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San Francisco Chronicle
7 days ago
- Business
- San Francisco Chronicle
I'm retiring in 7 years. Do I need to Trump-proof my assets?
Reader Christian in Oakland asks: I'm in my 50s and planning to retire in seven years. Does Trump represent a systemic risk to the economy that should be reflected in my retirement plan's asset allocation, i.e., reducing my exposure to U.S. stocks broadly now? Presidents come and presidents go, and the markets rise and fall. A durable retirement portfolio should be able to weather it all. And everyone who's approaching retirement should be making plans to de-risk their asset allocation. First, let's talk about that de-risking process. Like everything about investing and retirement, there's no one-size-fits-all approach. The fundamentals of risk reduction Broadly speaking, you want some portion of your investments in bonds and other low-risk vehicles. JL Collins, the author of 'The Simple Path to Wealth,' said he recommends starting to move some percentage of your investments to bonds about five years before you plan to retire, scaling up depending on your tolerance for risk, but never having less than 50% of your total investments in stocks. Christine Benz, the director of personal finance and retirement planning for Morningstar and the author of the book 'How to Retire: 20 Lessons for a Happy, Successful and Wealthy Retirement,' said she advises people to start thinking about de-risking their portfolio around age 50. Statistically speaking, most people think they'll work longer than they actually end up working, she said, so it makes sense to start hedging your planned retirement age well ahead of your desired timeline. However, that's not to say you should dump half your stocks once you hit the half-century mark. It should be a slow, measured transition toward what you want your finances to look like when you clock out for the last time. For what that financial picture should look like, she's written about what's known as the bucket approach: Bucket 1 is enough liquid funds to cover a year's worth of expenses (two if you're risk-averse), minus guaranteed funds coming in from sources such as Social Security, pensions or annuities; Bucket 2 has primarily low-risk investments to cover five to eight years of expenses; and the rest goes into Bucket 3, which consists of high-risk, high-reward investments like stocks. Brian Pollak is a partner and portfolio manager at Evercore Wealth Management, which handles primarily clients with net worth of more than $10 million. He said even for very wealthy people, it makes sense to diversify into short- and long-term bonds. As for international stocks, it's certainly not a bad idea to own some, no matter how far you are from retirement. Both Benz and Pollak recommend people maintain a blend of stock investments that roughly mirrors the global market capitalization of the national and international markets. The U.S. represents around two-thirds of it, so have two-thirds of your stocks in the U.S. market. Collins advocates for a simpler investment strategy that focuses on the U.S. market, though he's written that he's not inherently opposed to owning foreign stock. So: With retirement on the horizon, should you diversify? Yes. Should you diversify into international stocks? It could fit nicely into your overall investment strategy. The S&P 500 typically outperforms global equities, though certainly not always, and international stocks have done better so far in 2025. What about the Trump factor? But does Trump present such an existential risk to the long-term health of the U.S. economy that it should make you move away from U.S. stocks? It's true that Trump 2.0 has included a lot of policy decisions that most market watchers aren't thrilled about. Crackdowns on immigration strangle the labor supply in industries including construction and agriculture, both of which are incredibly important in California. The tariff turbulence from 'Liberation Day' in April sent the market into bear territory, though it seems to be shrugging off the latest round of levies that kicked in last week. Those are policy decisions that have historically increased inflation, something Trump campaigned on fighting. But the thing about policy decisions is that bad outcomes can be reversed, either by this president or whoever comes into office next. What's more concerning, experts say, is Trump's recent decision to fire Bureau of Labor Statistics Commissioner Erika McEntarfer. Trump, who has a documented history of making false or misleading statements about people he views as political opponents, claimed without evidence that the agency's recent negative jobs report was 'rigged' against him. Historically, there has been a division between members of a presidential administration and the bureaucrats who put together reports like that, said Jim Wilcox, a professor of the graduate school at UC Berkeley and the former chief economist at the U.S. Office of the Comptroller of the Currency and economist at the Board of Governors for the Federal Reserve. The political appointee who runs the Department of Labor may advocate for presidential policy priorities like labor laws, union rules or pension reform, he said. But the hard numbers on things like employment reports were 'considered out of bounds' for partisan tampering. 