How to find your unique work that can bring satisfaction and income before and during the traditional retirement years.

Topics discussed in this episode include:

• What is settled work.
• Why you need time and space to find and do your best work.
• What is a commonplace book and why it can be helpful.
• How filters and saying no can help us control our time.
• The important role of serendipity in finding our path.

Thanks to The Great Courses Plus and Vistaprint (use code David50) for sponsoring the episode.

For show notes and more information on this episode click here.

• [0:20] An antique lamp store in Phoenix
• [3:10] The concept of “Settled Work”
• [5:30] How do we find our settled work?
• [7:40] David’s commonplace book
• [12:15] Why we need settled work
• [15:00] Take time to reflect
• [16:05] Take back control of your time
• [18:00] The art of saying “no”
• [21:00] Capturing Serendipity

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Is it possible to be too diversified and how can you tell? Why Warren Buffet thinks diversification is protection against ignorance.

Topics covered include:

• The skills you need to be able to select individual stocks.
• How have active managers outperformed relative to passive indexing products.
• How much diversification is too much and a test to determine if one is over diversified.
• What is factor investing and which factors have worked over the past 200 years.

Thanks to LinkedIn and Policygenius for sponsoring the episode.

For show notes and more information on this episode click here.

• [2:22] Exploring the concept of over-diversification
• [5:25] Should you pay for an investment advisor to select individual stocks?
• [8:05] An individual investor should choose index funds
• [11:10] Determining how much diversification is enough?
• [13:37] Weighing the cost against the benefits
• [16:10] When being over diversified is possible
• [17:05] Analyzing the listener question regarding over-diversification
• [20:20] A Fascinating study analyzing 200 years of factors
• [25:08] Layer on additional value factor

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David's book Money for the Rest of Us: 10 Questions to Master Successful Investing is now available (at least the e-book version). To celebrate, here is a bonus episode with excerpts from the forthcoming audiobook.

Please enjoy the Introduction and Chapter One.

Also, as part of the book launch, David will be hosting an Ask Me Anything (AMA) on Reddit on Wednesday, October 30, 2019 at 1PM Eastern time. Please join us.

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What are the timeless principles we can follow in order to become better investors. 

Topics covered in this episode include:

• How a book's permanence makes it different from a podcast.
• How David's book got written and published and why his publisher just recalled the hardcover version of the book.
• What are the 10 questions we should answer before we invest in anything.

Thanks to NetSuite and The Great Courses Plus for sponsoring the episode.

For show notes and more information on this episode click here.

• [0:20] How David decided to write a book.
• [3:00?] The right book can change your life.
• [4:20] The art of writing a book.
• [7:00] The extensive process of writing a book.
• [9:57] Recording the audiobook.
• [11:32] Question 1: What is it?
• [13:36] Question 2: Is it investing, speculating, or gambling?
• [14:32] Question 3: What is the upside?
• [15:54] Question 4: What is the downside?
• [16:42] Question 5: Who is on the other side of the trade?
• [18:06] Question 6: What is the investment vehicle?
• [18:58] Question 7: What does it take to be successful?
• [20:20] Question 8: Who is getting a cut?
• [21:03] Question 9: How does it impact your portfolio?
• [22:05] Question 10: Should you invest?
• [23:06] What happened to the book launch

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What are the benefits and risks of investing in exchange-traded notes (ETNs) compared with ETFs.

Topics covered include:

• How big is the market for ETNs compared with ETFs.
• How ETNs can do a better job tracking their target index than ETFs.
• Why ETNs can be more tax-efficient than ETFs..
• How ETNs have counterparty risk, pricing risk, and liquidity risk.
• Under what circumstances would an ETN be preferred over an ETF.

Thanks to WIX and Policygenius for sponsoring the episode.

For show notes and more information on this episode click here.

• [0:21] ETPs, ETFs, and ETNs—which is the most popular?
• [3:10] Exchange-Traded Notes exhibit low tracking error.
• [5:28] ETNs are vastly more tax-efficient than ETFs.
• [6:14] Examples of Exchange Traded Notes.
• [10:16] Should there be a default-risk discount on ETNs?
• [13:34] Why there is issuance and closure risk with ETNs.
• [17:21] Clarification on the term “Net Asset Value” when referring to ETNs.
• [17:58] The issues of illiquidity risks and high fees.
• [20:46] Exchange Traded Notes are a niche product.

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Why some analysts believe the Consumer Price Index formula understates inflation while others believe the CPI formula overstates inflation. What really matters to us individually when it comes to inflation.

Topics covered in this episode include:

• What is inflation and what causes it.
• How is the Consumer Price Index calculated and how has the CPI formula changed over time.
• What are examples of different CPI measures.
• Why do some analysts believe U.S. inflation is higher than what CPI states while others believe inflation is lower than what the Consumer Price Index shows.
• How inflation calculations impact the measurement of other economic data such as the rate of poverty and the growth in real wages.
• What are consumer attitudes toward inflation and why do central banks worry about changes in household and business inflation expectations.
• How individuals can monitor and improve their cost of living.

Thanks to Sleep Number and Money For the Rest of Us Plus for sponsoring the episode.

For show notes and more information on this episode click here.

