will depend on several factors,
6IXMVI
CROSSING OVER
-XŞWMQTSVXERXXSWEZIYRXMP]SYVIEGLXLITSMRX[LIVI]SYVMRZIWXQIRXW
HSXLILIEZ]PMJXMRKJSV]SY&YXOIITWEZMRKTEWXXLEXMJ]SYVIEPP][ERX
XSWIIXLIFIRIƙXWSJXLMWWXVEXIK]
$35,000
ASSUME YOU MAKE $45,000 AND SOCK AWAY 10% A YEAR …
Your annual contributions
Your annual investment gains
$30,000
$25,000
$20,000
$15,000
Based on this
example, you will hit
the crossover point in
year 13. Congrats!
$10,000
$5,000
Year 1
Year 10
Year 20
Year 30
NOTE: Assumes you receive 2% annual raises and earn 6% annual returns on your investments. SOURCE: MONEY research
such as the rate of return you earn
on your investments, the rate at
which your salary grows throughout your career, and how dedicated you are to saving.
But the point is, you have to
commit to saving and investing
over an extended period if you
want your investments to be the
main driver of your wealth.
OTHER LEVERS TO CONSIDER
Of course, your ultimate goal isn’t
simply to cross this threshold. It’s
to build a nest egg large enough so
you don’t outlive it in retirement.
So you want to be sure you
save enough to support yourself
throughout a retirement that could
last upwards of 30 or more years.
If you follow the example above,
except you save just 5% of your
pay a year (not 10%), your investment gains will still eventually
exceed your contributions. But
after 40 years of saving and
investing, you would have a nest
egg worth only about $467,000
(about $136,000 in your contributions, plus nearly $331,000 in
investment earnings).
Save 10%, however, and you’ll
still come to that crossover point
at the same time, but you’ll also
end up with a much bigger nest
egg, a bit over $933,000 (almost
$272,000 in contributions plus
roughly $661,000 in earnings).
Boost your savings rate even
further to 15%, and you’ll have a
still more impressive stash of
$1.4 million (almost $408,000 in
contributions plus about $992,000
in investment gains).
It also pays to get an early jump
on socking money away. Begin
saving at 25, and you’ll reach the
point where investment gains
exceed your contributions in your
late thirties. If you wait until 35
to start saving, you won’t hit this
milestone until you’re nearly 50.
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YOUR NEXT PLAN
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Retirement investors shouldn’t overlook the “triple tax
benefit” of health savings accounts. BY S A R A H M A X
6IXMVI
Health savings accounts (HSAs)
are arguably the best deal for retirement savers. “There is a triple
tax benefit,” says Frank O’Connor,
VP of research and outreach at the
Insured Retirement Institute.
“You get a deduction going into
them, tax-free growth on any
earnings, and tax-free withdrawals on qualified expenses.”
There isn’t a single savings
vehicle like this, he says.
Yet most people know very
little about them, and just 7%
of Americans have them, according to a United Benefit Advisors
survey. “The vast majority of
clients have not heard of an HSA
when we bring it up,” says
financial planner Brian Parker,
managing director and cofounder
of EP Wealth Advisors in Torrance, Calif. And those who have
heard of HSAs, he says, don’t
understand them.
THE BIGGEST HSA MISCONCEPTIONS
enough money
for retirement, one of the biggest obstacles
you’ll face is the high cost of health care.
The Employee Benefit Research Institute estimates that a 65-year-old man would need $131,000
socked away just to stand a good chance of being able
to cover premiums and prescriptions in retirement.
For a 65-year-old woman, it’s still more: $147,000.
These are expenses that could blow up even the
best-laid income plans.
Yet a simple solution to address this problem—and
boost overall retirement savings—is often overlooked.
P H OTO G R A P H BY TO O G A— G E T T Y I M AG ES
WHEN IT COMES TO SALTING AWAY
HSAs allow you to set aside
money to cover basic medical
costs, from prescription drugs to
physical therapy. But you don’t
have to spend down your annual
HSA balances each year or lose
the benefits, as is the case with
flexible spending accounts (FSAs),
diferent vehicles used for
out-of-pocket expenses.
HSA balances roll over year
after year, even if you were to
change jobs or insurance plans.
And because of that, HSAs have
the potential to accumulate large
amounts of savings, which can
compound tax-free over time,
supplementing the retirement
savings you’re amassing through
your 401(k)s and individual
retirement accounts.
J U N E /J U L Y 2 0 1 8
M O N E Y. C O M
6IXMVI
YOUR NEXT PLAN
WHO QUALIFIES FOR AN HSA?
Many individuals access health
savings accounts through their
employers. But that isn’t the only
option you have.
As long as you’re in a highdeductible health care plan and
under the age of 65—when Medicare kicks in—you can open a
health savings account through a
bank or other HSA provider.
For individuals, health care
plans with a deductible of at least
$1,350 and maximum total annual
out-of-pocket expenses of $6,650
qualify as high-deductible plans in
2018, according to the IRS. For
families, it’s a deductible of at
least $2,700 and maximum out-ofpocket expenses of $13,300.
While more and more health
plans are considered highdeductible, your first priority
should be finding the best plan for
your situation, says Parker. HSAs
have their perks, but they shouldn’t
drive your health care decisions,
he cautions.
HOW MUCH CAN YOU SAVE IN AN HSA?
M O N E Y. C O M
First introduced in 2004, health
savings accounts were designed to
help ofset the out-of-pocket
expenses of high-deductible
health insurance plans.
For many people these
accounts have become a great
option for paying for qualified
health expenses with tax-free
dollars. (To see what types of
expenses qualify, visit IRS.gov
and look up Publication No. 502.)
But what happens if you end up
saving more than you need to
cover your qualified medical
needs in your HSA?
If you’re 65 or younger, you’ll
owe ordinary income tax plus a
20% penalty on nonqualified
withdrawals. After age 65,
however, you can take money out
for any purpose sans penalty—
you’ll simply owe tax on just the
nonqualified portions of your
withdrawals.
Keep in mind that HSAs
J U N E /J U L Y 2 0 1 8
shouldn’t be your primary
retirement savings tool. That
would be a 401(k) or other
employer-sponsored plan,
particularly if you qualify for
matching contributions.
But assuming you’re on track
with those other plans—and have
enough emergency savings on
hand—HSAs are an ideal place to
park additional savings, especially
since many plans now ofer the
option of investing HSA money in
a variety of stock and bond funds,
just like in a 401(k).
As with any investment,
though, you’ll want to be mindful
of fees, minimum balance requirements, and investment choices,
says Parker. Assuming you plan to
hold your HSA assets until your
golden years, your allocation can
mirror that of your other retirement accounts.
But just make sure you have
enough cash on hand to pay for
any big health expenses that come
up along the way.
P H OTO G R A P H BY T I M R O B B E RTS — G E T T Y I M AG ES
In 2018, contribution limits for
health savings accounts are $3,450
for individuals and $6,850 for
families. For savers over age 55,
there’s a catch-up contribution
worth an extra $1,000 a year.
An individual who socks away
$3,450 a year over the next 20
years and earns a 2% rate of return
could accumulate about $72,000
and save roughly $21,000 in
taxes—and that’s assuming he or
she spends $500 a year on health
care expenses. (To estimate your
potential savings, you can use
the free online calculator found at
healthequity.com/calculator/
future-balance.)
HOW AN HSA FITS INTO YOUR
OVERALL SAVINGS STRATEGY
A STRAIGHTFORWARD INCOME?
INVEST IN HIGHWAYS.
Tax-free municipal bonds are issued by state and local governments to raise money for major
infrastructure projects, such as local roads, hospitals and stadiums. Like any borrower, state and local
governments pay interest to investors who hold the bonds. But, what sets them apart are two important
investing benefits.
1. Potential Safety of Principal
When investing in municipal bonds,
investors are paid back the full face value
of their investment at maturity or earlier
if called, unless the bond defaults. This
is important because many investors,
particularly those nearing retirement or in
retirement, are concerned about protecting
their principal. In May of 2016, Moody’s
published research that showed that rated
investment grade municipal bonds had
an average cumulative 10-year default
rate of just 0.09% between 1970 and
2015.* That means while there is some
risk of principal loss, investing in rated
investment-grade municipal bonds can
be an important part of your portfolio.
2. Potential Tax-Free Income
Income from municipal bonds is not
subject to federal income tax and,
depending on where you live, may
also be exempt from state and local
taxes. Tax-free income can be a big
attraction for many investors.
About Hennion & Walsh
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tax-free municipal bonds.
© 2018 Hennion & Walsh Inc. Securities offered through Hennion & Walsh Inc. Member of FINRA, SIPC. Investing in bonds involves risk
including possible loss of principal. Income may be subject to state, local or federal alternative minimum tax. When interest rates rise,
bond prices fall, and when interest rates fall, bond prices rise. *Source: Moody’s Investor Service, May 31, 2016 “US Municipal Bond
Defaults and Recoveries”, 1970–2015. Past performance is not a guarantee of future results.
MIDYEAR INVESTOR’S GUIDE 2018
*MZI8LMRKW-RZIWXSVW+SX;VSRK8LMW=IEV
STOCKS ARE DOWN WHILE VOLATILITY
AND INFLATION ARE UP. FIX YOUR STRATEGY
TO PROFIT.
M O N E Y. C O M
J U N E /J U L Y 2 0 1 8
*MZI1MWGSRGITXMSRW%FSYXXLI8VYQT&YQT
TRYING TO PREDICT THE PRESIDENT’S
IMPACT ON THE FINANCIAL MARKETS IS RISKY.
HERE’S WHAT YOU CAN DO NOW.
MONEY
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THE MARKET IS OFF TO A MUCH
DIFFERENT START THIS YEAR THAN IN
2017. SEVEN CHARTS EXPLAIN WHY.
8LI&MKKIWX*YRHW
HOW THE LARGEST MUTUAL FUNDS—
WHICH ARE THE ONES YOU’RE MOST
LIKELY TO OWN—PERFORMED.
M O N E Y. C O M
J U N E /J U L Y 2 0 1 8
MONEY
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M O N E Y. C O M
MONEY
MIDYEAR INVESTOR’S GUIDE 2018
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AS INVESTORS, WE ALL GET THINGS wrong from
time to time. Just ask Irving Fisher, the
once famous (now infamous) economist
who declared in 1929 that equities would
keep racing ahead, since the stock market had reached what he called “a permanently high plateau.” Eight days later
the market plunged, setting of a series of
declines, culminating in Black Tuesday—
and, of course, the Great Depression.
While Fisher’s market call is now
part of Wall Street lore, he’s hardly
alone in making bad assumptions about
stocks. At the end of last year, for example,
most investors assumed that the tax cuts
passed in Washington would fuel another
round of risk taking on Wall Street,
pushing the bull market ever higher.
Clearly, that hasn’t happened yet.
Meanwhile, several things that investors
assumed wouldn’t take place—like the
return of worrisome levels of inflation
or volatility—are starting to materialize.
This isn’t necessarily a big deal,
so long as you adapt your thinking
and strategy to reflect the new market
reality. Investing success doesn’t
require prescience; it takes a willingness
to acknowledge miscalculations and to
make tactical adjustments accordingly.
FEAR ISN’T WHAT USUALLY kills a bull
market; it’s often the lack of fear,
or that sense of comfort and
confidence that leads investors to
forget how risky investing can be.
Well, in 2017 investors were about
as complacent as they’ve ever been.
At the end of last year, the market
witnessed 14 of the 20 lowest days in
the history of the CBOE volatility
index (or VIX), the so-called fear index that gauges investor anxiety.