'That's one reason that financial markets pay so much attention to these data, because they are so informative and reliable and unbiased,' he said. Now, that's at risk. Odysseas Papadimitriou, the CEO of WalletHub, said he saw this play out in his native Greece ahead of the country's debt crisis and economic collapse. 'The people responsible for the economic statistics were essentially political operatives' in Greece, he said. 'The government wanted to manipulate the stats to their liking. When the financial crisis came all of this changed. It's very concerning if we get to the place where we don't believe the stats.' Trump's decision to remove McEntarfer 'is the most concerning of anything that he has done, economic-wise,' Papadimitriou said. If we 'come to the place where we cannot believe the statistics, then I believe that is an existential threat (to the economy). Investors will not believe what they see. Foreign investment will collapse because no one will know what the hell is going on.' The president's pressure to replace Jerome Powell as head of the Federal Reserve is also a cause for concern. Like the BLS, the Fed is meant to operate outside of political whims, and if Trump installs someone there whose chief concern is keeping him happy, we could lose the progress we've made in the post-pandemic economy. Another move that caused a stir Friday was Trump's executive order opening the door to putting higher-risk private equity and cryptocurrency investments into 401(k)s. But those are risks to keep an eye on, not current reality. Collins said while there are a lot of things about the Trump administration that have him concerned about the near future of the economy, investors should 'tune out the noise' and stick to their long-term plan. It's fair to assume the market will go down at some point. What the specific catalyst will be is really anyone's guess. Attempting to time the market — in this case, hedging your retirement plans on the American economy's downfall — rarely works out. You should diversify in a way that makes you feel comfortable about your capability to hang in there through a protracted dip until the markets come back up, which they historically always have.
Business Insider
29-06-2025
- Business
- Business Insider
Hasan Minhaj says he once kept his money in shoeboxes — and wonders why he shouldn't hoard cash like Warren Buffett
Hasan Minhaj spoke about keeping his savings in shoeboxes, why using money wisely is so hard, and Warren Buffett 's cash hoard on a recent episode of his podcast. The comedian, best known for his Netflix stand-up specials, laid bare his personal-finance anxieties and doubts about investing advice in a conversation with JL Collins, the author of "The Simple Path to Wealth," on "Hasan Minhaj Doesn't Know." "Money and finances have been something that were oftentimes fear-inducing and very painful for me growing up," he said. Minhaj, who rose to fame as a correspondent on "The Daily Show," recalled doing open-mic nights in Los Angeles as a young comic and being paid in cash or checks that he'd cash immediately. He kept the money in his room and wound up having $3,200 stashed in Nike shoeboxes. One day, he said his roommate walked in and asked, "Are you selling drugs?" Minhaj quickly dispelled him of that notion, but the friend then quizzed him on whether he had a checking account (he did, but only kept a small sum in there) or a 401(k) or Roth IRA to save for retirement (he didn't). That was a wake-up call for Minhaj, who realized he lacked a solid grounding in personal finance. The awakening led him to read Collins' book, and the author's three rules for money resonated with him: Spend less than you earn; invest your savings in an index fund; and avoid debt. Money problems On the podcast, Minhaj underscored to Collins how much temptation there is to "get rich quick" and squander cash. "My feed is a constant stream of financial grifters," he said. "I'm talking crypto bros, NFT scammers, affiliate link farmers, and pump-and-dump incels." Minhaj described the urge to spend money on nice things like iced coffees and vacations, and the YOLO mindset that the stock market could crash tomorrow and pinching pennies was pointless. He also lamented how his bitcoin buddies taunt him