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I first heard about Acorns a few weeks ago. Acorns is a micro-investing mobile app designed to make it incredibly easy to invest small amounts in the stock market. As if designed perfectly for the Millennial generation, there’s no need to actually know anything about investing to get started; Acorn’s advisers simply designed a portfolio (based on “Modern Portfolio Theory”) that works for all investors using the app.

The creators of Acorn have found a way to solve major problems with the financial industry’s typical path to investing, and the biggest is the barrier to entry. Acorns lowers this barrier considerably. This is the continuation of a trend that stared centuries ago. Investing in equities was once the realm of the wealthy, not the middle class. Discount brokerages were the previous generation’s introduction to investing, allowing investing amounts as low as $100, and now Millennials are coming of age in an industry that allows them to invest with as little as $5.

Millennials (and everyone who owns a mobile phone today, but Millennials are the population most likely to bank and invest using a mobile device) are the beneficiaries of technological advancements that have greatly reduced the cost of investing. The cost of a trade to a brokerage is virtually nothing, and it has been the trend for brokerages to pass that savings onto the customers.

In the 1990s, it might have cost $35 per trade to buy and sell stocks with your full-service broker over the phone. Discount brokerages brought that cost down to $4 to $7 for certain types of trades, or about $20 for others, with some discount brokerages offering free trades for a limited time or in return for a small monthly fee.

And that’s how Acorns fits into this picture. It has moved the discount brokerage model to the mobile phone, has taken investment choice out of the equation for investors, and charges customers nothing to buy and sell. Instead, Acorns has a monthly account maintenance fee, which in the industry is called a “wrap fee.” This is a pricing model employed by Betterment, as well.

Acorns charges users/investors $1 per month plus a percentage of their assets. The fee percentage is an annual 0.25% to 0.5% based on the account’s average daily balance. The first $5,000 in an account receives the 0.5% rate, and all dollars above that $5,000 are charged at a rate of 0.25%. Acorns says, “The more you invest, the more you save,” which is a nice catchphrase, but just like most so-called savings wherein a rate gets lower the more money you have, the more you invest, the more you pay (as a total percentage of your assets).

If your account balance is $500, your monthly fee is $1.21 per month. If your account balance is $100,000, your monthly fee is $22.88 per month. That’s on top of any fees that may be embedded within the investments chosen by Acorns. Compare this to Betterment’s current fee structure, where investors are charged either 0.15%, 0.25%, or 0.35% annually, with the best rate reserved for accounts with a $100,000 minimum balance. But with Betterment, the lower rate is in effect for your entire balance.

With my Vanguard account, I choose my own funds (though other people may simply invest in one, such as the Total Stock Market Index Fund), and there is no wrap fee. VTSMX has an “expense ratio” (internal management fee) of 0.17%, but that’s different than a wrap fee. That’s because the exchange-traded funds that make up the Acorns portfolio each have their own fees, from 0.05% to 0.20%. These fund fees are akin to the VTSMX expense ratio, so Acorns charges a wrap fee on top of the fees of the underlying investments.

Acorns warns potential customers in an agreement when signing up via mobile phone — an agreement that most customers will never read:

Clients should be aware that Acorns is designed with frequent investing in mind. This fee structure may not be appropriate for individuals looking to make few or infrequent small-dollar investments.

Wait a second. The beauty of Acorns is the ability to make small-dollar investments. Let’s say you open an account and make just a few $5 trades. If you deposit a total of $20 to test the account and leave your money there for a year, you’ll pay an annual fee of $12.12. The stock market might improve, but it’s unlikely to grow so much that the gains cover the fees. It may be “just $12.12″ a year, but that could be an unacceptable percentage of your balance!

If you’re not going to invest frequently, such as catching your remainders when you spend money on a daily basis or throwing five dollars into the account when someone expresses market frustration as Carl Richards is doing, this isn’t the right type of investing for you.

The fees may hardly be the point, though. There’s quite the possibility that Acorns represent a new way to invest thanks to the convenience of mobile technology. It has the potential to introduce a new generation to investing, and the long-term benefits for the individual outweigh the fees, if that individual is unlikely to invest in the stock market otherwise.

