Understanding QE3—The Federal Reserve’s Latest Policy

Bad weather outside, rainy, dark, dismal—I’m thinking about economics. A retired friend asked about QE3, the acronym for Quantitive Easing 3—the Federal Reserve’s (Fed’s) newest effort to boost the economy. There have been two related efforts in the past few years, hence this new one is number 3. “I don’t understand it—is there anything in it for me?” he asked.

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Why I Hunt

Photo by Bill Davenport, Kentville, Nova Scotia, CA

During working years we often do things under pressure—to provide for our families, to advance our careers or maybe to set an example for our children. But in retirement many of these obligations fade into the background. So the choices we make seem to beg for reasons.

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Active Investing: Secrecy, Special Arrangements and Ethical Problems

Photo by PicketAces, Thomas Picard, Brooklyn, N.Y.

Active retail investors earn lower returns than their passive counterparts—it is a major theme here at Later Living. Today I’ll add one more argument for passive investing: active investing exposes retirees and others to greater likelihoods of dishonesty and conflicts of interest.  Continue reading

A MOTORCYCLE JOURNEY

Wayne Flick

Last year, my brother Wayne and I motorcycled the full lengths of Skyline Drive and the Blue Ridge Parkway, visited some museums and rode the Cherohala Skyway between North Carolina and Tennessee. We spent 7 nights together, 4 in tents, and the weather was good throughout. It’s been the longest time I’ve had alone with a brother in many years.

The best parts of retirement are often adventures we never had time for in middle life. Both Wayne and I motorcycled in our youth, then we gave it up because of the risks and costs. Retirement offered us each a few years when we could again experience the constant accompaniment of wind as we rode with somewhat modest abandon through mountain roads. Continue reading

How Much Does Active Investing Cost Retirees?

An active investor. Photo from Celal Teber, Teber Photography, United Kingdom

A great deal!—to answer the title question. Three examples will illustrate the loss associated with active investing, or, stated positively, the gain from passive investing. The examples build on last week when I showed that active and passive investing had to achieve the same average gross returns. Yet active investing costs more, so in the end, the net returns to retirees are smaller with active investing.

Active investing links retirees with financial planners, brokers and actively managed mutual funds. Active investors believe they can identify low-priced stocks to buy, or that they can predict which stocks will drop in price so they can sell. In addition to individual stocks and bonds, they often buy actively managed mutual funds where a fund manager does the buying and selling. Continue reading