With an average reading of about 11
last year, it was only a matter of time
before the VIX ticked back up to its
long-term average of 19.
But while many market watchers argued that volatility was sure
to pick up, few predicted market
fears would jump to levels not seen
since the recession of 2007–09, the
FEAR IS RISING
Stocks have gotten choppier, as the
market’s “fear gauge” has shot higher.
VIX “fear index”
April 2
23.6
25
20
15
10
Oct. 2, 2017
9.5
5
June 2017
SOURCE: Yahoo Finance
M O N E Y. C O M
J U N E /J U L Y 2 0 1 8
Jan. 2018
FIVE WRONG ASSUMPTIONS
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M I C H A E L N AG L E— B LO O M B E RG V I A G E T T Y I M AG ES
global financial panic, or the tech
wreck of 2000–02.
8LIVIEPMX]
IN JUST THE FIRST three months of
2018, the S&P 500 index experienced more daily swings of 1% or
greater than in any year since 2009,
according to DataTrek Research.
Blame the aging bull market,
which is about three months away
from becoming the longest rally
in history. After a nine-year run,
stocks have become historically
expensive and are as overvalued
as they’ve been since before the
dotcom bubble.
A conservative way to gauge
the level of froth in the market is
to measure stocks’ price/earnings
ratio, using 10 years of averaged
corporate profits. The S&P 500’s
Shiller P/E (named after Nobel
Prize–winning economist Robert
Shiller, who popularized its use) has
just climbed above 31. That’s nearly
double the historical median of 16.
As a result, investors are
now “acting out of a position of
fear instead of greed,” says Brad
McMillan, chief investment officer at
Commonwealth Financial Network.
This anxiety is shaking the
market every time a new issue—
whether it be talk of tarifs, rising
inflation, a geopolitical crisis, or
a controversy at a company with a
widely held stock like Facebook—
hits the news. Individual investors
are simply reacting day to day, and
have yanked a net $56 billion out
of U.S. equity mutual funds in the
first three months of the year.
;LEX]SYGERHS
DON’T PANIC JUST BECAUSE Wall Street
is starting to show some signs of
consternation. As the saying goes,
J U N E /J U L Y 2 0 1 8
M O N E Y. C O M
MONEY
MIDYEAR INVESTOR’S GUIDE 2018
“bull markets like to climb a wall of
worry.” Instead, use rising volatility
as an opportunity to reevaluate how
much risk you want in your portfolio,
says Joseph Heider, president of
Cirrus Wealth Management.
If you can handle a 10% or larger
fall in the short term—such as the
correction the market experienced
in late February—then it’s fine to
stay heavily weighted to stocks and
keep buying as the market dips;
you’ll gain more shares that way.
If such a drop is too discomforting, then consider dialing back your
exposure to equities. This is a step
many older investors failed to take
before the global financial panic. At
the end of 2007, nearly one-third of
401(k) investors in their sixties held
more than 80% of their nest eggs in
stocks—just in time for the 2008
market crash that erased 37% of the
value of those equity portfolios.
Also, investors of all ages should
consider using rising volatility to
embrace low-volatility investing.
“Low-vol” stock funds are filled with
Steady Eddie–type stocks that tend
to lose less when the markets fall
(but gain less when stocks climb).
Low-volatility investing tends to
be embraced in times of fear, but
this strategy has actually outperformed the broad market over long
stretches. Research Affiliates found
that low-volatility U.S. stocks have
outpaced domestic equities by more
than 1.5 percentage points a year
over the past 20 years. Meanwhile,
low-volatility foreign stocks have
beaten international equities by
more than four points a year.
On our MONEY 50 recommended
list, consider iShares Edge MSCI Min. Vol.
USA ETF (USMV) for domestic exposure
and iShares Edge MSCI Min. Vol. EAFE ETF
(EFAV) for steady foreign stocks.
-RƚEXMSR*IEVW
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on goods
and services, hasn’t been a real
threat to investors for more than a
quarter-century. In fact, for the past
decade, the Federal Reserve has
been fighting to keep the opposite
force—deflation—from wrecking
the economy in the aftermath of the
global financial crisis.
But with business activity finally
picking up steam, the consensus
forecast has been for a “modest
increase” in inflation—modest
being the operative word. A survey
of economists late last year by the
Federal Reserve Bank of Philadelphia found that forecasters were
INFLATION, OR RISING PRICES
PRICE CHECK?
Inflation on the goods that consumers
buy remains stable …
CONSUMER PRICE INDEX
March 2017
2.4%
… But wholesale prices—a leading
indicator of consumer prices—have
been climbing.
PRODUCER PRICE INDEX
M O N E Y. C O M
J U N E /J U L Y 2 0 1 8
8LIVIEPMX]
of February,
stocks plunged 9% after average
hourly earnings for workers grew
2.9%. Not only was that the biggest
annual jump in pay since 2009, it
was also seen as an omen for overall
inflation, since wages are still one of
the largest input costs for companies. Then, in March, the consumer
price index (CPI), the most-watched
gauge of inflation, jumped 2.4%.
Still, inflationary fears remain
muddled. Some economists, for
instance, believe bad weather
afected those wage growth figures,
as a high number of snow closings
may have impacted hourly employees in the workforce earlier this year.
That, in turn, may have overweighted the salaries of higher-paid
workers in the government data,
says McMillan. By the end of March,
some of those inflation fears were
quelled, as wage growth decelerated
to around 2.7% over the prior year.
On the other hand, another gauge
of inflation, which measures the
wholesale prices that manufacturers
pay, has been heating up faster than
the CPI. The producer price index
(PPI) has risen 3% over the past year,
a big jump from the prior year. And
what makes this worrisome is that
the PPI is seen as a leading indicator
of consumer prices, since manufacturers get squeezed first and then
must decide if they will try to pass
the rising costs of materials such as
steel and oil on to consumers.
IN THE FIRST WEEK
;LEX]SYGERHS
March 2017
2.2%
SOURCE: Bureau of Labor Statistics
March 2018
2.4%
banking on consumer prices rising
at an annual pace of 2.2% this year,
up from 2.1% in December.
March 2018
3%
shouldn’t
necessarily scare you as an
THE THREAT OF INFLATION
FIVE WRONG ASSUMPTIONS
investor. Inflation is heating up, but
it’s by no means historically high.
Since 1926, inflation has averaged
around 3%, and the CPI remains
below that threshold.
Even if you think the CPI will
soon hit that 3% mark, though, and
interest rates will rise to reflect that,
keep something in mind: The
S&P 500 has returned about 10%
annually during times of rising rates,
according to Bank of America.
Nevertheless, it’s smart to
consider inflation hedges before
rising prices become a real threat
and those inflation-protected assets
become truly expensive.
David Blanchett, head of retirement research for Morningstar,
notes that Treasury InflationProtected Securities (TIPS) are a
hedge against unexpected inflation,
since the underlying value of these
bonds moves upward as the
consumer price index increases.
And that, in turn, boosts your
actual interest payments.
Right now, the break-even rate
for 10-year TIPS is about 2.2%. That
means if inflation rises more than
2.2% for the next decade, you’re
better of in TIPS than traditional
bonds. In the MONEY 50, look at the
Vanguard Inflation-Protected Securities
Fund (VIPSX), which has beaten 80% of
its peers over the past 15 years.
As for stocks, research from
Charles Schwab finds that as
inflation rises, the price investors
are willing to pay for equities falls.
Historically, the market’s P/E ratio
has been 17.6 when inflation grows
2% to 3%. But when it climbs to 3%
to 4%, the P/E drops to 16.
This is why investors should also
focus their attention on low-P/E
stocks. You can find them in
Vanguard Value ETF (VTV) and PowerShares
FTSE RAFI U.S. 1000 ETF (PRF), which are
both on the MONEY 50. The
average stock in both funds trades
at a P/E ratio of 14.5.
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raising
interest rates since December
2015—really slowly. Over the past
2½ years, the central bank has lifted
rates by a modest 1.5 percentage
points. In prior eras, policymakers
might have boosted rates more than
that in a single meeting.
Contrary to popular belief, the
markets don’t necessarily mind
rising rates. After all, higher yields
are a sign of a growing economy.
It becomes problematic only if rates
THE FED HAS BEEN SLOWLY
WRONG ON RATES
Investors thought it would take months
for bond yields to climb above 3% …
CONSENSUS FORECAST FOR
10-YEAR TREASURY YIELDS
June 30, 2018
2.75%
8LIVIEPMX]
THE THREAT OF HIGHER -than-expected
8LIEWWYQTXMSR
Dec. 30, 2017
2.45%
grow faster than expected. You
don’t want to “be caught of guard,”
says David Joy, chief market
strategist at Ameriprise Financial.
Heading into this year, most
prognosticators expected the Fed to
lift rates another three times, at a
quarter of a percentage point per
hike, bringing a key short-term rate
to 2.25% by the end of the year.
Dec. 30, 2018
3.0%
inflation now raises the real
possibility of four hikes this year.
It’s not just economists who think
that. In their March meeting, Fed
governors indicated a fourth hike
was within the realm of possibility.
But a potentially bigger interest
rate question comes from the Fed’s
balance sheet. To help stimulate the
economy, the Fed didn’t just lower
short-term rates; it purchased huge
amounts of short- and longer-term
Treasuries and government-backed
securities to keep yields in general
low. Now that the economy can
stand on its own, the Fed is unwinding its $4 trillion portfolio, which
could boost the supply of bonds on
the market—driving prices down
and yields up. “It’s going to take
years” for it all to unwind, says Joy.
This selling may have contributed
to the fact that yields on 10-year
Treasury notes reached 3% in late
April, several months before investors
assumed that would happen.
;LEX]SYGERHS
… But they were wrong.
ACTUAL 10-YEAR TREASURY YIELD
Dec. 30, 2017
2.40%
Feb. 28, 2018
2.87%
April 25, 2018
3.02%
WITH THE FED HELPING to boost
short- and long-term rates, investors need to be mindful of interest
rate risk. Many strategists suggest
focusing on shorter-term debt that
will come due sooner and that can
be reinvested at higher yields.
SOURCES: Federal Reserve Bank of Philadelphia, Yahoo Finance
J U N E /J U L Y 2 0 1 8
M O N E Y. C O M
MONEY
MIDYEAR INVESTOR’S GUIDE 2018
On the MONEY 50 list, turn to
a short-term fund such as Vanguard
Short-Term Bond ETF (BSV). Or focus on
intermediate-term funds that own
relatively shorter-term securities,
such as Dodge & Cox Income (DODIX) or
Loomis Sayles Bond (LSBRX).
7XSGOW0SWI
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8LIEWWYQTXMSR
why so
many market watchers thought
stocks were bound to rise in 2018.
Not only did Congress just pass the
Tax Cuts and Jobs Act of 2017 in late
December—lowering personal
income tax brackets while slashing
the top corporate rate from 35% to
21%—but corporate earnings were
set to grow by nearly 20% this year.
Among the most bullish forecasts:
The wealth management firm
Canaccord Genuity predicted the
S&P 500 would gain 16% this year.
IT’S EASY TO UNDERSTAND
8LIVIEPMX]
have been signed into
law, and profit growth for the
S&P 500 got of to a roaring start in
the first quarter—earnings were up
more than 23%. Yet the S&P 500
has been flat.