And given time, just like in the world of online banking, traditional brokerages will eventually follow. If there’s money to be made with innovative enhancements spearheaded by financial start-ups, the financial industry establishment will implement it, by either copying or acquiring the technology.

As a relatively young member of Generation X, I was an early adopter of technology that made the web the primary way for doing business. I started my own personal website out of a computer in my dorm room twenty years ago. A few years later, online-only banks started business. These Web-only banks inspired traditional brick-and-mortar banks to create ways to bank online rather then over the phone or in person.

Twenty years later, mobile technology is in that same position. The services offered may not be perfect today, but they will mature as mobile technology continues to reach an increasing portion of American consumers and investors.

I was planning to give Acorns a try by opening a personal account, but after taking the time to think about it, and after reading the Terms and Conditions, I’ve determined it’s really not for me. I will stick with my Vanguard account for now, though it’s been suggested to me that I should look into “private client” banking; once again, those with more assets receive preferential treatment — like free checks, lower mortgage rates, and access to personal loans. I haven’t made any decisions yet.

Acorns is available for iPhone and Android. Search for it at the applicable app store, or visit the website. Will you give the app a try? Is this type of investing beneficial to you?


As of today, the Dow Jones Industrial Average has erased all of its gains this year. We’re not quite in “market correction” territory, though. The S&P 500 is still up year-to-date, but it isn’t presenting as fantastic a return as was evident earlier in the year. We could be getting to the point where the market finds itself in the midst of a market correction.

I wouldn’t pretend to be able to predict the daily, weekly, monthly, or annual swings of the stock market, but there’s no reason to rule a correction out as a possibility. Investing professionals typically define a market correction as the point at which an index that measures broad market performance is down 20 percent from a high. The Dow would have to be below 14,000 for there to be a market correction (and that would be down 20 percent from high of 17,279.74). The Dow could theoretically get there.

And if something is a possibility, it’s good to plan for it in advance. Here on the east coast of the United States, residents are prone to hurricanes. The good thing about hurricanes, and where they differ from stock market corrections, is that there are warning signs. If you pay attention to the weather segment in the news, you should know when a hurricane is going to arrive.

Before the destructive weather arrives, you have time to go to the store and buy water and food, nail boards to your windows, or evacuate. There’s little excuse for waiting until the last minute in most cases.

There are claims that there are warning signs of a market correction well in advance of a stock market crash (if the correction happens to come with one). But these claims generally come in two different situations. The first consists of those claims by people who are always predicting a correction is nigh — a broken clock is correct twice a day. The second consists of “experts” who point out the signals after the fact but were suspiciously silent while the signals were supposedly present.

Because markets generally operate in cycles, corrections are bound to occur. We just don’t always know when. So it’s good to know what to do ahead of time so you’re not searching for information in a moment of panic. If you just begin your planning during a moment of market panic, you’re going to find information from other people who are also affected by the panic.

And panic has never done any good for anybody, at least not with financial decision making. Panic supposedly developed as a biological response to physical threats and real danger. Panic causes adrenaline to pump through our bodies, increasing physical strength and agility in times of danger — like when you suddenly need to outrun a lion. Good luck with that. We haven’t adapted biologically to emergencies of a more cerebral nature, and that’s when panic fails us.

Before you think about taking any action with your finances during a correction, it’s good to know that corrections are not bad. The only reason the stock market is, in general, such a good place for investing for the long term is because of the corrections.

If the stock market offers an average of 8 percent returns over the course of any thirty-year period, it’s thanks to the occasional opportunities to invest during market corrections. If you want to get the market returns promised by financial planners, you have to be invested and continue to invest during times when newscasters and talking heads on television are concerned about the future of the economy.

Knowing what to do during a market correction starts long before any market correction. If, during the good times and bull markets, you create your plan to consistently invest a portion of your income, there’s no need to change course just because the stock market dips. In theory this makes sense, but in practice, there can be some complications.

Here is the one thing you need to do during a market correction.

Continue your investment plan.

One might say this isn’t an action to take, but a state of being to continue. Your ability to earn good returns in the long term relies on your willingness to continue your plan when the market is showing no sign of recovery. And this isn’t as easy as just tuning out the noise and leaving your automatic investment plan untouched.

