Is active fund management always bad?

The debate between actively and passively managed equity mutual funds has raged for decades.

Legal crossroads: Where lemon law meets auto fraud



Love watching exciting legal dramas on the tube? As many of you know, they are a bit of a stretch from real life, which is not always as compelling.

While my office handles mostly lemon law matters, wherein someone gets a bad car, we also handle auto fraud matters, wherein someone gets a bad car deal.

How market timing affects retirement savings

Graphic courtesy of Artie Green
The graph shows the growth and decline of a $250,000 portfolio over time. The blue line represents the results based on the actual returns, the green line sorts the returns such that the highest annual return occurs first and the purple line shows the opposite – the lowest return occurs first.

There are numerous investment-strategy aphorisms that have circulated throughout the years. For example, “Your percentage allocation to bonds should be the same as your age.” Most are rooted in the idea that as you become older, and particularly during retirement, you will become more dependent on your savings and therefore should take less risk with your investments.

But is there any mathematical basis for such a strategy? It turns out there is, but not necessarily in the way conventional wisdom would suggest.

Can your IRA be tapped before retirement?

Anyone who has contributed to an Individual Retirement Account is likely aware of the plan’s primary restriction – namely, that you cannot withdraw the money until you reach the age of 59 1/2.

At the same time, the government didn’t want this restriction to be too onerous, so rather than making it impossible, they simply decreed that if you do so, you will incur – on top of the taxes owed on the earnings that have accumulated – a penalty of an additional 10 percent. This was considered to be sufficient to discourage most taxpayers from arbitrarily raiding their retirement savings prematurely, while at the same time allowing it to be used as a safety net for those undergoing financial stress when younger.

Is the yield curve signaling a recession?

Graph courtesy of Federal Reserve Bank of St. Louis
Financial experts at the Federal Reserve Bank of St. Louis chart the difference between two- and 10-year bond rates to predict whether a recession is imminent.

You may have heard through the financial media that the U.S. Treasury yield curve has been flattening, portending a possible recession in the near term. As of this writing, the yield curve is at its flattest point since 2007. Exactly what is the yield curve, and is it truly a good indicator of a future economic downturn?

The Treasury yield curve is, simplified, the difference between the current two-year and 10-year U.S. Treasury bond rates. Ordinarily the two-year rate is lower than the 10-year rate, resulting in a positively sloped curve if you were to graph it. It is a function of the time value of money. If you buy a 10-year bond, you are lending money to the government for 10 years, hence the demand for a higher return as compared to only a two-year loan.

One simple way to deal with financial fraud



There seems to be no letup to the reports about fraudsters attempting to fleece unsuspecting investors out of their savings. I find it especially egregious when they target seniors who have a limited ability to recover. Below I offer the one piece of advice I believe is easy to follow and will at least help mitigate the damage.

But first, here’s a rundown of some of the latest scams to come to my attention.

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