What happened? Call it a classic
case of that old saying: “Buy the
rumor and sell the news.” The stock
market is forward-looking. Last
year, the anticipation of tax cuts to
come—which would allow companies to repatriate billions of foreign
profits back to the U.S.—helped the
market return nearly 22%. But now
THE TAX CUTS
that lower taxes and higher profits
are baked into the cake, stocks are
at a level that’s “hard to surpass,
but easy to disappoint,” says James
Paulsen, chief investment strategist
for the Leuthold Group.
Without a new carrot propelling
the market forward, it will take
better-than-expected corporate
performance to pique interest.
;LEX]SYGERHS
REASSESS YOUR international exposure. U.S. equities have been the
hands-down leader of the global
markets as of late. Over the past
five years, the S&P 500 has
returned nearly 13% annually, which
is more than double the returns of
foreign shares.
That means if you haven’t been
rebalancing, you may have less
exposure abroad than you once did.
For example, if you started of five
years ago with 20% of your stock
portfolio overseas, you’d now have
only 15% in international equities
owing to the market’s recent moves.
WHAT STIMULUS?
Investors incorrectly assumed that tax
cuts would spur bullish buying.
PERFORMANCE SINCE TAX CUTS
ON DEC. 22, 2017
0
U.S. stocks U.S. bonds
–0.5%
–3.0%
U.S. dollar
–3.5%
-0.5
-1.0
-1.5
-2.0
-2.5
-3.0
-3.5
SOURCES: Morningstar, Federal Reserve Bank of St. Louis
M O N E Y. C O M
J U N E /J U L Y 2 0 1 8
Yet many strategists believe that
with foreign shares so much cheaper
now—the Shiller P/E for foreign
stocks is about half that for domestic
equities—investors should hold
one-third or more of their equity
exposure overseas.
Because the fastest growth is
found in emerging economies such
as China’s, think about foreign
funds with exposure to both
developed markets and emerging
economies. Take the MONEY 50’s
Vanguard Total International Stock ETF
(VXUS). Nearly 20% of this ETF’s
assets are held in emerging-market
shares, with about half that
exposure held in China and India.
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FOR YEARS, IT PAID TO BE aggressive
in the stock market. And nowhere
did this strategy pay of more than
with the so-called FAANG stocks—
Facebook (FB), Amazon (AMZN), Apple (AAPL),
Netflix (NFLX), and Google-parent
company Alphabet (GOOGL).
Accounting for about one-eighth
of the total market value of the
S&P 500, these five stocks returned
an average of 47% in 2017. Few
analysts forecast such outsize gains
for 2018. But few assumed many of
these stocks would struggle.
8LIVIEPMX]
MANY FAANGS, including Apple and
Alphabet, are struggling more than
the broad market, signaling that
market leadership could be shifting.
FIVE WRONG ASSUMPTIONS
Facebook is probably the most
prominent example. Its shares are
down slightly for the year, as the
social media giant is embroiled in a
scandal related to an analytics firm’s
having used Facebook data inappropriately to try to sway voters in the
2016 presidential election.
And while Amazon shares are
up, the e-commerce giant finds
itself mired in a public feud with
President Trump, who has been
critical of the company’s tax rate
and shipping arrangement with the
U.S. Postal Service. This may stem
from bad blood between Trump and
Amazon CEO Jef Bezos, who also
owns the Washington Post, but it
points to the risk that tech leaders
may face more regulations.
These issues highlight some of
the weaknesses in tech’s armor, says
Peter Boockvar, chief investment
officer at Bleakley Advisory Group.
;LEX]SYGERHS
DESPITE THE BACKLASH, don’t jettison
your exposure to FAANGs alto-
B R YA N R . S M I T H — A F P/G E T T Y I M A G E S
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HAVE FAANGs LOST THEIR BITE?
Several tech stocks that drove the market last year are showing signs of fatigue.
2017 YEAR-TO-DATE 2018
Facebook
53.4%
-1.3%
Amazon
56%
29.8%
Apple
48.2%
-2.6%
Netflix
55.1%
63.6%
Alphabet
32.9%
-1.0%
SOURCE: Morningstar
-10
0
10
gether. These are the most influential names in technology, a sector
that typically performs well when
interest rates are rising, like now.
But diversify your tech exposure with a broader sector fund
20
30
40
50
60
70
like the Vanguard Information
Technology ETF (VGT), which still gives
you exposure to FAANGs but
balances that with less-volatile
older tech names like Microsoft
(MSFT) and Intel (INTC).
MONEY
MIDYEAR INVESTOR’S GUIDE 2018
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M O N E Y. C O M
MONEY
)
MIDYEAR INVESTOR’S GUIDE 2018
came into office,
investors thought they had the script figured
out. The promise of deregulation, tax cuts,
and fiscal stimulus would push the economy’s
pedal to the metal, while Trump’s tough
populist talk—and threats of new tarifs—
would steer focus back onto U.S. stocks.
The bottom line: Wall Street would shift into
a higher gear. And to some extent it has. But
the “Trump Bump” hasn’t played out anywhere near the way investors envisioned.
Sure, anticipation of a reinflating economy
“rekindled the animal spirits,” says Christopher Marangi of the Gabelli Funds. But that
enthusiasm has morphed into anxiety lately,
turning the Trump Bump into a bumpy ride.
And sure, the economy looks as if it’s
heating up. But one key indicator of future
growth—the spread in bond yields—is
throwing some cold water on this assumption. Even the Point Bridge GOP Stock
Tracker ETF (ticker: MAGA)—known as the
“Make America Great Again” fund because it
invests in firms whose political action committees and employees support the GOP and
Trump—is lagging the market this year.
It just goes to show that Wall Street
“probably attributes too much to this one
person and administration,” says Jason
Brady, CEO of Thornburg Investment
Management. And it illustrates that many
assumptions investors made about Trump’s
impact on the stock market were wrong.
Here are five of the biggest investor
misconceptions about the Trump Bump—
and how you can tack your portfolio back to
reflect what’s really going on:
EVER SINCE PRESIDENT TRUMP
M O N E Y. C O M
J U N E /J U L Y 2 0 1 8
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1MWGSRGITXMSR2Sc
policies
were supposed to turbocharge the
domestic economy, making U.S.
stocks great again.
TRUMP’S “AMERICA FIRST”
;LEXVIEPP]LETTIRIH
are up,
but they are actually laggards when
compared with foreign equities.
Since Trump took office in
January 2017, the S&P 500 index of
U.S. stocks has raced ahead 18%.
But if you look around the world,
you’ll find plenty of foreign markets
that have lapped American equities
during Trump’s tenure in office.
Austrian stocks, for instance, are
up 49% in the Trump era. Chinese
equities have advanced 44%. And
Italian shares are up 38% under
Trump and 12% this year. (By
comparison, U.S. stocks have been
flat so far in 2018.)
The reason? While the U.S.
economy has grown an average of
2.5% in the first five quarters of the
Trump administration—which is
faster than the pace of growth in
2016—gross domestic product is still
expanding at a slower rate than it
did for much of 2015.
What’s more, even if you’re
convinced that Trump’s policies will
eventually turbocharge the U.S.
economy going forward, there’s no
evidence that faster GDP growth
produces better stock results.
Nearly a decade ago, finance
professor Elroy Dimson and colleagues at the London Business
School discovered something
counterintuitive: Stocks in the
SHARES OF U.S. COMPANIES
MISCONCEPTIONS ABOUT THE TRUMP BUMP
FALLING BEHIND
While U.S. stocks have risen under the Trump administration, many foreign markets have done far better.
MEXICO
23.3%
U.S.
18.0%
SOUTH KOREA
33.4%
FRANCE
31.3%
AUSTRIA
49.4%
CHINA
43.5%
PERU
30.9%
CHILE
39.6%
BRAZIL
19.7%
ITALY
37.5%
THAILAND
33.7%
NOTE: Stock price gains are through April 29. SOURCE: Morningstar
slowest-growing economies of the
world have historically outpaced the
gains of companies in the fastestgrowing regions—based on more
than a century of economic and
market data.
More recently, a study by
Vanguard found that trends in GDP
growth have about as much
predictive power over the future
performance of equities as does the
level of rainfall—which is to say,
there is no correlation whatsoever.
Instead, the best determinant of
future stock performance over the
coming decade is how frothy stocks
are, Vanguard researchers found.
And U.S. equities are historically
expensive at the same time that
many foreign markets are not—and
there’s nothing that a President can
do to change that.
The price/earnings ratio for
U.S. equities (based on 10 years of
averaged earnings) is more than 31,
which is about twice the historical
average. By comparison, foreign
shares are trading at a P/E ratio
of 17, while foreign stocks based in
emerging economies like China are
trading at a P/E of just 15.
;LEX]SYGERHS
requires
counterintuitive thinking. And as
strange as it sounds, you have to be
willing to think more globally than
ever in the era of Trump.
That’s what financial planner
Lewis Altfest is doing. “We have
SUCCESS IN INVESTING
more money abroad than we normally would. Where we would normally have 25% abroad, we now have
40% of our money outside the U.S.,”
says Altfest, president of Altfest
Personal Wealth Management.
Forty percent is a key weighting.
Research by Vanguard found that
the full diversification benefit of
owning foreign shares kicks in only
when investors hold 30% to 40% of
their equity portfolio overseas.
Another reason to look overseas:
Based on the historical relationship
between valuations and future
stock gains, foreign equities in the
developed economies of Europe and
Japan are expected to return nearly
7% annually over the next decade,
while emerging-market shares are
J U N E /J U L Y 2 0 1 8
M O N E Y. C O M
MONEY
MIDYEAR INVESTOR’S GUIDE 2018
likely to return 8% annually,
according to Research Affiliates. By
contrast, U.S. stocks may gain only
2.4% annually for the next decade.
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would
push interest rates higher, boosting
optimism and investments in the
U.S.—and strengthening the dollar.
THE REINFLATING ECONOMY
;LEXVIEPP]LETTIRIH
has been sinking for
much of the Trump presidency,
making it harder for some U.S.
companies to compete abroad.
Now, in the days immediately
following the November 2016
election, the buck did begin to creep
higher—a development that
President Trump told the Wall
Street Journal was partially “my
fault because people have confidence in me.”
There is some truth to what he
was saying. Sometimes trading
in a country’s currency reflects the
THE U.S. DOLLAR
global market’s confidence in the
health of that economy.
Yet since President Trump
actually took office in January
2017, the dollar has lost more than
10% of its value against a tradeweighted basket of foreign
currencies.
Curiously, this took place at a
time when interest rates have been
rising in America. Normally, rising
rates in the U.S. entice global
investors to park more of their cash
in dollars, which boosts the
currency’s value.
Does this mean the world has
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N I C H O L A S K A M M — A F P/G E T T Y I M A G E S
M O N E Y. C O M
J U N E /J U L Y 2 0 1 8
MISCONCEPTIONS ABOUT THE TRUMP BUMP
lost confidence in the dealmaker-inchief? Nope.
There’s a perfectly good explanation for why the buck has weakened. The Federal Reserve Board
has been raising rates gradually to
combat inflation, notes James
Paulsen, chief investment strategist
for the Leuthold Group. And
“inflation is what destroys the value
of the U.S. dollar,” he says.
;LEX]SYGERHS
your portfolio
using “real assets” like oil and other
commodities to supplement your
equity holdings. If the dollar is
indeed falling because the U.S.
economy is reinflating, then history
says this is a good time to add some
commodities to your portfolio, as
they perform well in inflationary
times, says Paulsen.
An easy way to gain exposure to
real assets is through a fund like
iShares North American Natural Resources
ETF (IGE), which is on our MONEY 50
list of recommended exchangetraded funds. More than 90% of this
fund is exposed to energy and basic
materials.