Just think back to the recession of 2008. Those who invested through the recession came out on top, even with the Dow down for 2014 so far. But many people lost their jobs during the recession. Many couldn’t find work for a long time, and some are still out of work. Many graduates college between 2008 and today and haven’t had the opportunities others have had to continue — or even — start investing during a period of time in which investing in the overall stock market was crucial for receiving the best long term gains.

(Don’t worry if that’s you, and if you’re still young. There will be more opportunities in the coming decades.)

Some workers, perhaps because they were unable to maintain their jobs during the recession, retired early during this time frame. They retired early not necessarily because they were financially independent, but because the job market was unfavorable to men an women of a certain age looking for work. Some just gave up on the job hunt and learned to make do with a smaller nest egg than the one they were hoping for.

Even though just continuing your investing plan doesn’t sound like an action you take it’s absolutely necessary for coming out of a market correction with an advantage. It’s not even an advantage — it’s the baseline.

If you want those advertised market returns, don’t change your plans when the world of the stock market is crumbling.

So, when the world is shouting at you that the stock market is a terrible, horrible way to invest, how do you get through it and take advantage of a correction? The answers all require starting now, before the correction.

  • Save during the good times. The character of Joseph in Joseph and the Amazing Technicolor Dreamcoat (I also hear he was in a prominent figure in another book) seemed to have the plan down and could probably offer some lessons to today’s CEOs. Use your profitable times to set aside some of your surplus money for difficult times. Create that emergency fund that will help support you in the case of a break in your income.
  • Make your investments automatic. Don’t worry about individual stocks unless you have a small percentage of your portfolio you want to “play around” with. Choose a broad, low-cost index mutual fund like VTSMX. Start with your 401(k). Your employer will set that up for you if it hasn’t been done already. If you max out your tax-advantaged investment options, Vanguard will help you set up a recurring purchase of a fund every time you receive your paycheck’s direct deposit in your checking account.
  • Rebalance your investments automatically. Your 401(k) administrator may be able to set this up for you. And it’s only necessary if you’re investing in a basket of funds rather than one index fund. But if you do invest beyond your 401(k), you might need to rebalance manually. Twice a year is all that’s necessary. Don’t even worry about rebelancing during a market correction if you already have a schedule.
  • During the correction, tune out the noise. If the stock market is making headlines in non-financial news, everyone is going to be talking about their investments. And they’re going to be offering you advice, telling you what to do. Just ignore it. Turn off the television. Avoid social media. The less you’re exposed to panic, the less of a chance you’ll feel you need to change your plan.

How do you maintain your sanity during a stock market correction? Share your tips for investing here.


Neil Irwin at the New York Times points out that all asset classes around the world are expensive compared to their historical prices. If that’s the case, is there any investment class available that has the potential to provide great returns over the long-term?

Stocks and bonds; emerging markets and advanced economies; urban office towers and Iowa farmland; you name it, and it is trading at prices that are high by historical standards relative to fundamentals. The inverse of that is relatively low returns for investors…

But frustrating as the situation can be for investors hoping for better returns, the bigger question for the global economy is what happens next. How long will this low-return environment last?

The personal finance world operates on the assumption that the last century or so, minus the last decade, is a good reference for stock market expectations going forward. And depending on who you ask, that’s a return of 10 percent, 8 percent, or 6 percent. Regardless of the number, you’d have to go far outside of the mainstream to hear advice for the average investor that is something other than, “Invest mostly in a broad stock market index fund and don’t touch it for the best chance at getting historical returns.”

And this is the same assumption I’m living with. It’s why my investments are mostly in stock market index funds, though I’ve added some bond funds because it made sense to temper the risk of stocks and take advantage of tax advantages. But if my investments don’t end up appreciating over the next several decades, where will I be? Not so much better off than I am today, and if inflation erodes the value of my money (stored in these assets) faster than the values appreciate, then I’ll be worse off.

But what are the alternatives? Not investing my portfolio, keeping my money in cash form, there’s no doubt inflation will erode the value. At least invested, I have a fighting chance.

While the average investor is said to be better off investing in broad index funds, professional investment managers dealing with corporate cash look for undervalued opportunities. Not only are they not finding anything undervalued, but everything is overvalued. A company wants to reinvest in itself by building factories or property, for example, but it won’t if everything is overpriced, and they expect the company won’t get a good return on that investment.

