Taking a few days off

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No posts for the next week.  Gone fishing.

Investing: Upside risk

Individual investors typically understand investment risk as risk of losing a lot of money.  Today, the blog presents two recent articles for investors to consider the opposite risk they assume when their focus is mostly on downside, i.e., upside risk.  "As financial advisors know, a client may think he is avoiding risk by leaving his money in a money market fund—he has certainly reduced the risk to his principal—but he has effectively traded one type of risk for another" (from the first link below)


Smart Risk Taking: Realigning Client Portfolios with Their Long-Term Goals (American Century Investments study pdf)
How the individual investor can trade like a pro (Dash of Insight)

Insurance: Extended warranties - yea or nay?

You just bought the appliance, or the shiny new gadget, or the car. Now the salesperson is offering an extended warranty on the product. A couple recent articles on this topic with the general advice to avoid them. Save your insurance dollars to protect against catastrophic losses, and pay for the occasional repair. If they were money losers for the manufacturer or retailer, they would stop selling them.

Saying No To Service Plans (Palisades Hudson Financial Group)
Extended Warranties: Deal or no Deal? (Fox Business)

Personal Finance: U.S. default and main street

Just like the whole Greek debt drama a few weeks back, the whole high stakes game of chicken on the debt ceiling going on in Washington is not arcane economics.  Default will have significant impact on everybody, and Ezra Klein at the washington post tries to explain how.

How default would harm homeowners, cities, businesses and everyone else (washington post)

Insurance: When your health insurer denies coverage

The health issue is enough to be concerned with, so when a health insurer denies coverage for a claim, that is just a very unwelcome situation to also have to handle. Today's link, from the nytimes, is steps to take to give you a better chance in appealing the decision, from the co-founder of Health Advocate, "a business that helps people who get their insurance through their employer navigate dealings with their insurance company."

7 Steps in Appealing a Health Insurance Denial (nytimes)

Investing - ETFs fieldguide

Have you ever wanted to consider a sector ETF, but feel overwhelmed at the selection and have no idea how to compare different ones in that sector?  Today's links are to the ETF Digest, which has been running a series on top 10 ETFs "that matter and may not be repetitive" in many sectors.  The series may be ongoing at ETF Digest, so all sectors may not be reflected in the below set.

Technology
Alt Energy
Energy
Financial
Small/Mid-Cap
Large/All-Cap
Dividend
Bond, Muni, Preferred 
High Yield, Emerging Market Bond
Govt, Inflation Protected Bond
Corporate Bond
Retail

Retirement: Optimal equity exposure to mitigate longevity risk

This Monday's link is a study on stock allocations in retirement and risk of running out of funds before you die (longevity risk). It is one of the main risks to manage.  According to Putnam, your equity exposure should be no more than 25% which is more conservative than most studies I've seen.

Marketwatch writeup of the report.  Key snippet, "In an interview, Harlow noted that once a retiree starts taking money from their retirement accounts, the withdrawals become “path dependent.” And if the success of a retirement income plan rests on whether the markets go up or down, one has to figure out how to protect oneself against that volatility, and especially against the risk of unfavorable “sequence of returns.” And the best way to do that is by reducing one’s overall exposure to equity to no more than 25%, he said."

Actual report is here (putnam website)

Inertia and your 401(k)

Inertia can be good and bad.  If inaction causes desired behavior, then inertia is positive. When your employer automatically signs you up to save for retirement via the 401(k) and places the savings in an age-appropriately allocated portfolio, that's a good thing.  However, if they set aside too little, you may not be saving sufficiently for your retirement, and that's probably not a good thing.  If you are at an employer, with an automatic feature for the 401(k), check your automatic savings defaults at your employer, don't rely on inertia.  See if you need to take some additional action.

401(k) Law Suppresses Saving for Retirement (wsj)

Vexing mortgage question 2: Should you payoff the mortgage?

Lots of web discussion and opinion on this one.  The Get Rich Slowly blog recently revisited the topic and got lots of reader reaction.  Paying it off early versus investing the funds is "like choosing between an apple and an orange...they're both good"

Vexing mortgage question 1: Should you refinance?

Mortgage rates are low these days. Today's link is one mortgage loan officer's take on the question, should you refinance.  His take is pretty simple,  no break-even points to consider.  If you can save money with no costs, say "yes." (hsh.com)

Auto Insurance: Shopping around? Check out Amica

The JD Power annual auto insurance satisfaction survey is out.  Overall top pick is Amica...again. 12th straight year. A great run, like UCLA under Wooden. Other insurers also worth mentioning - if price is your top criteria, Ameriprise.  Erie Insurance also ranks very high for pricing and customer service, if you are in one of the states where they offer insurance.

JD Power's 2011 National Auto Insurance Study

If you aren't shopping around right now, don't let your policy lapse with your insurer in hopes of savings some money by picking it up a little later. Bad move says an Insurance.com study.