Another way for Americans to
take advantage of a weakening
dollar is by investing in funds that
hold international stocks. When
you—or the funds you own—buy
foreign shares, you aren’t just
buying overseas equities, you’re
also purchasing the foreign
currency that the stock is denominated in to make that trade.
That means if the dollar were to
weaken while you hold that investment, you could see gains simply
because the foreign currency you
used to buy those equities appreciated against the dollar.
There is a wrinkle, however, says
START BY DIVERSIFYING
Jack Ablin, chief investment officer
for Cresset Wealth Advisors. When
the dollar weakens, it also makes it
harder for foreign companies to
compete against U.S. firms in the
global marketplace, since the falling
dollar reduces the prices that
American companies can charge.
Ablin says a simple way around
this is to focus on shares of foreign
businesses that derive most of their
sales in their home regions. You
can do that by concentrating on
small- to medium-size foreign
companies, which are more apt to
be locally focused than giant
multinational firms.
You can find those types of
stocks in the Vanguard FTSE All-World
ex-U.S. Small-Cap Index Fund (VFSVX),
which is also on the MONEY 50
and focuses on small- and midsize
stocks in the developed and
emerging markets.
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corporations
were supposed to be big losers
under Trump’s populist trade
policies, which were expected to
make it harder for “elites” to move
products and jobs across borders.
LARGE MULTINATIONAL
;LEXVIEPP]LETTIRIH
are all right.
In fact, giant companies that sell
globally are likely to keep being
big winners, regardless of Trump’s
threat of a trade war.
Throughout the 2016 campaign,
THE MULTINATIONALS
candidate Trump used social and
traditional media to take a verbal
hammer to global titans like Ford,
Boeing, and Goldman Sachs.
But in the era of Trump, large
stocks have actually outpaced
small-company shares, even though
small stocks tend to outperform
over time. Multinationals “seem
rather happy right now,” says Terri
Spath, chief investment officer for
Sierra Investment Management.
Why? There are a bunch of
reasons. For starters, tarifs or no
tarifs, the weak dollar under Trump
has helped U.S. multinationals sell
their products and services abroad,
boosting revenues and earnings,
Spath says.
Consider this fact: The three
sectors that generate the biggest
percentage of sales abroad
are technology, energy, and basic
materials. This year, all three
sectors are on track for the fastest
revenue growth in the S&P 500.
Okay, but isn’t a trade war—not
just with China, but also with our
biggest trading partners in Europe
and North America—a real threat?
Absolutely. But remember that
multinationals are also better
positioned than smaller businesses
to deal with the fallout of a trade
war. “They’re the ones with a global
supply chain. They’re better able
to adapt” to rising production costs
since they can switch where they
source their materials, says Adam
Abelson, chief investment officer at
Stralem & Company.
There’s also the fact that tough
talk on trade wasn’t the only thing
the Trump administration promised. “Probably the most significant
and arguably least-covered substance of the Trump administration
has been deregulation,” says Chris
J U N E /J U L Y 2 0 1 8
M O N E Y. C O M
MONEY
MISCONCEPTIONS ABOUT THE TRUMP BUMP
Brightman, chief investment officer
for Research Affiliates. “Trump and
his appointees have been very busy
deregulating, and that’s been
wonderful for large corporations.”
After all, unlike small businesses,
the biggest companies in America
have armies of lobbyists who can
advocate for specific regulatory
relief that benefits them, he says.
;LEX]SYGERHS
AT THE START of the Trump administration, conventional wisdom said
investors should think small, as
shares of small- and midsize U.S.
companies are likely to derive the
bulk of their sales domestically—
allowing them to avoid much of the
fallout from a potential trade war
with China and Europe.
But if large U.S. multinational
corporations are disproportionately
benefiting from other Trump
policies, then you may want to think
big. Really big.
For instance, the average stock
in the Vanguard Mega Cap Value Index ETF
(MGV) has a market value of more
than $126 billion, 30% larger than
the typical company in the S&P 500
blue-chip stock index. The fund’s
top holdings include big financial,
tech, health, and energy names that
are global in nature, led by Microsoft, JPMorgan Chase, Johnson &
Johnson, and Exxon Mobil.
With this strategy, Vanguard
Mega Cap Value has outperformed
more than 85% of its peers over the
past three and five years, according
to Morningstar. Even better, the
average holding in this fund sports
a low P/E ratio of 14.5 (based on
projected profits), roughly 15%
cheaper than the stocks in the S&P
500 and the Russell 2000 smallstock index.
M O N E Y. C O M
J U N E /J U L Y 2 0 1 8
8LI
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1MWGSRGITXMSR2Sc
to be the
infrastructure President, proposing
to boost spending on the nation’s
crumbling roads, bridges, and
tunnels by $1.5 trillion. This was
expected to hurt the fortunes of
municipal bonds used to finance
many of these projects, as an
infrastructure boom could flood the
bond market with new muni debt
supply, driving down prices.
TRUMP WAS SUPPOSED
;LEXVIEPP]LETTIRIH
that infrastructure
was one of the few Trump initiatives that had some real bipartisan
support in Washington, this
initiative has gone nowhere.
To date, Congress has allocated
only around $21 billion for infrastructure spending, a tiny fraction
of what the administration has
called for. Meanwhile, the White
House has been busy pushing its
other policy priorities, including
tax cuts, deregulation, and
trade deals.
Some of this is to be expected,
says the Gabelli Funds’ Marangi.
“Infrastructure is a particularly
difficult issue. There isn’t a national
funding mechanism for the type of
infrastructure spending that needs
to be made,” he says. Instead, any
efort to rebuild crumbling roads
and bridges must be taken up on a
state-by-state and, in many cases,
city-by-city basis.
Meanwhile, there aren’t that
DESPITE THE FACT
many shovel-ready projects. Sites
still have to be debated with public
comment; environmental issues
have to be assessed; and traffic has
to be studied—all before an official
vote can be taken to move forward.
In many cases, “this is a 10-year
framework,” Marangi says.
;LEX]SYGERHS
of trying
to boost infrastructure spending
are understood, it’s time for
investors to give muni bonds
another look.
Tax-advantaged municipal bonds
issued by states and municipalities
have had a rough year. Over the
past 12 months, muni bonds have
returned a little more than 1% after
taking a couple of hits. First, fears
of oversupply in an infrastructure
boom scared of some investors.
Then Congress passed the Tax
Cuts and Jobs Act of 2017, which
lowered income tax brackets.
“When you’re talking about a
tax-advantaged investment, any
lowering of taxes is bound to make
it less attractive than before. And it
has to be repriced,” says Mark
Freeman, chief investment officer
at Westwood Holdings Group.
But Freeman says that this
repricing has already taken place
and now “munis are more attractive
relative to the rest of the market.”
At the same time, fears about a
flood of new munis hitting the
market have dissipated, giving
investors reason for hope.
His advice: Focus on shorterterm muni bonds, which he says
have repriced the most.
Financial planner Altfest agrees.
With interest rates rising, Altfest
says it’s safer to buy short-term
debt that will come due sooner, so
NOW THAT THE DIFFICULTIES
FREE RETIREMENT PLANNING TOOLS
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MONEY
THE MULTINATIONAL MARKET
Conventional wisdom said giant U.S.
firms that sell globally would be hurt by
Trump’s trade policies. But the largest
U.S. stocks have outperformed …
… as have sectors that generate more than 25% of their sales abroad.
% OF SALES ABROAD GAINS SINCE JAN. 20, 2017
PERFORMANCE
SINCE JAN. 20, 2017
Technology
60%
33.3%
Industrials
39%
15.6%
Financials
26%
20.1%
Real estate
18%
–0.3%
17.8%
Large-cap stocks
15.8%
Small-company stocks
4%
5.4%
Utilities
4.2%
Microcap stocks
4%
Telecom
–21.3%
0
10
20
–30
–20
–10
0
10
20
30
40
50
60
NOTE: Stock price gains are through April 29. SOURCES: Morningstar and FactSet
you can reinvest it at higher rates
quickly. On our MONEY 50
recommended list, you can turn to
Vanguard Limited-Term Tax-Exempt Bond
Fund (VMLTX), a short-term muni fund
whose holdings have an average
maturity of around three years.
8LI6IEP
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who, during
the 2016 election, kept warning
investors that the stock market was
in a bubble that was about to burst,
Trump was expected to be a
champion of property ownership,
and not Wall Street’s cheerleader.
AS A REAL ESTATE MOGUL
M O N E Y. C O M
J U N E /J U L Y 2 0 1 8
;LEXVIEPP]LETTIRIH
Trump can’t defy
the laws of supply and demand—
nor can he control interest rates.
As a result, real estate is likely to
continue to be a laggard under this
administration.
Since President Trump took
office, real estate has been the one
sector of the economy that hasn’t
enjoyed a Trump Bump. Since
Jan. 20, 2017, real estate investments have been largely flat while
the S&P 500 has risen 18%. Why?
Part of it is tied to the reinflating
economy. As the economy has
picked up, investors have been
selling slow-growing bonds to buy
faster-growing stocks. And as bond
prices have fallen, yields have risen.
The result: The average 30-year
fixed-rate mortgage has gone from
4.09% when Trump was sworn in to
4.58%, according to Freddie Mac.
IT TURNS OUT THAT
Meanwhile, there are supply
issues throughout real estate. With
single-family homes, the dearth of
supply amid decent demand has
sent prices higher. “Some people
are choosing not to sell,” says
Spath. “Interest rates are going up,
so that’s slowing the velocity in new
demand.” In commercial real estate,
it’s the opposite problem: “There’s
lots of concerns of oversupply”
in properties ranging from storage
facilities to multifamily buildings,
says Freeman.
;LEX]SYGERHS
If you own a
home, you probably have plenty of
exposure to real estate to begin
with. There’s no need to bolster that
with your investable portfolio.
What’s more, if you own an S&P 500
index fund, about 3% of that is in
real estate too. So relax.
DON’T FORCE THE ISSUE.
MONEY
MIDYEAR INVESTOR’S GUIDE 2018
8,)
A SLUGGISH START
Unlike last year, stocks stumbled at the start of 2018.
8%
March 30, 2017
5.8%
S&P 500
YEAR-TO-DATE IN 2018
6
4
2
S&P 500 YEAR-TO-DATE IN 2017
0
–2
–4%
February
January
March 30, 2018
–1.2%
March
VOLATILITY UP
ACROSS-THE-BOARD LOSSES
The market’s losses have been felt across the board …
… as the market shifted from stable
to shaky.
2018 2017
NUMBER OF DAYS
WITH SWINGS
LARGER THAN 1%
IN THE S&P 500
SECTOR PERFORMANCES, YEAR-TO-DATE
Real estate
–6.7%
Telecommunications
–6.6%
Consumer staples
Materials
25
+1.9%
+2.7%
–6.2%
+5.5%
–5.3%
Utilities
+7.4%
–3.3%
Industrials
–1.5%
Health care
8
+6.2%
–0.8%
+4.7%
+8.6%
2018
NOTES: Total return figures are through March 30, 2018. Price/earnings ratios are based on 10 years of averaged profits. SOURCES: Morningstar, Robert Shiller, Bitcoin.com
M O N E Y. C O M
J U N E /J U L Y 2 0 1 8
2017
THE FUND REPORT
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PRICED FOR PERFECTION
FEW PLACES TO HIDE
Adding to the worry: The market has
grown much frothier since last year.
