Archive for the ‘personal investing’ Category

The top 1% are different. Yes, they own more financial assets.

25 June 2013

Lawrence Mishel’s recent piece on inequality includes a very telling graph:

top-1-percent-income-advantage

We see that the second half of the 1990s  is the first prolonged period when the top 1%’s income soared above that of the college educated in general; it coincided with the dot-com boom/bubble. We see a similar takeoff during the mid-2000s housing bubble and stock boom. In the market corrections/crashes that began in 2000 and 2007, we see the top 1%’s advantage mostly, but not completely, disappear. 

A combination of stock options, stock-market-based bonuses, and “Takes money to make money” seems to be at work here. The graph seems to be at odds with the common argument (Greg Mankiw’s?) that the top 1% deserve all they get because they are so much more productive, as it seems doubtful that their superior productivity deserts them in bad times.

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Clinging to your stocks and bonds

29 December 2008

A useful personal investing article in the Dec. 26 New York Times about bonds, pointing out that bonds and bond funds have also fallen victim to the financial crisis and concluding with a helpful list of what’s available.  But hey, NYT, bonds aren’t just for old people!  (The headline: “Older Investors Should Examine the Risks in Bonds.”  Oh well, I’ve seen worse headlines — will somebody please inform their headline writers that “printing money” and “issuing Treasury bonds” are two different things?)

By now, the personal finances are way overdue for a rebalancing.   Burton Malkiel, author of the great A Random Walk Down Wall Street, suggests the following portfolio allocation for people my age (early 40s):

60% STOCKS (20% international, 20% growth & income, 10% small cap, 10% growth; all in stock funds, not individual stocks)

35% BONDS (12.5% GNMA mortgage bond funds, 12.5% high-grade bond funds, 10% T-bills)

5% CASH (money market funds or short-term bond funds)

I can’t follow that completely, as I derive too much pleasure from the lottery tickets known as individual stocks (and I figure it’s not too reckless as long as they’re a small part of the overall portfolio), and I’m not putting any money into Treasury bills while they’re paying 0% interest, but it still looks like sound advice.  Having a third of your stock holdings be international stocks sounds especially logical (not that European or Japanese stocks have been going gangbusters themselves lately).

Some stock-market links from a couple months ago, when the Wall Street crisis was in full roar: