In December of 1954, 23-year-old John Neff hitchhiked from Ohio to New York in search of work. A Navy veteran, Neff had recently graduated from college—near the top of his class—with a degree in finance. His hope: to land a job as a stockbroker. But despite these qualifications, Neff was turned down for the role. Why? According to a biographer, the brokerage firm felt that “his voice didn’t carry enough authority.”
It didn’t take long for Neff to recover from this setback. He soon found work at a firm back in Ohio, where he rose quickly through the ranks. From there, he moved to Philadelphia, home of the Vanguard Group, where he took over management of its Windsor Fund. Over the course of 31 years in that role, Neff’s track record was nothing short of outstanding. Investors poured into Windsor, and by the 1980s it had become the largest fund of its kind—so large, in fact, that Vanguard feared it might become too large and closed its doors to new investors. In the words of Vanguard founder John Bogle, “It would be impossible to overestimate John’s importance to Vanguard’s survival in the early years.”
But according to that early hiring manager, Neff really wasn’t cut out for the investment industry. His voice didn’t sound authoritative enough. Absurd as it sounds, this is the way Wall Street thinks. They want people who look good and sound good—who can get in front of investors and make declarative, authoritative sounding statements.
While this approach might make sense in some industries, I find it especially ill-suited in the world of finance. Investment markets are inherently uncertain. No one can predict (with accuracy) where the stock market—or interest rates or taxes or anything else—will be headed next. For that reason, the artificial self-confidence of Wall Street pundits is not just misplaced; it’s entirely counter-productive.
The reality is that the world is far less binary than Wall Street would acknowledge. While it may not sound “authoritative,” the fact is that the only and best answer to many financial questions is, “It depends” or “I’m not sure.” Wall Street doesn’t like these kinds of statements because they don’t motivate people to take action. And that’s why they didn’t hire John Neff as a broker. Neff preferred facts and candor and measured statements, an approach that wouldn’t generate nearly enough trading commissions to keep Wall Street going.
As you think about your finances, I would encourage you to embrace the John Neff way of thinking. Never mind Wall Street’s talking heads, no matter how authoritative or self-assured they sound. Instead, recognize that oftentimes there is no single “right” answer to a question and that the best solution may be to take the middle course, to split the difference, to avoid seeing questions in simplistic black-or-white, yes-or-no terms.
What are some examples? Below are 13 questions that, for many people, are open-and-shut cases, with simple, unequivocal answers. In my view, however, each of these is a topic for discussion and should allow room for disagreement. You’re not a heretic if you see it one way—or a fool if you see it the other. And if you want to split the difference, that might make the most sense of all. But whatever you do, don’t listen to any one person’s view—especially if they sound like they have all the answers.
1. Robert Shiller is a Nobel Prize winner and has accurately predicted past market crashes. His CAPE Ratio says the stock market is now extremely overpriced. Should I worry?
2. Whether or not the market is overpriced, it’s clearly at (or near) all-time highs. Doesn’t it make sense to take some profits?
3. If I have a high income, should I save every dollar I possibly can in a retirement account?
4. If I have a high income, is a Roth 401(k) a silly idea?
5. If I have surplus cash, should I pay down (or pay off) my mortgage?
6. With the estate tax exclusion now at $11.4 million per person, do I even need to think about this anymore?
7. Should I make cash gifts to my adult children?
8. Warren Bufett says that bonds can increase a portfolio’s risk. Should I be concerned?
9. Indexing theory says I should own a little bit of everything. Should I own international stocks?
10. How about international bonds?
11. If I have a whole life insurance policy—and I realize how much it’s been costing me—should I liquidate it? How about a similarly overpriced annuity? Do either of these much-maligned investments make sense for anyone?
12. I’ve heard that I’ll earn the largest possible Social Security check if I wait until age 70. Should I wait?
13. If I’m researching one of these questions and find an academic article that cites solid evidence, should I believe it?