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Investing Blog Roundup: Responding to Stock Market Volatility

On Monday, I shared my thoughts on how to respond to a bad day or week in the stock market. Naturally, countless other financial publications have written about similar topics over the last couple of weeks. Here are a few of my favorite such articles:

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Investing Blog Roundup: Fund Investors Are Making Better Decisions

This week, I particularly enjoyed a piece from Morningstar’s John Rektenthaler discussing some positive, investor-driven changes that have occurred in the mutual fund industry over the last few decades.

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Investing Blog Roundup: How Different Full Retirement Ages Affects Social Security Strategies

With regard to Monday’s article (about Social Security strategies for couples with very similar primary insurance amounts), an astute reader pointed out that I made a mistake. Specifically, I neglected to take into account how the analysis changes when the two spouses have different full retirement ages due to being born in different years. (You can see a chart with full retirement age by birth year here.)

In short, the analysis is different because, if you have an older full retirement age, your maximum possible retirement benefit is reduced relative to somebody with the same primary insurance amount and a younger full retirement age. For example, if a person with a full retirement age of 66 has a primary insurance amount of $1,000, his retirement benefit if he waits until age 70 would be $1,320 per month — because he delayed for 4 years beyond his FRA, with each year granting an increase equal to 8% of his PIA. But for a person with a $1,000 PIA and a full retirement age of 67, his retirement benefit at age 70 would be just $1,240 per month — because by age 70 he has only delayed for 3 years beyond his full retirement age.

This is actually a relevant point in the analysis for any married couple. I often write about how it is advantageous for the spouse with the higher PIA to be the one to delay (because doing so results in a higher retirement benefit as long as either spouse is still alive). It would be more precise, however, to write that it is advantageous for the spouse with the higher age-70 benefit to be the one to delay. (In most cases, this is the spouse with the higher PIA, but it could be a spouse with a slightly lower PIA and a younger full retirement age.)

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Investing Blog Roundup: Bonds, Bond Funds, and Annuities

For the last few years, the most common questions I’ve received about portfolio construction have been about bonds — what to do about potentially-rising interest rates, whether to buy international bonds or not, whether to use individual bonds or bond funds, etc. This week, I encountered three different articles putting forth interesting/uncommon ideas about fixed-income investing.

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Investing Blog Roundup: What’s the Biggest 529 Plan?

This week, Harry Sit of The Finance Buff asks which state has the biggest 529 plan. The answer — and the reason for it — is a pretty telling fact about how the investment industry works.

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Investing Blog Roundup: Finding the Optimal Portfolio

A pattern I’ve seen over and over is that, when an investor starts to learn about passive investing, they get stuck trying to figure out how to allocate their portfolio. They can’t figure out exactly how much they want in Fund A as opposed to Fund B, and they can’t quite decide whether or not they should include Fund C.

As Rick Ferri explains this week, trying to find the precisely optimal portfolio is an exercise in futility — even for the experts with access to the best data and software — because the critical inputs (including average returns for asset classes and correlation between them) change meaningfully over time.

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