Financial Well-being

Large growth, which typically holds over 50% in technology , has entered into crash territory today with around 22% drop from it's peak from Dec last year. Broad market, such as Vanguard Total Stock index, is still in correction territory with just 13% drop from it's peak.  Market hates uncertainty . We have enough share of uncertainties lately, such as pandemic surge in China, geo political crisis in Europe caused by war in Ukraine, global food inflation and associated geo political crisis in developing nations, just to name few.   This makes Central Banks job even harder in taming inflation and hence increases potential for global stagflation . It's natural in such scenario to have investor emotions of cutting losses by resorting to panic selling of stock equities, before it drops even further. However, savvy investing is all about managing emotion of such pain of loss . Long-term stock investing's contribution to our financial well-being depends a lot on how...

"When it comes to savings, paying for college and home-buying , most say young adults today have it harder than their parents’ generation" Source: https://www.pewresearch.org/fact-tank/2022/02/28/most-in-the-u-s-say-young-adults-today-face-more-challenges-than-their-parents-generation-in-some-key-areas/ft_22-02-25_youngadults_01/ My advice to millennials in this group is to consider starting early  in investing as one of the best coping techniques for above lack of savings  challenge they are having. This might require some hard choices when it comes to discretionary  splurges, such as destination  bachelorette/birthdays/weddings, which seems to be extraordinarily higher for this generation than their parents. This takes a big slice away from some of mandatory savings one can start early well rounded financial well-being.

Congratulations to all those savvy investors who paid attention to valuable advices  by some of us and acted timely  to lock in one of the best mortgage rates in history. Some of us managed our short term greed  well and paid little bit extra in mortgage rate so as to stretch  our mortgage to longer 30 years  term as opposed to otherwise cheaper 15 years term. Our portfolio is likely to benefit through increased investing in stock equities (as opposed to slow growing home equity) in subsequent long 30 years  through magic of compounding. In counter intuitive way, perhaps some of us have been accelerating  mortgage payment with no regard to such low interest rate  opportunities. Such behavior could be correlated to so-called debt aversion  (or perhaps inability to manage pain of occasional losses during investing in stock equities). Unfortunately, such behavior is likely to cost quite a bit to their long term financial well-being. Savvy inve...

ETF  ProShares UltraPro QQQ (TQQQ) offers 3x ( T riple) daily long leverage to the NASDAQ-100 Index based Invesco QQQ Trust (QQQ) ETF . Using 3x leverage means that fund manager invests another ( borrowed  ) $2 for each $1 investors put in. This results into 3 times of index return in boom times like last several years. This all sounds great until market moves to crash  territory. All those gains as well as principal could be quickly wiped out during a crash. For example a 10-20% market correction  (which typically happens every alternate  year) would result into 30-60% drop in TQQQ. If one had doubled one's money in last couple of years, all that gain is wiped out with just a mild 15% correction. With such outsized  loss, one is likely to resort to panic selling  and so would miss out further during quick  recovery (typically 4-5 months for corrections). I strongly suggest to stay away from such souped up leveraged  investing. Savvy invest...

iShares Russell Top Growth ETF (IWY) is one of the best passive index ETFs for large cap growth asset class. It's quite inexpensive with expense ratio of just 0.20%. It has outperformed it's category by almost 25% for last 3,5,10 years period: Source: Morningstar Performance tab It's holdings are 12% cheaper (PE of 30 vs 34) than broad large cap growth index. It's projected long term earnings growth of 17% is quite comparable to that of it's index.  It's standard deviation of 18% is same as that of Total Stock index, even though it has outperformed   Vanguard Total Stock index by 50% in last 3,5 years period. Note that, as long term investor, my advice is to mostly stick with style-neutral broad market index. Styles come and go and those chasing today's hot style are mostly too late in the style game and eventually tend to lag.  As such, we can go for Large Growth factor bias for small portion of portfolio. My suggestion would be to go s...

Tax advantage is not that great for after-tax  contribution when not converted to Roth. Even though tax liabilities for growth from capital gains and reinvested dividend is deferred, eventually gains gets taxed at higher  ordinary income tax rate at withdrawal. Taxable brokerage account is perhaps better tax optimized for after-tax dollars. Capital gains are deferred here too, especially for passive index (which rarely do any capital gains distribution). When we withdraw, we pay lower  capital gains tax or perhaps no taxes for middle class lower tax bracket household . For example, Vanguard Total Stock Market ETF (VTI) has distributed only 1.5% yearly (just for dividends), even though it grew 9% annually since 2001. So 85% of growth has been tax deferred, even in taxable account.

When we apply for Home Equity Line Of Credit (HELOC), we normally try to get maximum possible line. However, near-retirees should get HELOC for only amount they realistically need. It's good to keep debt to income (DTI) ratio low for them. As they retire and wish to take another loan (say zero percent auto loan financing deal), it might get tricky to qualify as retiree (with limited  income). For the same reason, as near-retiree, it's better to go for 30 years mortgage refinancing . It would keep DTI ratio low. Also this would make it much easier to qualify for  another  HELOC in future  as and when current HELOC's draw period is about to end. BTW, while calculating new loan DTI ratio, prospective lenders assume maximum utilization of line, even though our current HELOC loan balance might be just zero. For example, I have $80K HELOC line with 3% interest. When I re-financed my mortgage few months back, I had no current loan balance on my HELOC. However, I saw $...