Unfortunately, bonds haven’t been the safe haven they were in 2017 …
35x
SECTOR PERFORMANCES, YEAR-TO-DATE
March 2018
32.8
Long-term government
30
2018 2017
–3.4%
1.6%
–2.1%
Corporate
1.4%
PRICE/EARNINGS RATIO
25
–1.3%
Intermediate-term
20
1.1%
–1.1%
Municipal
1.3%
16.8
HISTORICAL P/E
–1.0%
High-yield
15
2.3%
–0.7%
Inflation-protected
1.2%
10
Jan. 2017
Jan. 2018
NO ALTERNATIVES
–0.5%
Multisector
2.1%
A GLIMMER OF HOPE
…Nor have alternative assets provided
much protection for your overall portfolio.
The good news: Some foreign investments have shown signs of life.
YEAR-TO-DATE 2018 PERFORMANCE
FOREIGN
MARKET
PERFORMANCES
–0.5%
Agricultural commodities
–0.6%
Precious metals
–2.8%
Global real estate
–4.4%
–42.0%
Infrastructure
China stocks
1.4%
Latin American stocks
8.2%
World bonds
1.1%
Emerging-market bonds Emerging-market stocks
4.2%
2.0%
Asia Pacific stocks
0.4%
Foreign growth stocks
0.2%
Bitcoin
J U N E /J U L Y 2 0 1 8
M O N E Y. C O M
MONEY
MIDYEAR INVESTOR’S GUIDE 2018
8,)
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,S[XLIPEVKIWXQYXYEPJYRHWMRXLIMVVIWTIGXMZI
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RANK
FUND NAME (TICKER)
1-('%4
783'/*92(7
1-YEAR 3-YEAR
TOTAL ANNUAL
RETURN RETURN
RANK
FUND NAME (TICKER)
28.6% 14.3%
1
Vanguard Mid-Cap
Index Admiral (VIMAX)
Fidelity Low-Priced Stock
1
Fidelity Contrafund (FCNTX)
2
American Funds Growth
Fund of America (AGTHX)
25.2
13.7
2
3
Dodge & Cox Stock (DODGX)
15.8
11.1
3
Vanguard Mid-Cap Value
Index Admiral (VMVAX)
4
American Funds Investment
Co. of America (AIVSX)
15.6
10.2
4
Vanguard Strategic Equity
5
American Funds Washington
Mutual (AWSHX)
17.6
11.1
5
Vanguard Mid-Cap Growth
Index Admiral (VMGMX)
6
7
American Funds
Fundamental Investors (ANCFX)
T. Rowe Price Growth Stock
(PRGFX)
(VSEQX)
1-YEAR 3-YEAR
TOTAL ANNUAL
RETURN RETURN
RANK
FUND NAME (TICKER)
1-YEAR 3-YEAR
TOTAL ANNUAL
RETURN RETURN
15.7% 8.5%
1
Vanguard Small-Cap
Index Admiral (VSMAX)
17.8
9.1
16.4% 9.1%
18.1
8.7
2
Vanguard Extended
Market Index Admiral (VEXAX)
13.0
8.9
3
Fidelity Extended
Market Index (FSEVX)
17.9
9.1
11.7
9.0
15.8
9.1
4
Vanguard Small-Cap Value
Index Admiral (VSIAX)
18.9
8.0
5
Vanguard Explorer Admiral
26.6
10.3
22.3
9.2
(VEXRX)
19.0
12.6
6
Fidelity Mid-Cap Stock (FMCSX)
15.9
8.5
6
Vanguard Small-Cap Growth
Index Admiral (VSGAX)
29.1
14.8
7
Vanguard Mid-Cap Growth
24.8
7.2
7
T. Rowe Price Small-Cap
Value (PRSVX)
14.1
12.0
American Century Heritage
19.7
12.2
8
T. Rowe Price Blue Chip
Growth (TRBCX)
35.5
16.5
8
9
Vanguard Windsor II Admiral
13.0
8.2
9
10
Vanguard Growth
Index Admiral (VIGAX)
(VWNAX)
(FLPSX)
71%00'%4
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21.9
12.1
10
(VMGRX)
(TWHIX)
Federated Kaufmann (KAUFX)
Fidelity Mid Cap Index (FSCKX)
20.5
7.7
8
Vanguard Tax-Managed
Small-Cap Admiral (VTMSX)
33.3
12.3
9
T. Rowe Price QM U.S. SmallCap Growth (PRDSX)
21.6
10.5
10
Schwab Small-Cap Index
17.8
9.7
15.5
8.6
(SWSSX)
NOTES: Funds are ranked in descending order of assets under management. Return figures are as of April 18, 2018. The three-year total return figures are annualized. Exchange-traded funds and mutual funds that show up in
M O N E Y. C O M
J U N E /J U L Y 2 0 1 8
THE BIGGEST FUNDS
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FUND NAME (TICKER)
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TOTAL ANNUAL
RETURN RETURN
RANK
20.0% 6.2%
1
American Funds American
Balanced (ABALX)
1
Vanguard Total International
Stock Index (VGTSX)
2
Oakmark International (OAKIX)
20.9
7.8
2
3
American Funds EuroPacific
Growth (AEPGX)
23.0
7.3
4
Vanguard International
Growth Admiral (VWILX)
33.3
5
Harbor International (HAINX)
6
FUND NAME (TICKER)
97+3:)621)28
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1-YEAR 3-YEAR
TOTAL ANNUAL
RETURN RETURN
RANK
FUND NAME (TICKER)
Fidelity Government Income
1-YEAR 3-YEAR
TOTAL ANNUAL
RETURN RETURN
11.2%
8.1%
1
Vanguard Target Retirement
2025 (VTTVX)
11.8
6.4
2
American Funds U.S.
Government (AMUSX)
–2.3
–0.1
3
Vanguard Target Retirement
2020 (VTWNX)
10.2
5.7
3
MFS Government (MFGSX)
–1.3
–0.2
11.9
4
Fidelity Balanced (FBALX)
12.5
7.4
4
Sit U.S. Government (SNGVX)
0.4
0.8
16.3
4.0
5
Vanguard Balanced Index
Admiral (VBIAX)
10.3
7.0
5
JPMorgan Government Bond
–1.4
0.0
Vanguard Developed Markets
Index Admiral (VTMGX)
19.8
6.5
6
Vanguard STAR (VGSTX)
14.1
7.1
6
Wells Fargo Government
–1.2
0.1
7
T. Rowe Price International
Stock (PRITX)
18.9
6.6
7
Fidelity Puritan (FPURX)
15.2
7.9
7
Putnam American
Government Income (PAGVX)
–0.8
–0.3
8
Fidelity International Index
19.4
5.8
8
Vanguard Target Retirement
2015 (VTXVX)
8.1
4.7
8
Prudential Government
Income (PGVAX)
–1.7
–0.1
9
T. Rowe Price International
Value Equity (TRIGX)
14.9
3.6
9
Vanguard LifeStrategy
Moderate Growth (VSMGX)
11.1
6.1
9
WesMark Government Bond
–1.7
–0.1
10
Fidelity Diversified
International (FDIVX)
17.6
5.2
10
Dodge & Cox Balanced
9.5
8.0
10
John Hancock Government
Income (JHGIX)
–1.8
–0.2
(FSIVX)
-2:)781)28+6%()
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RANK
FUND NAME (TICKER)
(DODBX)
,-+,=-)0(
&32(*92(7
1-YEAR 3-YEAR
TOTAL ANNUAL
RETURN RETURN
RANK
–0.6% 0.7%
1
Vanguard High-Yield
Corporate Admiral (VWEAX)
Fidelity Capital & Income
FUND NAME (TICKER)
1-YEAR 3-YEAR
TOTAL ANNUAL
RETURN RETURN
Vanguard Total Bond Market
II Index (VTBIX)
2
Vanguard Total Bond Market
Index Admiral (VBTLX)
–0.5
0.8
2
3
Dodge & Cox Income (DODIX)
1.3
2.1
3
4
Vanguard Short-Term
Invest.-Grade Admiral (VFSUX)
0.1
1.3
4
Fidelity High Income (SPHIX)
6.2
5
Vanguard Interm.-Term
Invest.-Grade Admiral (VFIDX)
–0.6
1.5
5
Vanguard High-Yield
Corporate (VWEHX)
4.4
5.7
4.7
American Funds American
High Income (AHITX)
(OGGAX)
(SGVDX)
(WMBDX)
–1.4% 0.1%
8%<)<)148*92(7
1
(FAGIX)
(FGOVX)
4.5%
4.6%
RANK
FUND NAME (TICKER)
1-YEAR 3-YEAR
TOTAL ANNUAL
RETURN RETURN
1
Vanguard Interm.-Term
Tax-Exempt Admiral (VWIUX)
1.0%
1.9%
0.3
0.9
8.6
5.7
2
Vanguard Limited-Term
Tax-Exempt Admiral (VMLUX)
5.0
4.0
3
Vanguard Municipal
Money Market (VMSXX)
0.9
0.5
5.2
4
Vanguard Short-Term
Tax-Exempt Admiral (VWSUX)
0.6
0.7
4.5
5
Vanguard High-Yield
Tax-Exempt Admiral (VWALX)
3.8
3.5
4.2
6
Vanguard Long-Term
Tax-Exempt Admiral (VWLUX)
2.3
2.9
5.5
7
American Funds Tax-Exempt
Bond Fund of America (AFTEX)
2.1
2.2
0.7
0.3
6
Fidelity Total Bond (FTBFX)
0.4
1.8
6
Northern High Yield Fixed
Income (NHFIX)
7
T. Rowe Price New Income
0.1
1.0
7
MainStay MacKay High Yield
Corporate (MHCAX)
8
American Funds Bond Fund
of America (ABNDX)
–0.9
0.7
8
City National Rochdale Fixed
Income Opportunities (RIMOX)
5.5
5.5
8
Fidelity Municipal Money
Market (FTEXX)
9
Vanguard Short-Term Bond
Index Admiral (VBIRX)
–0.6
0.5
9
Franklin High Income (FHAIX)
3.5
3.4
9
Franklin Federal Tax-Free
Income (FKTIX)
0.9
1.6
10
Vanguard Interm.-Term
Bond Index Admiral (VBILX)
10
Schwab Municipal Money
Ultra (SWOXX)
0.9
0.4
(PRCIX)
–1.5
0.8
10
Ivy High Income (WHIAX)
Lipper’s “multicap stock fund” and “S&P 500 index fund” categories are not shown. SOURCE: Lipper, 877-955-4773
6.5
5.0
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789()287
Fro m f re e c h e c k i n g to f l ex i b l e
AT M r u l e s , t h e s e a c c o u n t s o f f e r
the best special deals.
BY K A I T L I N M U L H E R E
ILLUSTRATIONS BY
STUDIO MOROSS
BEST BANKS
EXTRA-LONG MATTRESS? Check. Econ textbook? Check. Bank
account? For many students, college means using a bank
other than their parents’ for the first time. For up to 30% of
students, it’s the first time they’ll have a checking account.
The good news is that many banks ofer special terms
for young people. The tricky part is finding the most
competitive ones, especially since colleges muddy the
waters with marketing deals.
To help, MONEY polled 16 of the nation’s largest banks
to find which ofer the best terms for college students.
We always name our Best Banks with an eye toward
low fees so you can keep more of your cash. But for the
college population, we doubled down: We considered only
accounts with no monthly service fee and paid close
attention to overdraft policies, since college students—
often living on tight budgets—overdraw their accounts
more frequently than other bank customers. (We’ll also
show you how to avoid these fees completely.)
Finally, because college students are often anchored to
a small area around campus yet still need access to their
bank when they head home, we prioritized accounts with
wide ATM networks or free withdrawals.