• [0:18] Traditional methods of measuring inflation.
• [4:00] The CPI has changed from a fixed-basket approach to a consumer-representative approach.
• [6:39] The controversy concerning the accuracy of CPI measurement.
• [9:11] Is inflation overstated because of how the CPI-U is calculated?
• [11:23] Rwanda case study: the connection between inflation and poverty.
• [15:17] Why governments care so greatly about the public’s view of inflation.
• [17:31] How inflation expectations are measured.
• [18:52] How do we calculate the desired standard of living?
• [20:41] The CPI isn’t an accurate depiction of the standard of living.
• [24:20] Are you satisfied with how you spend your money?

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Why true financial independence means eliminating financial vulnerability including not being overly reliant on stock market appreciation.

Topics covered in this episode include:

• What does it mean to be financially vulnerable.
• What are the two paths to financial independence.
• Why we shouldn’t stake our financial independence and early retirement on the historical performance of stocks and bonds.
• What are the rules of thumb we can use to develop reasonable assumptions for stocks and bonds and how those assumptions will lead to lower portfolio balances compared to using historical returns.
• What has historical earnings growth been for U.S. stocks.
• Why stock buybacks will be less in the future due to high debt balances unless companies grow their revenues and overall earnings.
• How are actions lead to financial independence even when it is difficult.

Thanks to Vistaprint and WIX for sponsoring the episode.

For show notes and more information on this episode click here.

• [0:17] Being financially independent begins with a decision. 
• [2:33] Protecting yourself against financial vulnerability. 
• [4:14] Should you solely rely on investment returns for financial stability?  
• [7:52] Estimating the returns of asset classes. 
• [13:40] Earnings per share drives the returns of the stock market. 
• [17:31] Build an active and flexible strategy for financial stability. 
• [22:49] Uncertainty doesn’t negate the positive effect of small actions.

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How a liquidity crunch in the short-term lending markets sent interest rates soaring. Why this is a huge blunder on the part of the Federal Reserve, and what it means for us as individual investors.

Topics covered in this episode include:

• What are repurchase agreements and how are they used to finance U.S Treasuries.
• How outflows from money market funds and hoarding by banks led to a liquidity crunch that caused repo rates to spike to 10%.
• Why banks are hoarding reserves held at the central bank even though there are over $1.4 trillion of them, up from $20 billion in 2007.
• How quantitive easing increases reserves and quantitative tightening reduces reserves.
• How the Federal Reserve was able to stop the disruption in the repo market, even though the central bank was caught off guard and could have prevented it.
• How individual investors can protect themselves from unintended consequences arising from the unconventional policies and experiments being conducted by the Federal Reserve and other central banks.

Thanks to The Great Courses Plus and LinkedIn for sponsoring the episode.

For show notes and more information on this episode click here.

• [0:20] The Fed loses control over policy rates, and repo interest rates soar.
• [2:19] What is a repurchase agreement (repo)?
• [5:02] Why the big players in repos pulled back on Sept. 16th.
• [8:38] Banks need more liquidity because of regulations.
• [12:53] Why reserves have fallen so low.
• [17:43] How does the reserve balance get reduced?
• [19:23] The Fed may have shrunk it’s balance too far.
• [21:36] What can be done about the reserve shortage?
• [24:17] What can we learn from the repo rate raise?

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Why most state and municipal pension plans are underfunded and why that could lead to higher taxes and reduced government services. Why participants in state government retirement systems have greater protection against benefit cuts than participants in municipal retirement systems.

Topics covered include:

• How defined benefit plans work.
• Why there is more subjectivity regarding valuing a pension plan's liabilities compared with its assets.
• What does it mean for a pension plan to be underfunded, and why are so many public sector pension plans in that situation.
• Under what circumstances can a pension plan cut benefits to beneficiaries.
• Why underfunded pension plans will most likely lead to higher taxes and reduced government services.

Thanks to WIX and Peloton for sponsoring the episode.

For show notes and more information on this episode click here.

• [0:18] The crisis of underfunded defined-benefit state and city pension plans.
• [2:32] Calculating the financial value of a public pension plan.
• [4:46] What rate of return should public pension plans use?
• [8:44] Why public pension plans are highly underfunded.
• [11:34] Kentucky’s 13%-funded pension plan raises red flags.
• [13:37] Failing to meet the needs upfront causes a funding crisis down the road.
• [15:33] Why states cannot go bankrupt but cities can.
• [17:52] How do public sector pension plans affect tax-payers?
• [20:18] How states and cities are trying to solve the crisis.
• [21:45] Considering underfunding when deciding what to invest in or where to live.
• [24:09] How private-sector pension plans could possibly affect tax-payers.

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What are the three steps to better manage risk and get what you really want.

Topics covered in this episode include:

• Why goods and services that lessen risk tend to cost more.
• What is the three-step process for assessing and managing risk.
• Why defining the risk-free option or asset is critical to managing risk.
• Why immediate annuities are the retirement risk-free option rather than a conservative investment portfolio.
• What are the two types of risk and how do we mitigate them.
• What is the difference between hedging and insuring against risk.

Thanks to Dashlane and The Great Courses Plus for sponsoring the episode.

For show notes and more information on this episode click here.

• [0:17] Weighing the risk and knowing how to make a decision under uncertainty.
• [5:00] Three steps for assessing and managing risk.
• [9:11] Finding the risk-free asset in a retirement plan.
• [14:36] Idiosyncratic & systemic risk.
• [16:40] De-risking and using hedges to create a risk buffer.
• [20:22] Identifying a sound insurance operation.
• [23:36] Using flexibility as a risk management strategy.

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