for missing out on the crypto boom, and how eking out a modest return from an index fund doesn't seem attractive when others have seen their wealth explode by owning tech stocks like Tesla or Nvidia. Collins responded that it's OK to splurge but be selective, and there have been many crises in past decades yet stocks have always recovered and reached new highs. He added that nobody has a "crystal ball" to see which bets will pay off and which will go to zero ahead of time. Minhaj also asked about Buffett choosing to hold more than $300 billion of cash in Berkshire Hathaway's coffers. Be more Buffett? "If Warren Buffett is sitting on cash and not VTSAX and holding, why are we?" he asked, referring to Collins' favorite holding, the Vanguard Total Stock Market Index Fund. "Why can't we be more like Buffett and just know that something bad is about to happen and maybe hold on to that bread?" Minhaj added. Collins responded by noting the legendary bargain hunter had been stockpiling cash not because he's predicting doomsday, but because he can't find enough compelling purchases to make. Minhaj added that as he approaches 40, he feels the competing forces of the "greed to make more money" and the "fear, holy shit, I could lose a lot of money," and asked how to reconcile them. Collins answered that staying the course and owning an index fund for the long term is the most surefire way to get rich and to avoid losing money. In short, he made it clear to Minhaj that the smart money isn't in crypto or shoeboxes, but in low-fee, long-term index funds that are the safest route to lasting wealth.
Yahoo
24-06-2025
- Business
- Yahoo
Expert: How To Grow Your Investments to $100K in 5 Years on an Average Salary
Building your investment portfolio up to a six-figure balance over a short time frame when you don't even earn six figures might seem like an impossible task. However, YouTuber and frugal living expert Austin Williams was able to do just that. How To Get a 10% Return on Investment (ROI): Learn More: 'Right now, my investment portfolio stands at $103,499.51,' he shared in a recent YouTube video. 'This is something I am very proud of, but what makes me most proud is that 90% of it was built on incomes below $50,000, which is a story you don't often hear when it comes to building wealth,' Williams continued. 'Most advice assumes you have a high income, can save half your paycheck, max out retirement accounts, buy rental properties and build a thriving side hustle.' Williams broke down the exact steps he used to build a large investment portfolio on an ordinary salary. To get from $0 to his first $1,000, Williams said he learned how to invest by simply doing it. 'I knew absolutely nothing about investing, and I had no one to guide me through the process,' he said. 'When I was first deciding how to start, I considered taking an expensive online course, choosing a robo-advisor or talking to a professional. 'However, eventually, after further thought, I came to the conclusion that the best way to learn is by putting my own money on the line.' Williams knew that he would be more invested in his success than anyone else, so decided to just go for it on his own. He started by investing a small percentage of his money, sticking with an amount he was willing to lose. 'I took $1,000 of my own money and invested in the market, and I bought individual stocks,' Williams said. 'I bought Carnival Cruise Line, renewable energy [stocks] and Aaron's.' Williams decided on these stocks based on what he had heard others talk about and his sheer intuition. 'I was met with beginners' luck, because due to the stock market crash of 2020, all my stocks were up, and like most people at that time, because they were up, I thought I knew what I was doing and was smart,' he said. 'However, I was just making blind decisions with no logic, but that was still a huge win, because I got started and I was beginning to learn about investing, because my own money was on the line.' While this may not be a great long-term strategy, Williams advised that you just get started with a small amount of money, and see what you can learn along the way. 'As the days pass, you will get more experience and start to understand the market more, and then can ultimately make better decisions with more money,' he said. I'm a Self-Made Millionaire: To grow his portfolio from $1,000 to $20,000, Williams needed to develop an actual strategy. 'Choosing winning stocks is actually incredibly hard,' he said. 'I started to try to learn different investment strategies and eventually, I was led to this book, 'The Simple Path to Wealth.'' The book, written by JL Collins, a leader in the financial independence community, recommends buying index funds. Index funds are groups of stocks that match the performance of a stock market index, such as the S&P 500. 