Of course, our list isn’t for everybody. If you have
access to a great local credit union or are willing to go
completely online, you may be able to find better deals.
(For instance, all the national accounts we assessed carry
an overdraft fee, and most charge at least $2 for out-ofnetwork ATM activity. Both are fees you may be able to
avoid at a credit union or online.)
That said, if you’re looking for a bank with low fees,
a wide footprint, and top-notch mobile oferings, here are
your best options.
3
789()287
J U N E /J U L Y 2 0 1 8
M O N E Y. C O M
8,);-22)67
Many banks offer special terms for students,
but few have a truly national footprint. Check your
region and state for the best options for you.
THE WEST
MIDWEST
NORTHEAST
SOUTHEAST
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WHY IT WINS:
WHY IT WINS:
W H Y I T W I N S:
WHY IT WINS:
With 4,700 free
ATMs in 25 states,
U.S. Bank spans a
huge geographic
area. The bank also
refunds four out-ofnetwork withdrawals
a month. If you like
old-fashioned paper
checks, your first
box is free. Plus, the
mobile app gets
above-average
ratings.
C AV E AT: There’s no
free savings account
offered.
B R A N C H E S : Ariz., Ark.,
Calif., Colo, Idaho, Ill.,
Ind., Iowa, Kans., Ky.,
Minn., Mo., Mont.,
Neb., Nev., N.M., N.D.,
Ohio, Ore., S.D.,
Tenn., Utah, Wash.,
Wis., Wyo.
A consistent high
performer in J.D.
Power’s annual Retail
Banking Satisfaction
Study, Huntington’s
overdraft policy is
generous: You have a
24-hour grace period
to deposit more
money, and you can
set up a free transfer
from a savings
account to cover
overdrafts. Plus, the
account is always
free, even after you
graduate.
C AV E AT: The out-ofnetwork ATM fee is a
high $3.
B R A N C H E S : Ill., Ind.,
Ky., Mich., Ohio, Pa.,
W.Va., Wis.
This brand-new account doesn’t charge
out-of-network ATM
fees, and Citizens
Bank scores above
most other banks in
our universe for customer service in its
region, according to
J.D. Power. Plus the
account lasts until
age 25, a year longer
than many others do.
C AV E AT: You could be
hit with up to seven
overdraft fees in one
day. Other banks in
MONEY’s survey
limited it to fewer
than five.
B R A N C H E S : Conn.,
Del., Mass., Mich.,
N.H., N.J., N.Y., Ohio,
Pa., R.I., Vt.
The unique account
includes one checking and two savings
accounts—one shortterm and one longerterm—all in one. PNC
allows one free overdraft in the first year
and two out-ofnetwork ATM withdrawals a month.
C AV E AT: The out-ofnetwork ATM fee is
a high $3, so stick
to one of 19,000 free
ATMs (450 on college campuses).
B R A N C H E S : Ala., Del.,
D.C., Fla., Ga., Ill.,
Ind., Ky., Md., Mich.,
Mo., N.J., N.Y., N.C.,
Ohio, Pa., S.C., Va.,
W.Va., Wis.
Asterisk-Free
Checking
Student Checking
Virtual Student
Wallet
Monthly fee:
$3.99, waived
until age 25
Monthly fee:
$7, waived for up to
six years as a student
Out-of-network
ATM fee: $0
Out-of-network
ATM fee: $3
Overdraft fee: $35
Overdraft fee: $36
Student Checking
Monthly fee:
$0, with e-statements
Out-of-network
ATM fee: $2.50
Overdraft fee: $36
Monthly fee:
$0
Out-of-network
ATM fee: $3
Overdraft fee:
$37.50
METHODOLOGY: MONEY evaluated the 16 largest U.S. banks by reach—those that have at least 1,000 branches or a presence in at least 12 states. These were Bank of America, Bank of the West, BB&T Bank, Chase, Citibank, Citizens Bank, Fifth
Third Bank, First Citizens, Huntington, KeyBank, PNC, Regions, SunTrust, TD Bank, U.S. Bank, and Wells Fargo. Account data
was collected in March and fact-checked with each bank in April. Citibank did not respond to attempts to verify account information. To determine winners, MONEY considered minimum-balance requirements, monthly fees, overdraft policies, ATM
fees, savings account offerings, and customer service scores from J.D. Power’s 2018 U.S. Retail Banking Satisfaction Study.
BEST BANKS
3
789()287
M O N E Y. C O M
J U N E /J U L Y 2 0 1 8
&%2/-2+
P R E V I O US S P R E A D : P H OTO G R A P H B Y M L H A R R I S — G E T T Y I M AG ES.
T H I S S P R E A D : J AC O B A M M E N TO R P LU N D — G E T T Y I M AG ES
*SVKIXWGLSSPWTMVMX
Many colleges have marketing deals
that steer students toward specific
accounts, and those often carry high
fees or risky terms, according to a 2016
report from the Consumer Financial
Protection Bureau. It’s a great deal for
colleges—but not necessarily for you.
The Wall Street Journal found 112
colleges earned more than $18 million
last year through bank agreements.
“Don’t assume the school has
made sure the bank is offering you the
best terms,” says Suzanne Martindale,
a lawyer with Consumers Union.
(SRŞXKIXWSPHSRŠTVSXIGXMSRš
It can be tempting to opt into so-called
overdraft protection to avoid high
fees. But the name is misleading—this
service is actually what allows banks
With a little homework you can learn to avoid many of the gimmicks banks use
to get customers to pay extra, while making branch networks work for you.
to charge fees when you overdraw.
Instead, decline the service,
and your card will simply be denied
at the cash register if you don’t have
enough money—no fees charged.
We know what you’re thinking: embarrassing. But that’s the point, says
Tim Ranzetta, founder of Next Gen
Personal Finance.
“That’s going to lead you to track
your money more closely,” he says.
7TPMXYTXSKIXXLIFIWXXIVQW
7GSTISYX]SYVWYVVSYRHMRKW
Most student checking accounts
automatically convert to a regular
account when you graduate or reach
a certain age. Of the banks MONEY
surveyed, those carry a monthly fee
ranging from $4 to $12. Take note
of when your free account expires and
what requirements you have to meet
to avoid that charge.
During your first weeks on campus,
find all your bank’s nearby ATMs. Stick
with these to avoid a nearly $5 fee each
time you take out cash. In 2017, banks
charged a fee of $1.72 on average for
using an out-of-network ATM, according to Bankrate. That’s on top of the
$2.97 charged by the machine owner.
You want a free checking account with
wide access to ATMs and a free savings
account that earns at least a bit of
interest. The challenge? Finding these
at the same bank. Instead, consider
opening an online savings account,
where there are no minimums and
better interest rates, to stash away
a little emergency cash.
8LMROEFSYXKVEHYEXMSR
MONEY
&]/IVVM%RRI6IR^YPPM
M O N E Y. C O M
J U N E /J U L Y 2 0 1 8
AMERICANS HAVE FALLEN back in
love with debt.
Total household debt—a
category that includes mortgages,
student loans, and car loans along
with credit card and other debt—
dipped in the wake of the Great
Recession, but it has steadily
rebounded in the years since.
Overall, Americans’ debt hit a new
high of $13 trillion last year,
surpassing the previous record set
in 2008 by $280 billion, according
to the New York Fed.
MONEY dug into data from the
Federal Reserve’s 2016 Survey of
Consumer Finances to see just how
much debt—and of what types—
Americans carry at every age.
As it turns out, people’s peak
earning years also appear to be
their peak debt years. People
between the ages of 45 and 54
reported the highest levels of debt
overall, totaling $134,600. Those in
the 35–44 age bracket carry the
second-largest amount, at $133,100.
That’s to be expected, says John
R. Salter, professor of financial
planning at Texas Tech University.
“The trend tends to follow when
people have children and those
kids’ needs. We see that rise in
debt at the time most people are
looking for bigger homes to get
more space for their family, buying
cars for their children, or paying
college tuition for them.”
People may also feel more
comfortable taking on debt in these
years, Salter speculates: This stage
of life is also typically when people
feel established in their careers, a
time when they seek out promotions and raises and therefore
experience higher earnings.
The top chart at right, based on
Fed data, breaks down average
2016 debt levels and types for all
U.S. consumers. It has, to some
extent, an element of symmetry.
For those just starting out, the
K
%:)6%+)()&8 &=%+)&6%'/)8
%132+8,))28-6)9743490%8-32
Figures here are averaged across all households, whether they carry debt or not.
$150,000
EDUCATION LOANS
VEHICLE LOANS
CREDIT CARD DEBT
120,000
DEBT ON NONPRIMARY
RESIDENCE
90,000
OTHER DEBTS
60,000
MORTGAGE OR HOME-EQUITY
LINE OF CREDIT (HELOC) ON
PRIMARY RESIDENCE
30,000
0
LESS
THAN 35
35–
44
45–
55–
54
64
AGE ( H E A D O F H O US E H O L D)
65–
74
75 OR
MORE
%132+&3663;)67320=
When you restrict the pool to debtors, you see much higher average amounts owed.
$600,000
EDUCATION LOANS
VEHICLE LOANS
CREDIT CARD DEBT
500,000
OTHER DEBTS
400,000
DEBT ON NONPRIMARY
RESIDENCE
300,000
200,000
MORTGAGE OR HELOC
ON PRIMARY RESIDENCE
100,000
0
LESS
THAN 35
35–
44
45–
55–
54
64
AGE ( H E A D O F H O US E H O L D)
65–
74
75 OR
MORE
NOTE: Other debts may include home-improvement or medical debt, non-HELOC lines
of credit, and loans against retirement accounts or insurance policies, among others.
SOURCE: Federal Reserve’s 2016 Survey of Consumer Finances
J U N E /J U L Y 2 0 1 8
M O N E Y. C O M
AMERICAN DEBT
under-35 group, the total
average debt was $67,400.
That’s pretty close to the
$66,000 average debt for those
between the ages of 65 and 74.
Both groups are sitting just
outside the peak earning years,
and they are less likely to have
child-related expenses to
contend with. (We’ll get to the
75-plus cohort in a minute.)
Yet the types of debt held by
the two groups were vastly
diferent. Households run by
those under age 35 carry the
most education debt—a
function of their age as well as
recent surges in education
expenses and financing, a
challenge that older generations
were less likely to face. The
average millennial household
owes $14,800 in student loans.
For those in the 65–74
category, on the other hand,
the second-largest source of
debt was tied to real estate that
was not a primary residence—
presumably vacation homes or
investment properties.
Debt levels drop of sharply
for those 75 and older, who owe
less than $35,000 on average—
most of that in the form of a
mortgage. Even so, some
experts note, that five-figure
burden is still jarring.
“We’re seeing people
carrying much more debt than
in previous generations into
retirement,” says Ron Rhoades,
assistant professor of finance at
Western Kentucky University.
“Before, most people would have
already paid of their 30-year
mortgage before retiring—but
those generations also weren’t
taking advantage of home-equity
M O N E Y. C O M
J U N E /J U L Y 2 0 1 8
lines of credit and refinancing
options,” he says. “Paying of
such a loan really aids cash
flow in retirement and makes
your financial situation less
precarious.”
Some fretted that younger
families will be carrying even
more debt as they age, compared with today’s sixty- and
seventysomethings.
“Younger people are taking
on debt at a higher rate and
paying it of at a lower rate,”
says Lucia Dunn, an economics
professor at Ohio State
Š;)Ş6)7))-2+
4)340)'%66=-2+
19',136)()&8
8,%2-246):-397
+)2)6%8-327
-2836)8-6)1)28š
University who has studied
consumer debt. “When they
reach age 75, the debt picture
for them will look a lot diferent
than what we currently see.
