Interesting Reading
One of the best aspects of my job is the various topics that I come across in my reading. From one day to the next, the subject matter changes. Never would I have predicted that I would delve into the “Cognitive Bias Codex” nor read “A Final Report Card on the States’ Response to Covid-19,” yet both apply to investing and economics. A third area of recent reading is more directly applicable; I have reviewed recent commentary on Retirement Income Planning, RIP for short (lovely acronym). I’d like to share a little about each of these with you.
At a recent Raymond James conference, I attended a talk on behavioral finance, a subject of deep interest to me. I learned more about how behavior influences outcomes for investors. For example, fear and greed affect us differently. Moreover, investors often respond to these two emotions irrationally. But did you know that “fear” is two times more powerful than “greed” when it comes to investments? Are you aware that we seek out information that corroborates what we believe? This is called confirmation bias. As the famed investor Benjamin Graham said “the investor’s chief problem – and even his worst enemy – is likely to be himself.” The main message of this seminar was simple: to achieve better outcomes, it is more important to set the right goals and control your behavior than it is to “beat the market.” In conversation with the speaker after the seminar, he referred me to the cognitive bias codex. This resource is incredibly insightful, with enough detail to keep one busy for days. No, I did not go down that rabbit hole.
The recent National Bureau of Economic Research (NBER) “A Final Report Card on the States’ Covid-19” was absolutely fascinating too. The research compiled by three economists has received attention in the popular press. In a nutshell, the economists analyzed the different responses pursued by different states throughout the country. They looked at economic impacts, health outcomes, and educational progress. If you care about any of these things, you will find it interesting. This report is proof that economic analysis can be understood and is useful.
A third set of recent reading has been reviewing a multitude of articles, reports, and recommendations on spending in retirement, a subject that I live and breathe every day. Some of the discussion concludes that we need “new” retirement spending rules, and the old “4% rule” is defunct. Others argue that because interest rates have changed, we need to alter sources of income in retirement and modify asset allocations. What some of these reports are not saying is that they misjudged interest rates and their planning assumptions were faulty.
Planning for retirement is very personal. Situations change. Needs change. Anyone who has ever bought a bond or borrowed for a mortgage knows that interest rates change all the time and you need to be aware of the impact of these changes. And just because bonds may earn less than in the past does not mean we should abandon their use in portfolios, moving more money into other investments that have different risks. My gut tells me that some of these reports are written with other purposes in mind.
If you would like to learn more about any of these topics, please let me know. And happy reading!
Ralph McDevitt April 18, 2022
Any opinions are those of Ralph McDevitt and not necessarily those of Raymond James.
Raymond James & Associates, Inc., member New York Stock Exchange/SIPC
