THE BIG TAX BREAK YOU MAY BE MISSING P. 35 . 9 2 ) . 9 0= 3 ť 1 3 2 ) = ' 3 1 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 1EOMRK 7IRWISJ XLI8VYQT&YQT 8LI*YRH 6ITSVX &]XLI2YQFIVW ,S[XLI &MKKIWX *YRHW%VI*EVMRK 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 *MZI 8LMRKW -RZIWXSVW+SX ;VSRK8LMW=IEV 8LI&IWX&EROW JSV'SPPIKI7XYHIRXW 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 ,S[1YGL(IFXXLI%ZIVEKI %QIVMGER,EW2S[ŜEX)ZIV]%KI 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. . 9 2 ) . 9 0= 3 : 3 0 9 1 ) 2 9 1 & ) 6 'SRXIRXW IN THIS ISSUE -VMW%TJIPEXLIVLSQI MR2I[=SVOMWE JEWLMSRMGSRŜERHE GEVIIVVSPIQSHIP ,IVWXSV]MWSRTEKIc Editor’s Note Letters & Comments The MONEY 50/50 0-:) ;LIVI%MVFRF;MPP 7EZI=SY1SRI]ŜERH ;LIVI-X;SRŞX Hotels are usually cheaper. But there are exceptions. 3RI;IHHMRK (IXEMP2SXXS7GVMQT3R There are plenty of costs that you can (and should) cut. Here’s where to spend more. *MZI7IGVIXW 7IPJ1EHI1MPPMSREMVIW 8IEGL8LIMV/MHW It’s not just about money. Successful parents also pass on good habits. ;36/ %=IEV3PH ;SVO)XLMG 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. 8LI*MRI%VXSJ 4VSGVEWXMREXMSR Trouble with deadlines? Easily distracted? Turn to Leonardo da Vinci for inspiration. +IXE/MPPIV,SQI 3JƙGIJSV9RHIV *MRHMRK8LEX 7EZMRKW7[IIX7TSX 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. 6)8-6) &IWX&SSOWXS ,IPT=SY6IXMVI6MGLIV It’s not necessarily light, but this summer reading list is one you can bank on. 8LI&MK8E\&VIEO =SY1E]&I1MWWMRK Health savings accounts deliver a triple tax advantage. But not enough retirement investors are cashing in. '30912 THE MONEY TALK WITH... 8]VE&EROW 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 33662-2120. Canada Post Publications Mail Agreement No. 40110178. Return undeliverable Canadian addresses to: Postal Station A, P.O. Box 4326, Toronto, Ontario M5W 3H4. GST No. 888381621RT0001. © 2018 Time Inc. All rights reserved. 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 years (or at quantity rates for more than 10 copies). Call 800-633-9970 or visit backissues.money.com. REPRINTS: To order 1,000 or more custom reprints, or for photocopy permission, call 212-221-9595, ext. 437, or go to timeincreprints.com. 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 provide updates to the card information we have on file. You may opt out of this service at any time. CUSTOMER SERVICE AND SUBSCRIPTIONS: For 24/7 service, go to MONEY.COM/CUSTOMERSERVICE. You can also call 800-633-9970; write MONEY, P.O. Box 62120, Tampa, FL, 33662-2120; or email email@example.com. MAILING LIST: We make a portion of our mailing list available to reputable firms. If you would prefer that we not include your name, please call or write us. PRINTED IN THE U.S. J U N E /J U L Y 2 0 1 8 M O N E Y. C O M )(-836Ş7 238) -XŞW&IIRE;MPH=IEVŜERH ;IŞVI3RP],EPJ[E]8LVSYKL 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: firstname.lastname@example.org 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 KYnaf_akYfYeZalagf&9ae`a_`]j& 9j]qgmjkYnaf_kjYl]k`gd\af_qgmZY[c79[d]jYl] qgmjhdYfkYlKqf[`jgfq:Yfc&O]g÷]j[gfkakl]fldq _j]YljYl]kgfYnYja]lqg^kYnaf_khjg\m[lk$kmhhgjl]\ Zqgmj:YfcjYl]KY^]Kgmf\-%KlYjJYlaf_ Yf\`a_`dqjYl]\[mklge]jk]jna&" AlÌkZYfcaf_afkqf[oal`qgm& )*% EGFL@ ; < *&)9HQ" *$(((eafaemegh]faf_\]hgkal NakalmkYlkqf[`jgfqZYfc&[gegj[Ydd)%0((%/-+%.-1*& Annual Percentage Yield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dam 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. Daily Money delivers news, advice, and deal alerts every weekday. Retire With Money shares successful savings strategies twice a week. 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 ;IMKLMRK6MWO 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: email@example.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 0MZI ;LIVI%MVFRF ;MPP7EZI=SY 1SRI]ŜERH ;LIVI-X;SRŞX 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 'PSGO[MWIJVSQXST VMKLXXLI2I[ 7LIVMHER,SXIPMR 8IPPYVMHI'SPSXLI 4EVOIV4EPQ 7TVMRKWERHER %MVFRFVIRXEPRIEV 7ERXE1SRMGE 2 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 4 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 0MZI WEDDING PLANNING 8LI3RI;IHHMRK (IXEMP=SY7LSYPH 7TIRH 1SVI3R 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 %TVEGXMGIH SJƙGMERXPMOI 2EWLIVTMGXYVIH EFSZIGERLIPT ]SYQEOIEPEWXMRK MQTVIWWMSR 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 0MZI 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 )PSR1YWOWLS[WEGPE]1SHIPc7 TVSXSX]TIXSLMWOMHWHYVMRKEZMWMXXS 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¬ EXXIRHXLI+VEQQ]W[MXLXLIMV HEYKLXIV&PYIc-Z] 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 -VMW%TJIPMR 2I[=SVO'MX] 1E] %=IEV3PH ;SVO)XLMG 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 *361)6)8-6)1)28-7%*%8) ;367)8,%2()%8,š 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. The TD Ameritrade Earnings Tool simplifies research on your earnings trades by aggregating thousands of estimates into a single data point. This earnings season, make your most insightful trades yet. Get up to $600 when you open and fund an account. Visit tdameritrade.com/earnings to learn more. 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 (IWMKRE /MPPIV ,SQI 3JƙGI JSV 9RHIV 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 7MQTPILSQISJƙGIYTKVEHIW EVIEJJSVHEFPIIEW]ERHRSX EXEPPXMQIGSRWYQMRK 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 *SV1MHHPI %KIH4ISTPI %KI4VSSJ WXVIWWIW XLIRIIHJSVFSXL ƙRERGMEPERHTL]WMGEP [IPPFIMRK 8LI&IWX&SSOW XS,IPT=SY 6IXMVI6MGLIV 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 7SGMEP 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 ) *SV=SYRK %HYPXW 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 ;LS;ERX XS6IXMVI =SYRK 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 8EOMRK XLI6IMRW 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 2IVZSYW -RZIWXSV “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 -71%2%+-2+8,)-6&),%:-36š —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 -RZIWXSVW ;LS;ERX XS(IPZI (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 7IEWSRIH -RZIWXSVW *SV&VSEH *MRERGMEP %HZMGI “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. =396132)=36=3960-*) *3'97)732 0-*))2)6+= Ŧ ,3;(3=3946-36-8->)#š —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 smaller. faster. stronger. Meet the all new SimpliSafe. It’s smaller, faster, stronger than ever. “The best home security system” wirecutter april 2018 “...SimpliSafe belongs at the top of your list...” cnet editors’ choice 3/28/18 Engineered with a single focus: to protect. With sensors so small they’re practically invisible. Designed to disappear into your home And blanket it with protection. More than easy to use—downright delightful. All at prices that are fair and honest. It’s home security. Done right. Right now get free shipping at SimpliSafe.com/money “A seamless system” pcmag editors’ choice 4/2/18 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. You can’t see possibilities if you’re not willing to look for them. We see opportunity when others don’t. Our entrepreneurial spirit fuels us to explore opportunities others wouldn’t, with the financial strength you can count on. Experience the difference at Athene.com. ANNUITIES REINSURANCE INSTITUTIONAL PRODUCTS 21471 (5/18) 2064530-0508118 Athene © 2018 YOUR NEXT PLAN 8LI&MK8E\&VIEO =SY1E]&I1MWWMRK 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 Since 1990 Hennion & Walsh has specialized in investment-grade taxfree municipal bonds. The company supervises over $3 billion in assets in over 16,000 accounts, providing individual investors with institutional quality service and personal attention. Our FREE Gift To You In case you want to know more about the benefits of tax-free Municipal Bonds, our specialists have created a helpful Bond Guide for investors. It’s free and comes with no obligation whatsoever. Call C ll (800) 316 316-1837 1837 and request our Bond Guide, written by the specialists at Hennion & Walsh. It will give you a clear and easy overview of the risks and benefits of 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 -RZIWXMRKMW E PSRKNSYVRI] ERH ]SY LEZI XSGSYVWIGSVVIGXEPSRK XLI [E]ŜIWTIGMEPP] MJ]SYVEWWYQTXMSRW [IVISJJ XLI QEVO ,IVIŞWLS[ XS KIX FEGOSRXLI VMKLXXVEGO - 0 09 7 8 6 %8 - 3 2 &= 7 ) 6 + - ( ) 0+ % ( 3 8LI*YRH6ITSVX 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 *-:)8,-2+7-2:)78367 +38;632+8,-7=)%6 %2(,3; 83 *-< =396 786%8)+= ;LEXXSHSRS[XLEX MRƚEXMSRMRXIVIWXVEXIW ERHZSPEXMPMX]EVIYT[LMPI QER]WXSGOWEVIHS[R &] 6=% 2 ( ) 6 3 9 7 7 ) % 9 - 0 09 7 8 6 %8 - 3 2 &= ( % 2 4% + ) 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 :SPEXMPMX] 6SEVW&EGO 8LIEWWYQTXMSR 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 8VEHIVWSRXLIƚSSV SJXLI2I[=SVO 7XSGO)\GLERKISR 1EVGLcEWZSPEXMPMX] FIKERXSGSQIFEGO XS;EPP7XVIIX 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 )QIVKI 8LIEWWYQTXMSR 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. 