If these professional investors with millions or billions of dollars to invest can’t come up with any good options, how is the average investor supposed to succeed?

Change your expectations.

There’s nothing magical about the 8 percent long-term annual return on the stock market. Most investors don’t see that return, anyway, because their behavior gets in the way. Even if the next hundred years was as promising for corporate performance as the last hundred years — the century in which the United States became a global economic power, the winner of the second World War, and the standard-bearer for the world (in its own mind, anyway), most Americans wouldn’t see the same kind of personal performance that financial planners advertise.

The kind of growth the United States saw in the twentieth century just doesn’t seem sustainable. Thinking globally, there still seems to be a lot of potential. But the economy in the United States has just become too expensive for the growth to happen here. I think that’s well understood, and people are looking internationally for growth opportunities, but this seems to be the point — it’s too expensive everywhere.

So maybe we just have to assume that long-term growth will be around 4 percent annually over the long term. No one wants to take this assumption because it causes problems with just about every financial planning model out there. Your “safe withdrawal rate” of 4 percent will fail, and inflation is a bigger risk.

The good news is that just doing something has to be better than doing nothing. If you invest 10 percent of your income into a stock market index fund for the long term over the next couple decades, it may only return an annual 2 percent, 4 percent, or maybe 6 percent. Well, there’s still the possibility of returns being higher. But even if they’re not, you’ll still be better off than those who have done nothing at all.

Start really thinking about the future.

The most promising way to make a future is to make it yourself. What are the biggest problems human existence will be facing in the next century? How can these problems be addressed? Apparently, there are enough people who believe that the availability of potable water is one of the problems humanity will face in the future. Scientists, including kids taking on middle school science experiments, are coming up with more efficient methods for cleaning water. It currently takes a lot of energy to turn ocean water into drinking water, and in areas of the world that don’t receive much rain, potable water is needed. This could lead to the growth of an industry in the next hundred years.

As the will for government spending continues to disappear, people will have to look to corporations to lead the way without government support. We may not get much from NASA in the next era, but private companies led by people who see some potential will pave the way for technological investment. The Internet is a product of twentieth century government funding, but that’s something that would never exist if the impetus was under today’s political climate. The next Internet, and by that I mean a world-changing technology, is going to be an opportunity that comes about only if the market deems it potentially profitable. And to take this further, the best opportunities will not be available to everyday investors; venture capitalists stand to gain from much of the potential economic growth of the next century.

We hear about the latest billion-dollar sale of technology companies, but most of these are backed — and therefore owned — by venture capitalists. So the smart kid who dropped out of college because he had a germ of an idea but pitched his business to venture capitalists will certainly see some financial benefit when he eventually exists the business, but it’s those who provided the capital who stand to win the bulk of the financial rewards.

So as much as I dislike the idea that average investors can now participate in angel investing through syndicates (because this is generally risky and sophisticated, and most investors don’t have enough wealth to manage risk and aren’t very sophisticated), this type of investing may be the only opportunity to see growth in the next decade. Angel investors take on risks, and usually they mitigate risk by diversifying across a large number of start-up businesses. These start-up companies may never see a time in which their stock is offered to the general public — or if they do, it will be after the initial investors take advantage of the early, most profitable period of growth.

Thinking about the needs of the future could give you insight not so much into where to invest, but where to spend your time. Or your life’s work. This may be more personally profitable than trying to invest 10% of your income into a certain industry or asset class.

Unfortunately, we have no way of predicting the future. Even the best minds have trouble coming up with what an industry will look like ten years from now. The automobile has lasted a hundred years. It’s probably a good bet that automobiles will be around for at least a few more decades. But after that, what will they look like? How will they be operated?

Google is betting on driverless cars. Tesla thinks the future is in purely electric vehicles. The traditional manufacturers and companies involved with the oil industry are the slowest to move. Will cars fly, like in Back to the Future? Probably not in 2015, but what about 2080? Someone is going to be right, and lots of people are going to be wrong. Those who are right will be the investors who experience the growth that is remembered — those who are wrong will be forgotten about and not included in historical accounts of a market. (That’s survivorship bias.)

