Earlier this week, I received an anguished call from an investor—let’s call her Emily. Emily’s accountant was finishing up her tax return and was surprised to see a $113,000 capital gain. The explanation turned out to be just as surprising. The issue stemmed from a well-intentioned move by the [...]
Investments 101
Earlier this week, I received a call from a college student who had started a successful business. His school, he said, doesn’t offer any practical courses in personal finance so he asked my advice on investing. We walked through the following key questions. I would offer this same advice to [...]
Looking around the corner
Last week, I discussed the perils of market timing. This week, I’ll address its close cousin: stock-picking. These days, many people accept that stock-picking isn’t a great idea. Evidence shows that both professional and individual investors fare poorly, on average, when they choose individual [...]
Jane’s story
I'd like to start with a seemingly simple question: Suppose you'd purchased an investment for $19,000 and later sold it for $287,000. Would there be a gain or a loss? If you answered that there would be a gain, I would agree with you. Specifically, it appears the gain would be $268,000. But what if [...]
The Hatfields and the McCoys
The nineteenth-century feud between the Hatfields and the McCoys doesn’t hold a candle to the debate between supporters of index funds and supporters of active management. Those in the index fund camp cite decades of data—going back to the 1930s—to support their view that active management is a [...]
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