8LI*IH 1SZIW*EWXIV 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 7SQI.YMGI 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. 8IGL7PS[W (S[R 8LIEWWYQTXMSR 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 '2&'EMVW*EGIFSSO ')31EVO>YGOIV FIVKŞWGSRKVIWWMSREP XIWXMQSR]SREHEXE WGERHEPXLEXLMXXLI WSGMEPQIHMEKMERX 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 *-:)1-7'32')48-327 %&3988,) 86914 &914 8V]MRKXSTVIHMGXXLI 4VIWMHIRXŞWMQTEGXSRXLI ƙRERGMEPQEVOIXWMWVMWO] ,IVIŞW[LEX ]SYGERHSRS[ &] 4% 9 0 . 0 - 1 - 0 09 7 8 6 %8 - 3 2 &= 6 % 1 - 2 - ) 1 - 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 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 %QIVMGE*MVWX# 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. 8LI7XVSRK (SPPEV# 1MWGSRGITXMSR2Sc 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 4VIWMHIRX8VYQTƙVIW YTXLIGVS[HEXE Š1EOI%QIVMGE+VIEX %KEMRšVEPP]MR1EVGLMR 1SSR8S[RWLMT4E 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. 1YPXMREXMSREPW 8EOIE &EGO7IEX# 1MWGSRGITXMSR2Sc 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 -RJVEWXVYGXYVI 4VIWMHIRX# 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 “How is my money doing? Will I have enough to retire?” When can I retire comfortably? What if I retire earlier? Find out how different scenarios play out Assess your readiness here What impact will Social Security have? How much money will I have to spend each month? Add income events to explore answers Make sure you save enough What if something unexpected happens? Can I afford that splurge? Plan for big expenses You can prepare for that too Get answers with our free retirement planner. Want more? Get personalized planning and advice from our expert advisors. Our advisory fees are competitively low and the tools are always free! BONUS OFFER GO TO: Available on web & mobile personalcapital.com/MY78 Personal Capital Advisors Corporation is a registered investment advisor with the Securities Exchange Commission ("SEC"). Any reference to the advisory services refers to Personal Capital Advisors Corporation. SEC Registration does not imply a certain level of skill or training. © 2018 PERSONAL CAPITAL CORPORATION. ALL RIGHTS RESERVED. 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 )WXEXI 4VIWMHIRX# 1MWGSRGITXMSR2Sc 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 8LMW]IEVŞWQEVOIXMW SJJXSEHMJJIVIRXWXEVX XLERŞWXIWXMRK]SYV WXVEXIK]ERHVIWSPZI 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,) &-++)78 *92(7 ,S[XLIPEVKIWXQYXYEPJYRHWMRXLIMVVIWTIGXMZI GEXIKSVMIWŜXLISRIW]SYŞVIQSWXPMOIP]XSS[RŜ TIVJSVQIHSZIVXLITEWXQSRXLWERHXLVII]IEVW 0%6+)'%4 783'/*92(7 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'%4 783'/*92(7 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 -28)62%8-32%0 783'/*92(7 RANK FUND NAME (TICKER) &%0%2')( *92(7 1-YEAR 3-YEAR 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 &32(*92(7 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%() &32(*92(7 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 8,) &)78&%2/7 *36 '300)+) 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 97&ERO ,YRXMRKXSR &ERO 'MXM^IRW&ERO 42' 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 Spring ahead with a rate that’s 21x the national average.1 There’s never been a better time to open a Barclays Online Savings Account. • No monthly maintenance fees • Secure 24/7 online access to your funds • Online transfers to and from other banks • 100% U.S.-based customer service Open an account today at barclaysus.com/MoneyMag 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 YOUR MONEY. If you like to feel in control of your investments, let us introduce you to E*TRADE Personalized Investments. We offer professionally managed portfolios that are customized to help meet your goals. You’ll know what you’re invested in, what you’re paying for, and how it’s performing. So go ahead and get as control freak as you like. All investing involves risk, including the possible loss of principal. For more information about investment strategies, portfolio management, and advisory fees, visit etrade.com/personalized investments. Investment advisory services are offered through E*TRADE Capital Management, LLC, a Registered Investment Adviser. © 2018 E*TRADE Financial Corporation. All rights reserved.