'This investment seemed a lot less risky, because over the last 100 years, the market has always gone up in the long term,' Williams said. 'And so, because my stocks were starting to tank, I decided to withdraw all of them and put all that money into the Schwab Index Fund along with about $5,000 more.' Index funds tend to experience smaller swings in value compared to individual stocks. 'As someone who is very risk averse when it comes to money, I really like this strategy,' Williams said. 'Over time, I started to buy more and more index funds, eventually building a $20,000 portfolio.' To grow his investment balance from $20,000 to $50,000, Williams said he created a 'pay myself first' routine. At this time, he got a new job with a salary of $48,000 a year. 'Once I started to get paychecks, I sat down and created a plan,' he said. Williams' monthly take-home pay was $3,200 and his expenses totaled $2,300, which left him with $900 a month to save and invest. He decided that he would divide that $900 between his emergency fund, his brokerage account and his retirement accounts. 'What I was really doing was creating a payday routine that consisted of three simple steps,' Williams said. 'First, get the money deposited into my account. Second, pay myself first, distributing the $900. And third, pay my bills. I did that once a month.' By saving and investing the $900 before paying his bills, he ensured that he never spent money he was planning to save. 'Along with getting a generous 401(k) match, this is what I did to reach $50,000 invested,' Williams said. 'It was a slow process, but steadily, over time, through consistency, I was on my way to building a respectable portfolio.' Williams said that 'something crazy happened' to get him from $50,000 to $70,000 — he ended up getting a 50% raise, which bumped his salary up to $72,000. 'I wanted to take advantage of this opportunity and not let it go to waste,' Williams said. 'Instead of spending that extra money, I took about $1,600 a month and added it on to that $900, meaning I was now paying myself first $2,500 a month, which really started to make things this move.' At this point, he had built an emergency fund, so he was living off $2,300 a month and was investing $2,500 — over 50% of his income. 'You never know when an opportunity will come, but when it does, it's up to you to seize it,' Williams said. 'I could have just increased my quality of life and saved nothing, but I didn't. I stayed frugal, invested aggressively and went all in on building financial security.' Having this financial safety net enabled Williams to quit his job and focus full-time on growing his YouTube channel. At this point in his investment journey, Williams saw his portfolio balance decline from $70,000 to $60,000 as he lost the stability of his full-time job and was reliant on his income as a YouTube creator. 'In the first three months, I was making about $1,800 a month — not terrible, but nowhere near enough to pay my bills, nonetheless invest some money at the end of the month,' Williams said. 'So the first year of doing this, I didn't invest a single dollar because I was trying to bring this dream to life.' At the same time, the stock market was taking a post-COVID nosedive, and Williams lost much of his market gains. Fortunately, he did have an emergency fund, so even though he was not able to invest more, he did not need to withdraw his investments. Eventually, Williams started making more money as a YouTube creator. 'I decided I needed to stop making excuses and couldn't delay investing any longer, which leads me to the final part of this story — $70,000 to $100,000,' he said. After a full year on YouTube, Williams was making enough money to cover his bills — but not much more than that. However, he decided to 'stop making excuses' and funnel as much money as possible into his investment accounts. 'For the next two years, I maxed out my Roth IRAs, even invested a bit more my brokerage, and now I'm in the process of opening a Solo 401(k) to keep building my portfolio,' Williams said. Thanks to a market rebound and his disciplined investing, Williams has been able to bring his portfolio over the $100,000 mark. 'My portfolio is $103,49.51, and out of that, $67,936 is principal and $35,562 is interest,' he said. 'That's how I was able to build a six figure portfolio without making six figures. I started, I learned, I failed, I learned more. I came up with a plan. I followed through. 'I seized opportunities, I took chances, I stayed calm and I never made excuses.' More From GOBankingRates 4 Housing Markets That Have Plummeted in Value Over the Past 5 Years This article originally appeared on Expert: How To Grow Your Investments to $100K in 5 Years on an Average Salary Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