When you project out these
trends, it is not so optimistic.”
This Fed data set considers
debt levels for all Americans—
both borrowers and nonborrowers—and averages out debt
levels across the whole group.
So MONEY also looked at a Fed
public data set that considered
only the debt levels of those who
do borrow. The results are in
the lower chart, “Among
Borrowers Only.”
In these cases, total debt
loads rapidly rise after age 35
and taper only slightly as
people inch toward retirement.
Some areas such as education
loans, vehicle loans, and credit
card balances remain relatively
consistent across all ages—
suggesting that for those who
habitually borrow for car
purchases, for instance, the
amount borrowed doesn’t vary
much by age. (The share of
people who carry vehiclerelated debt, however, peaks at
44% among 35- to 44-year-olds
and slides to 13.7% among
those 75 and older.)
Education debt follows a
similar pattern. The average
balances stay fairly consistent
among age groups under 75,
hovering in the range of $32,900
to $37,000. (More on that in the
sidebar opposite.) However, the
share of each age bracket with
education-related debt drops
steadily with time. About 45%
of people under 35 have
education debt, but that figure
falls about 10 percentage points
for each subsequent cohort
before bottoming out to nothing
for those over age 75.
Another big diference
between the charts is the large
light-green band of “other debts”
in the second graph, particularly
among those 75 and older. This
category, which includes loans
taken out against a pension or
life insurance policy, afects just
1.5% of the 75-and-up population,
according to the Fed data. Yet
the size of the balances owed
hints at the budgeting struggles
many retirees face as they try to
live on a fixed income.
Other diferences between
the charts are less surprising.
While relatively few people (less
than 10% across all age groups)
carry debt on a nonprimary
residence, for instance—something reflected in the relatively
slim lighter-blue band in the
first chart—such loans and
mortgages can be substantial,
making that debt much more
significant for those who hold it,
as seen in the second chart.
Both Rhoades and Salter
noted that all generations show
a greater comfort level with
debt in all forms. “This idea of
saving for what you need and
buying it outright has diminished as people have become
more comfortable with financing,” Salter says. That could
pose a problem later on, he
adds: “These norms come with
the future risk that you won’t be
able to pay it all of.”
8,)6)Ş7&))2%&-+7,-*8%132+30()6%(9087;-8,
)(9'%8-32()&8,)6)Ş7;,%8Ş7+3-2+32
revealed a startling shift: Borrowers
between 45 and 74 now owe more money in education-related
debt, on average, than those under age 35.
That’s a big change—especially since the Fed also finds that the share of
older Americans holding education debt has climbed over the past two
decades.
What’s behind the surge? It’s not just aging debt stragglers. The Urban
Institute found that, while some borrowers are still paying off their own
tuition costs, a bigger culprit appears to be loans meant to assist a child
or grandchild.
“The spiraling cost of college education is stretching families,” says Richard
Johnson, director of the Urban Institute’s program on retirement policy.
Such late-career borrowing can be dangerous, especially as people edge
closer to retirement. MONEY asked several experts to give us advice for parents and grandparents. Among their recommendations:
THE FED’S 2016 REPORT
DON’T STEP IN ...
TAP A ROTH IRA
until a student has maxed out
aid options and his or her own
federal loans. The rates and
protections offered on federal
student loans will be the best
financing option.
You can withdraw any amount contributed to a
Roth without paying a penalty, if you use the
money to fund qualified education expenses,
such as tuition and fees, says college funding
expert Fred Amrein. (You’d pay tax on any earnings, however, so avoid touching those.)
LIMIT YOURSELF
Borrow no more, for all children, than your yearly household income, says student-loan expert
Mark Kantrowitz. “If the debt is less, parents
should be able to pay it back in 10 years.” And a
corollary: “If retirement is less than 10 years
away—say, five years out—borrow half as much,”
he adds. “You want it paid off before retirement.”
SIGN UP FOR
AUTO DEBIT PAYMENTS
“Many [education] lenders will
give you a slight discount
as an incentive for signing up,
usually a quarter- or halfpercentage point off your
interest rate,” says Kantrowitz.
LOOK AT ALTERNATIVE
LOAN SOURCES
Parent PLUS loans
can carry higher interest rates—around 7%
as of mid-April, plus
an “origination” fee
that’s 4.3% of the total loan amount—than
other financing, says
Kantrowitz.
But if you have
excellent credit,
he adds, private loans
could be much
cheaper; lender SoFi
currently offers parents rates as low as
4.25%.
You may also get
lower rates on homeequity lines of credit
or by borrowing
against a 401(k), although both have big
drawbacks. HELOCs
will become more expensive when interest
rates rise. And 401(k)
loans have several
restrictions, including
five-year terms and a
requirement that you
stay with your employer for the life of
the loan (or repay the
remaining balance
quickly, typically
within 60 days).
J U N E /J U L Y 2 0 1 8
M O N E Y. C O M
THE MONEY 50
6)'311)2()(
*92(7
*YRHW
TOTAL RETURN
-RZIWXSVW6IMR
-R6MWO8EOMRK
AS INTEREST RATES and inflationary pressures rose
in the four weeks ended April 18, volatility returned to
Wall Street with a vengeance. This led to losses for
many of the stock mutual funds on our MONEY 50
recommended list.
Aggressive funds with big stakes in the fastestgrowing sectors of the economy were hit particularly
hard. This group included Primecap Odyssey Growth,
which keeps nearly a third of its assets in technology
stocks and which fell more than 4% in the month.
Funds that invest in companies based in developing
economies such as China and India also sufered big
losses, led by T. Rowe Price Emerging Markets Stock,
which was down 3.5% in the past four weeks.
,3;8397)3966)'311)2()(0-78
Building-block funds: For broad exposure to core asset classes
Custom funds: Specialized investments that can tilt your strategy
One-decision funds: If you want stocks and bonds in one portfolio
TOTAL RETURN
FUND (TICKER)
EXPENSES
(AS % OF
ASSETS)
PHONE
NUMBER
(800)
17.9% 11.4%
17.8 10.9
0.03
0.03
435-4000
435-4000
–1.0
0.0
15.6
17.8
8.4
9.7
0.18
0.05
662-7447
435-4000
1.5
0.6
1.4
–2.7
19.2
20.0
21.9
20.7
5.7
6.2
8.6
4.9
0.16
0.17
0.25
0.32
544-8544
662-7447
662-7447
662-7447
0.0
–7.4
1.8
0.26
662-7447
0.2
0.0
–0.6
–0.7
0.7
0.5
0.15
0.15
662-7447
662-7447
ONE
MONTH
ONE
YEAR
–1.5%
–1.3
THREE
YEARS 1
BUILDING-BLOCK FUNDS
Large-Cap
Schwab S&P 500 Index (SWPPX)
Schwab Total Stock Market Index (SWTSX)
Midcap/Small-Cap
Vanguard Mid-Cap Index (VIMSX)
Schwab Small Cap Index (SWSSX)
Foreign
Fidelity International Index (FSIIX)
Vanguard Total Intl. Stock (VGTSX)
Vanguard FTSEA/W ex-U.S. Small (VFSVX)
Vanguard Emerging Markets (VEIEX)
Specialty
Vanguard REIT Index (VGSIX)
Bond
Vanguard Total Bond Market (VBMFX)
Vanguard Short-Term Bond (VBISX)
M O N E Y. C O M
FUND (TICKER)
Vanguard Inflation-Protected (VIPSX)
Vanguard Short-Term Infl.-Prot. (VTIPX)
Vanguard Total Intl. Bond Index (VTIBX)
ONE
MONTH
ONE
YEAR
THREE
YEARS 1
0.9% –0.2% 0.6%
0.3
0.2
0.8
0.6
2.5
2.2
EXPENSES
(AS % OF
ASSETS)
PHONE
NUMBER
(800)
0.20
0.15
0.13
662-7447
662-7447
662-7447
CUSTOM FUNDS
Large-Cap
Dodge & Cox Stock (DODGX)
Schwab Fundamental U.S. Large (SFLNX)
Sound Shore (SSHFX)
Vanguard Value Index(VIVAX)
Primecap Odyssey Growth (POGRX)
T. Rowe Price Blue Chip Growth (TRBCX)
Midcap
Vanguard Mid-Cap Value Index(VMVIX)
Vanguard Mid-Cap Growth (VMGIX)
T. Rowe Price Div. Mid Cap Gro. (PRDMX)
Small-Cap
Vanguard Small-Cap Value (VISVX)
Schwab Fundamental U.S. Small (SFSNX)
Vanguard Small-Cap Growth (VISGX)
T. Rowe Price QM U.S. Small-Cap Gro.(PRDSX)
Specialty
T. Rowe Price Dividend Growth (PRDGX)
Vanguard Intl. Div.Appreciation (VIAIX)
Cohen & Steers Realty Shares (CSRSX)
Vanguard Global ex-U.S. Real Estate(VGXRX)
Fidelity Select Natural Resources (FNARX)
Foreign
Oakmark International (OAKIX)
Vanguard International Growth (VWIGX)
T. Rowe Price Emerging Markets (PRMSX)
Bond
Dodge & Cox Income (DODIX)
Fidelity Total Bond (FTBFX)
Vanguard Short-Term Inv. Grade (VFSTX)
Fidelity Corporate Bond (FCBFX)
Loomis Sayles Bond (LSBRX)
Fidelity High Income (SPHIX)
Vanguard Intm.-Term Tax-Ex. (VWITX)
Vanguard Limited-Term Tax-Ex. (VMLTX)
Templeton Global Bond (TPINX)2
Fidelity New Markets Income (FNMIX)
–2.1
0.1
–2.4
–1.1
–4.4
–2.2
15.8
15.0
12.1
14.6
33.0
35.5
11.1
9.7
7.4
10.4
16.6
16.5
0.52
0.25
0.91
0.18
0.67
0.72
621-3979
435-4000
551-1980
662-7447
729-2307
638-5660
–0.5
–1.6
–1.1
12.9
18.8
22.6
8.8
7.9
10.2
0.19
0.19
0.87
662-7447
662-7447
638-5660
–0.3
0.8
0.1
–0.4
11.6
14.3
22.1
21.6
8.8
9.0
9.1
10.5
0.19
0.25
0.19
0.81
662-7447
435-4000
662-7447
638-5660
–0.5
1.5
–0.1
0.6
8.6
16.1
16.1
–3.7
16.3
9.0
10.7
N.A.
