[eBook Code] Ignore the Hype (eBook Code, 1st)

Acknowledgments xi

About the Author xiii

Preface xv

Introduction 1

Part I: Yes, The Game is Rigged, But You Don’t Have to Play 7

Chapter 1: The Times They are a-Changin’ 9

There is a World of Difference Between Speculation and Investing 10

So, Why is It So Damn Hard to Ignore the Hype?! 12

To Play, or Not to Play, That is the Question 14

Life at the Speed of Light 15

Lower Transaction Costs 17

Self-Directed Investing 20

High-Frequency Trading 23

The 24-Hour News Cycle 24

Globalization 29

The Rise of the Institutional Investor 31

The Bottom Line 33

Chapter 2: Don’t Play a Game That’s Rigged 35

The Upward Path of Markets 36

Asset Class Returns 38

A Twist in the Plot 40

Time in the Market versus Timing the Market 41

Why are Las Vegas Casinos So Nice? 43

The True Cost of Sitting on the Sidelines 45

Does Crisis Equal Opportunity? 48

Chapter 3: Guess What? A Forecast is Just a Guess 51

But Forecasting is Fun 52

Economists 54

Wall Street Analysts 55

Media Pundits 57

The Federal Reserve (the Fed) 58

So, What’s the Problem? 59

The All-Star Team 60

What Should You Do with Forecasts? 62

Part II: If You Don’t Know Where You’re Going, You Probably Won’t Get There 65

Chapter 4: You Must Know What Drives Investment Returns 67

You Can Beat the Dealer, But Can You Beat the Market? 69

It’s Hard to Stand Above the Crowd in a Room Full of Tall People 70

So, What’s the Solution? 71

Indexed Products 72

A Rules-Based Approach 75

Fundamental Factors for Success 78

Stock Market Factors 79

Growth Stocks 80

Value Stocks 81

Bond Market Factors 87

The Bottom Line on Factor Premiums 93

Chapter 5: You Must Have a Specific Financial Goal 95

Step One: Determine Your Vision of Retirement 96

Step Two: Determine How Much You Spend Today 98

Step Three: Determine When You Want to Retire 99

Step Four: Determine How Much Income You’ll Need in Year One of Retirement 99

Step Five: Determine Your Sources of Retirement Income 103

Step Six: Determine How Much You’ll Need from Your Savings and Investments 103

Step Seven: Determine a Sustainable Distribution Rate 104

Step Eight: Determine How Much Money You Need to Retire 105

Step Nine: Determine Your Plan to Accumulate the Money You Need to Retire 105

Putting It All Together with a Step-by-Step Example 107

Already Retired? 111

The Bottom Line 111

Chapter 6: You Must Invest to Meet Your Goal 113

How Much Money Do You Want to Make? 114

How Much Money Do You Need to Make? 115

How Much Risk Should You Take? 116

Sleeping on a Bed of Money 120

Adding Some Stocks to the Mix 121

Portfolio A 123

Portfolio B 123

What Portfolio Do You Want? 124

Still Not Convinced? 125

Enjoy Your Retirement! 127

Chapter 7: You Must Practice Smart Diversification 129

What is Smart Diversification? 130

You Don’t Want to Be a Pig! 130

Owning What You Know May Not Be Best 132

It’s a Big World 137

Sometimes You’re Trapped by Your Own Success 140

Dealing with Concentrated Positions 143

Smart Diversification Enhances Your Odds of Success 145

Winning the Lost Decade 147

Chapter 8: You Must Learn How You’ll Be Taxed 151

But First, the Hype 153

And Now, the Truth 154

Income Taxes: A Quick Primer 154

Are Taxes Going Higher? 157

Tax Diversification 158

Do You Know Who Your Partner Is? 159

As If That’s Not Enough … 162

What’s Certain in Life? 163

Part III: Just Because You’re Paranoid Doesn’t Mean They Aren’t Out To Get You 169

Chapter 9: How to Avoid the Taxman Without Going to Jail 171

Building Your Tax-Free Pool of Money 172

Accelerating the Flow of Funds to Your Tax-free Pool 176

Building Your Taxable Pool of Money 177

Do You Want to Keep More of What You Make? 181

Chapter 10: Sorry, But You’re Probably Your Own Worst Enemy 185

Tales Your Parents Told You 187

Anchoring 189

Confirmation Bias 190

Overconfidence Bias 192

Herd Behavior 194

Framing Bias 196

Hindsight Bias 198

Self-attribution Bias 200

Myopic Loss Aversion 201

Chapter 11: FYI, the Media Doesn’t Care If You Make Money 205

But Then There’s the Media … 206

Did Black Monday Spell Doom for Investors? 211

What Side of the Aisle are You On? 214

Would You Hitch Your Family’s Future to the Circus? 217

Chapter 12: Avoid the Wolf in Sheep’s Clothing 223

Does It Pass the Sniff Test? 224

Who’s Got Your Back? 224

Focus on Minimizing Unnecessary Fees 229

Is What You’re Buying Even an Investment? 232

Drowning in a Sea of Complexity 234

Do You Even Know What You’re Buying? 236

But My “Regular” Bonds are Free from Commissions, Right? 237

What are You Using Derivatives For? 241

Market Voodoo (AKA Technical Analysis) 243

Let Me “Sell” You an Annuity… 244

Now, Let Me “Explain” an Annuity… 245

The Bottom Line 247

Chapter 13: How to Survive a Bear Attack 249

Prepare for the Bear 250

Risk Capacity versus Risk Tolerance 252

Rebalance to Stay on Course 254

Buy-and-Hold Investing 257

Buy-and-Forget Investing 258

So, What Do You Do When Market Valuations are Extreme? 259

Does What Gets Measured Get Improved? 260

Ready for Some Good News? 262

A Better Life 263

Conclusion 267

Index 271