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Investing Blog Roundup: Employer Stock in Your 401(k)

No matter how confident you are in your employer’s prospects, it’s generally a bad idea to hold a significant portion of your portfolio in your employer’s stock, if you have a choice in the matter. As Ron Lieber reminds us this week, investing heavily in the stock of your employer puts you in a position where not only your income but also your savings are dependent upon the results of one company.

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Investing Blog Roundup: Rebalancing Isn’t Easy

Over the last few weeks, I’ve repeatedly received questions (and seen similar questions on the Bogleheads forum) about whether it’s worth ditching international stocks entirely, given their poor performance over the last several years relative to U.S. stocks. In short, my answer is that that’s the opposite of what most investors should be doing right now. For any investor following a buy/hold/rebalance investment strategy, now is the time to be rebalancing into international stocks.

By definition, rebalancing means beefing up your allocation to the asset class that has performed the worst recently, in order to bring your overall allocation back in line with the original plan. For many investors, that’s not easy.

This week, Christine Benz has tips on how to rebalance when you’re feeling chicken:

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Investing Blog Roundup: Senate Tax Writers Want Your Input

I generally make a point to keep politics out of my writing, because I do not want to alienate anybody. (And I don’t intend to change that policy.) At the same time, many financial topics are important political issues. Kay Bell of Don’t Mess With Taxes has some information this week on how you can participate in the current tax reform discussion, if you’re interested.

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Investing Blog Roundup: Supreme Court Hears Case Regarding Premium Tax Credit

This week the biggest personal finance news is the Supreme Court’s hearing of oral arguments in King v. Burwell. The issue to be determined is whether people who purchased health insurance on the federal exchange can qualify for the new premium tax credit. (The act itself states that, to qualify, a person must purchase insurance “through an Exchange established by the State.” The federal government has argued that the credit was clearly meant to be available regardless of whether the state in question chose to establish an exchange or use the federal exchange. The plaintiffs in the case disagree.)

The key point right now is simply that we won’t know the results of the case for quite a while — presumably this summer.

If you’re interested, you can read the actual transcript of the oral arguments here.

Alternatively, Robert Barnes of The Washington Post has an understandable (and reasonably politically-neutral) summary of how the arguments went.

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Investing Blog Roundup: Schwab “Intelligent Portfolios” Suddenly Less Exciting

For several months now, Schwab has been promoting their upcoming “Intelligent Portfolios” platform, which will offer automated rebalancing and tax-loss harvesting of a portfolio of ETFs. The big selling point is that there is no fee for the service, aside from the cost of the funds held in the portfolio.

Frankly, an automatically rebalanced portfolio of Schwab’s super low-cost ETFs sounds pretty darned neat to me. For lazy investors such as myself, such a thing could even be preferable to a low-cost Target Retirement or LifeStrategy fund from Vanguard.

Unfortunately, now that Schwab has released additional information, we can see that the service isn’t going to be nearly as exciting as it could have been. You don’t get to choose the portfolio. Schwab assesses your risk tolerance and puts you into one of a few portfolios that they’ve created. And those portfolios have (what I consider to be) two drawbacks:

  1. They include some higher-cost ETFs, and
  2. They include a mandatory cash holding (which will earn almost nothing).

The Finance Buff has more information:

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Investing Blog Roundup: Staying Flexible with Retirement Withdrawals

There are many personal finance rules of thumb that can be helpful when developing a rough-draft retirement plan. However, as Darrow Kirkpatrick and Christine Benz remind us this week, following a given rule of thumb may not be the best approach. Kirkpatrick addresses the question of how much to spend per year, while Benz looks at which account(s) to spend from each year.

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