Of course, there’s always a chance that no amount of planning will make a difference. Doomsday scenarios exist, even if they’re unlikely. Nature may change our ways of life in ways that we haven’t sufficiently planned for. But you can’t assume things that seem impossible. The best we can do is plan with the only understanding we have of the world today.

This may not solve the problem. Chances are good that people have already thought about what you see for the future, and that’s why professional investors can’t find any good, potentially profitable opportunities today. But if you take your ideas and start building something of your own, you’re creating your own value. Even if you don’t give birth to a new industry (kudos if you do!) you’ll be building value for yourself over the long-term, probably far better than an investment in any particular asset class will do for you.


Through the end of the second quarter, the S&P 500 has climbed 6.22%. That’s a nice increase, and the stock market’s performance has provided me impressive gains on paper in my overall portfolio. The bulk of my investments are split between tax-efficient bonds and a stock market index in my non-retirement accounts, and despite losses on paper in January and March, between dividends and market gains, I am satisfied with my financial situation.

But I am at the point right now — between projects — where I may decide to start drawing upon the income from my investments for expenses occasionally. I’ve mentioned this before. My plan has been to leave my investments untouched as much as possible, and I’ve been able to do that so far except for taxes and a few other expenses related to selling my business. I’ve relied on other income from working — mostly writing, coaching, and to a lesser extent speaking — to meet my needs for living day-to-day. But this has brought upon the need to be a little more frugal than I had been while I was receiving income from my business.

While the bulk of my investments have been performing well, it’s a little harder to look at my investments in the “Grow Your Dough Throwdown” As readers know, at the beginning of 2014, I and a number of other financial writers and bloggers invested $1,000 to track our progress throughout the year. Each participant was able to choose where and how the money would be invested, and I chose ShareBuilder and the buy-what-you-use philosophy. I invested in five stocks (or their analogues) based on products I use every day: Microsoft, Canon, Honda, Samsung, and Google.

You can review my previous articles about the Grow Your Dough Throwdown: initial purchases; review at the end of February; first quarter review; and review at the end of May.

So because I chose ShareBuilder, and I purchased six different investments, I paid a transaction fee of $6.95 six times. That’s an automatic loss of $41.70 before even taking a losing January into account. And while the stock market has shows this great return through the first half of the year, my investments have still not broken even when considering the transaction fee a loss (which it should be).

Continue reading this article to see the investment results as of June 30.

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Growing My Dough: The Latest Look at My Portfolio

by Luke Landes
Grow Your Dough May

CNN is sounding the alarm bells. The “Fear and Greed Index,” which is a strange measure of market sentiment, has passed the threshold into the “extreme greed” level.CNN is sounding the alarm bells. The “Fear and Greed Index,” which is a strange measure of market sentiment, has passed the threshold into the “extreme greed” level. ... Continue reading this article…

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Should You Become an Angel Investor?

by Luke Landes
Angel Investing

Two years ago I wrote about how I was “winding down”, whatever that means, after selling Consumerism Commentary, in the sense that I was looking to involve myself in new projects. I was considering, among other things, investing a portion of my assets in start-up companies. In fact, I signed up for a service called ... Continue reading this article…

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Buying and Selling Stocks Is Often a Losing Strategy

by Luke Landes
Grow Your Dough Throwdown - March 2014

After three months, my $1,000 investment portfolio, nicknamed “Feemaggeddon,” is lagging. This portfolio is part of an investing challenge, the “Grow Your Dough Throwdown.” It’s a lighthearted competition featuring several top financial bloggers. I have two goals with this portfolio. The first is to test a specific popular investing philosophy. Among those who offer advice ... Continue reading this article…

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Grow Your Dough: My Investing Results as of February

by Luke Landes
Grow Your Dough February

As I mentioned at the beginning of the year, I’m participating in an investing competition — well more of just a game than a competition — with several other writers and bloggers this year. The premise of the game is to start the year with $1,000 invested in discount brokerages of our choice, and track ... Continue reading this article…