3.2
5.4
–1.7
0.64
0.35
0.96
0.34
0.84
638-5660
662-7447
437-9912
662-7447
544-8544
0.3
–2.0
–3.5
20.9
33.1
29.0
7.8
11.8
9.9
0.95
0.45
1.23
625-6275
662-7447
638-5660
0.2
0.3
0.0
0.3
0.8
1.3
0.2
0.0
1.3
0.1
1.3
0.4
0.0
1.5
4.1
6.2
0.9
0.2
0.3
2.7
2.1
1.8
1.2
2.1
2.7
5.2
1.8
0.8
1.5
6.4
0.43
0.45
0.20
0.45
0.91
0.72
0.19
0.19
0.93
0.82
621-3979
544-6666
662-7447
544-6666
633-3330
544-8544
662-7447
662-7447
632-2301
544-6666
0.55
1.03
0.25
544-6666
544-6666
662-7447
0.58
0.63
638-5660
638-5660
0.14
0.14
662-7447
662-7447
ONE-DECISION FUNDS
J U N E /J U L Y 2 0 1 8
Balanced
Fidelity Balanced (FBALX)
–0.7
12.5
7.4
Fidelity Global Balanced (FGBLX)
–0.5
18.1
6.5
Vanguard Wellington (VWELX)
–0.5
10.7
7.5
Target Date
T. Rowe Price Retirement series (STOCK/BOND ALLOCATION)
Ex.: 2005 Fund (36%/64%) (TRRFX)
0.0
7.1
4.6
Ex.: 2020 Fund (58%/42%) (TRRBX)
–0.3
11.5
6.5
Vanguard Target Retirement series
Ex.: 2025 Fund (62%/38%) (VTTVX)
–0.3
11.8
6.4
Ex.: 2035 Fund (77%/23%) (VTTHX)
–0.4
14.7
7.5
NOTES: As of April 18, 2018. N.A.: Not available. Load funds are included for those who prefer
to use a broker. 1Annualized. 24.25% sales load. SOURCES: Lipper, New York, 877-955-4773;
the fund companies
THE MONEY 50
6)'311)2()(
)8*W
)8*W
TOTAL RETURN
7XSGOW7PMHIEW
3MP4VMGIW6MWI
CRUDE OIL SURGED to nearly $70 a barrel in the four
weeks ended April 18, marking the highest level since
2014. This sparked another round of inflation fears that
weighed on ETFs on our MONEY 50 recommended
list. However, one fund that jumped on the news was
iShares North American Natural Resources, up 9.2%,
as 80% of its assets are held in energy companies.
7
46%8-37
P/E
DIVIDEND YIELD
24.0
2.2%
23.0
CURRENT
2.0
ONEYEAR
RANGE
1.95
1.9
ONEYEAR
RANGE
22.0
21.5
1.8
CURRENT
21.0
1.7
,3;8397)3966)'311)2()(0-78
Building-block ETFs: For broad exposure to core asset classes
Custom ETFs: Specialized investments that can tilt your strategy
One-decision ETFs: If you want stocks and bonds in one portfolio
TOTAL RETURN
FUND (TICKER)
ONE
MONTH
ONE
YEAR
THREE
YEARS 1
EXPENSES
(AS % OF
ASSETS)
PHONE
NUMBER
(800)
BUILDING-BLOCK ETFs
Large-Cap
Vanguard 500 ETF (VOO)
Schwab U.S. Broad Market ETF (SCHB)
Midcap/Small-Cap
iShares Core S&P Mid-Cap ETF (IJH)
iShares Core S&P Small-Cap ETF (IJR)
Foreign
iShares Core MSCI EAFE ETF (IEFA)
Vanguard Total Intl. Stock ETF (VXUS)
–1.5%
–1.3
17.9% 11.4%
17.9
11.0
0.04
0.03
662-7447
435-4000
–0.6
0.7
14.8
19.7
9.9
12.5
0.07
0.07
474-2737
474-2737
1.5
0.6
20.8
20.1
6.8
6.3
0.08
0.11
474-2737
662-7447
EXPENSES
(AS % OF
ASSETS)
PHONE
NUMBER
(800)
1.5% 22.0% 8.7%
–2.6
20.9
5.1
0.13
0.14
662-7447
662-7447
0.0
–7.3
2.0
0.12
662-7447
0.1
0.0
1.0
0.3
0.5
–0.5
–0.7
0.3
0.3
2.5
0.8
0.5
0.7
0.8
2.2
0.05
0.07
0.05
0.06
0.11
662-7447
662-7447
435-4000
662-7447
662-7447
–0.6
–1.1
–1.2
–0.1
–1.5
–1.9
13.8
14.7
12.5
12.9
13.2
21.9
9.3
10.5
9.8
11.1
11.2
12.1
0.39
0.06
0.28
0.15
0.29
0.06
983-0903
662-7447
909-94732
474-2737
983-0903
662-7447
–0.5
0.2
–1.6
13.1
10.1
18.9
8.9
9.7
8.0
0.07
0.38
0.07
662-7447
909-94732
662-7447
–0.3
1.4
0.5
0.1
11.7
9.5
17.6
22.3
9.0
9.4
9.8
9.2
0.07
0.38
0.39
0.07
662-7447
909-94732
983-0903
662-7447
–0.7
1.5
–0.4
0.6
9.2
10.8
16.2
–6.5
16.5
9.0
11.1
N.A.
1.9
5.7
–1.1
0.35
0.25
0.34
0.14
0.48
787-22572
662-7447
474-2737
662-7447
474-2737
PowerShares FTSE RAFI
2.1
Developed Markets ex-U.S.(PXF)
iShares Edge MSCI Min.Vol. EAFE (EFAV) 1.0
SPDR S&P Emerging Markets Small
Cap ETF (EWX)
−0.8
Bond
Fidelity Total Bond ETF (FBND)
0.3
Pimco Active Bond ETF (BOND)
0.1
Pimco Enhanced Short
0.2
Maturity Active ETF (MINT)
iShares iBoxx $ Inv. Grade Corp.(LQD)
0.3
Vanguard Short-Term Corp. ETF (VCSH)
0.1
iShares iBoxx $ High Yield Corp. (HYG)
1.4
Vanguard Tax-Exempt ETF (VTEB)
0.3
SPDR Nuveen Bloomberg
–0.2
Barclays S/T Muni (SHM)
PowerShares Intl. Corporate (PICB)
1.7
20.8
6.1
0.45
983-0903
15.6
6.4
0.20
474-2737
18.4
6.0
0.65
787-22572
0.2
0.1
1.6
1.5
1.2
1.5
0.36
0.61
0.35
343-3548
400-43832
400-43832
0.7
0.1
4.2
1.3
1.6
1.3
3.6
N.A.
0.15
0.07
0.49
0.09
474-2737
662-7447
474-2737
662-7447
−0.7
0.4
0.20
787-22572
FUND (TICKER)
Vanguard FTSEA/W ex-U.S. Small (VSS)
Vanguard FTSE Emerging Mkts.(VWO)
Specialty
Vanguard REIT ETF (VNQ)
Bond
Vanguard Total Bond ETF (BND)
Vanguard Short-Term Bond ETF (BSV)
Schwab U.S.TIPS ETF (SCHP)
Vanguard Short-Term Infl.-Prot. (VTIP)
Vanguard Total Intl. Bond ETF (BNDX)
ONE
MONTH
ONE
YEAR
THREE
YEARS 1
CUSTOM ETFs
Large-Cap
PowerShares FTSE RAFI U.S. 1000(PRF)
Vanguard Value ETF (VTV)
WisdomTree U.S. LargeCap Div. (DLN)
iShares Edge MSCI Min.Vol. USA (USMV)
PowerShares S&P 500 High Qual. (SPHQ)
Vanguard Growth ETF (VUG)
Midcap
Vanguard Mid-Cap Value ETF (VOE)
WisdomTree U.S. MidCap Div. (DON)
Vanguard Mid-Cap Growth ETF (VOT)
Small-Cap
Vanguard Small-Cap Value ETF (VBR)
WisdomTree U.S. SmallCap Div. (DES)
PowerShares FTSE RAFI U.S. 1500 S-M(PRFZ)
Vanguard Small-Cap Growth ETF (VBK)
Specialty
SPDR S&P Dividend ETF (SDY)
Vanguard Intl. Div. Apprec. ETF (VIGI)
iShares Cohen & Steers REIT ETF (ICF)
Vanguard Global ex-U.S. Real Estate (VNQI)
iShares N.Amer. Nat. Res. ETF (IGE)
Foreign
13.0
3.7
0.50
983-0903
0.7
8.9
3.6
0.40
787-22572
Balanced
iShares Core Conserv.Alloc. ETF (AOK)
0.0
0.0
iShares Core Moderate Alloc. ETF (AOM)
–0.1
iShares Core Growth Alloc. ETF (AOR)
iShares Core Aggressive Alloc. ETF (AOA) –0.2
0.0
SPDR SSGA Global Alloc. ETF (GAL)
5.8
7.7
11.5
15.3
14.7
3.6
4.4
6.0
7.5
5.2
0.25
0.25
0.25
0.25
0.35
474-2737
474-2737
474-2737
474-2737
787-22572
SPDR Bloomberg Barclays
Emerging Markets Bond ETF (EBND)
ONE-DECISION ETFs
NOTES: As of April 18, 2018. N.A.: Not available. 1 Annualized. 2Phone numbers are 866.
SOURCES: Lipper, New York, 877-955-4773; the fund companies
'ERHMHGSRZIVWEXMSRW
[MXLTISTPI[IPSZI
What makes a good leader,
a good boss, in 2018?
A good leader is being the
dumbest in the room.
What?
Knowing a little bit about
what everyone is doing but
making sure you give them
the permission to do what
they have to do. Hiring people
who are super capable of doing their jobs. You can still
lead them, but have the expert who can execute for you.
I’ve made the mistake in the
past of micromanaging people who knew more than I did.
Now I realize that I’m the
visionary, the dreamer, the
creator. So I have to give them
room to execute on things.
8LI 132)=XEPO[MXL
8]VE&EROW
,IVEGGSYRXERXWSRGIFIKKIHLIVXSWXSTWEZMRKERHWXEVXWTIRHMRK
BY M I K E AY E R S
MONEY: Your new book,
M O N E Y. C O M
When did you start becoming really diligent about
saving and investing?
I was always conservative. I
was always more interested
in experiences over things.
Things didn’t make me
happy. I saved, saved, saved.
But I saved to a fault. About
15 years ago, my accountants
pulled me aside, and they
were like, “Tyra. You’re not
spending money. Nothing.
You’re just giving it away to
J U N E /J U L Y 2 0 1 8
the government. You need to
spend some damn money!”
So we created something
called the “F Account.” Which
was the “frivolous account.”
And I had a budget to spend
frivolously for the year, every
year. I needed that to
feel safe.
So what did you do?
Stupid stuff. In hindsight, I
should have bought art and
things that appreciate. I was
getting private planes, nothing
to show for it. It was a privateplane kinda moment for me.
Do you ever see yourself
retiring?
I look forward to retiring one
day. There are more legacy
businesses I’m creating that
will [endure] past me being on
this earth. That’s very important to me: creating things
that live beyond me.
P H O T O G R A P H B Y M I R E YA A C I E R T O —W I R E I M A G E
Perfect Is Boring, is all
about lessons you’ve
learned from your mom.
What did she teach you
about money?
TYRA BANKS: My mom
explained to me the importance of real estate and that
typically in Los Angeles it’s
going to appreciate. While a
lot of models were partying
it up, going shopping and
buying a closet of designer
clothes, and staying at the top
hotels, I was at the DoubleTree or Embassy Suites, sav-
ing my money. I bought a
house at 20 years old.
Do people respond to
bluntness?
I have my TV self, which is
very blunt. But that’s not who
I am in real life. I wish I was a
little bit more like that. I’m the
opposite. I’m conflict averse.
Many years ago I hired an executive coach who helped me
with confrontation with team
members. She taught me to
count to 10 and blurt it out.
I was doing so well when I was
coaching with her, and then
I stopped, because I thought I
had arrived. And I went back
to those same old habits.
Simply a
better way
to save
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1
National savings average rate courtesy of the FDIC’s Weekly National Rates and Rate Caps, as of 04/09/2018; average rate used is for deposits under $100,000.
© 2018 Barclays Bank Delaware, Member FDIC.
IT’S OK TO BE A
CONTROL FREAK
WHEN IT COMES TO
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E*TRADE Capital Management, LLC, a Registered Investment Adviser. © 2018 E*TRADE Financial Corporation. All rights reserved.
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