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Should You Open an IRA With Your Bank? Ally Bank Offering $250 Bonus

by Luke Landes

It’s easy for me to look back in time and analyze the faults of my twenty-two year-old self. If only I had started saving and investing sooner, I’d be in a better financial situation. My younger self would assume I had forgotten what it was like for me during that time period, when I had ... Continue reading this article…

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Grow Your Dough Throwdown

by Luke Landes

I’ve joined a number of other financial writers in the “Grow Your Dough Throwdown,” a stock market competition. At the beginning of 2014, each of us will invest $1,000 in the stock market through a discount brokerage. We can trade as often as we like, and publicly track our investments throughout the year. It’s similar ... Continue reading this article…

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401(k) Contribution Limits for 2014

by Luke Landes

After two years of increases, the IRS is not adjusting the retirement savings opportunities for American taxpayers this coming year. From 2009 through 2011, the maximum contribution to retirement accounts — 401(k) accounts, 403(b) accounts, most 457 plans, and Thrift Savings Plans, was $16,500. In 2012, this amount increased to $17,000. After considering inflation and ... Continue reading this article…

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The Myth of Early Retirement for the Middle Class

by Luke Landes
Is early retirement a myth?

Financial independence has become an important topic for me over the course of my adult life. It’s been a progression. First, I discovered the concept of spending less than I earn — simple mathematics but a behavioral change — and how that, in addition to making better choices, could eventually lead to financial independence through ... Continue reading this article…

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Should Millennials Trust the Stock Market?

by Luke Landes
Should millennials trust the stock market?

First impressions often form the basis of how a young person perceives an object for the remainder of that person’s life. The object in question could be another person, a business, an industry, a group of people, or even a part of society. Deeply-seated beliefs are entrenched during several stages of formative development. Psychologists point ... Continue reading this article…

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IRA Balances At Five-Year Highs: Time for a Retirement Check-Up

by Luke Landes
IRA balances at an all-time high

Thanks to the stock market’s upward trend since the recession (if the trend hadn’t been upward, we couldn’t say “since the recession”), policy changes that allow investors to convert traditional IRAs to Roth IRAs without limit other than the income tax bill, and perhaps even younger savers inspired to plan for their retirement by saving ... Continue reading this article…

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Variable Annuities Customers Facing Benefit Reductions

by Luke Landes
Money - Variable Annuities

When people find out I’ve been writing a blog about personal finance for ten years — yes, it seems crazy, but the tenth anniversary of Consumerism Commentary is Tuesday — they recognize it is an opportunity to share their financial troubles and triumphs. I’m a good listener. For the most part, I am happy to ... Continue reading this article…

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School Gives Club of Teens $100,000 to Play in the Stock Market

by Luke Landes
Teens investing

For many children, one primary exposure to just a piece of financial literacy is the Stock Market Game. The public elementary school I attended pitted a hundred or so fourth-graders against each other. After a few months, the student with the highest overall account value, not taking fees or expenses into account like the real ... Continue reading this article…

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How to Close an E*TRADE Investing Account

by Luke Landes
How to close an E*TRADE investment account

Yesterday, I was motivated to further clean up my excess financial accounts. After a long delay, I moved my main accounts into a revocable living trust, a legal entity I created earlier this year to keep my finances in the best order possible. As I visited Wells Fargo yesterday to move my primary checking account ... Continue reading this article…

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4 Types of Retirement: Which Will You Choose?

by Luke Landes
Which retirement will you choose?

While every situation is different, there are only a few types of retirement for those of us in the working class. Before I get to the retirement concept, here’s what I mean by “working class.” The working class includes those who need to survive by trading their time and effort for an income. They could ... Continue reading this article…

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Four Excuses Prevent You From Investing

by William Cowie

This is a guest article by William Cowie, who writes at Bite the Bullet Investing. While I considered myself a late bloomer in the world investing, not doing much with my money besides spending it until I was about twenty-eight, William started much later in his life. In this article, William describes how certain attitudes ... Continue reading this article…

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Are Financial Planners Hurting Investors Approaching Retirement?

by Luke Landes

If you’ve watched the financial industry over the course of the last decade, you’ve probably noticed some important contradictions. It’s a good indication that taking generalized investment advice and applying it to your own situation is not a smart idea. Anyone who retired at the height of the recession is going to understand exactly what ... Continue reading this article…

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