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Investing Blog Roundup: Reinvestment Risk with an Inverted Yield Curve

Since late 2022, we’ve had an inverted yield curve, which is when shorter-term fixed-income investments actually have higher yields than longer-term fixed-income investments. That’s not the typical situation. Bonds with longer duration have more interest rate risk (price volatility), so they typically have higher yields to compensate for that higher risk.

But, right now, they don’t. For instance, as of right now, the yield on 1-month Treasury Bills is more than a percentage point higher than the yield on 30-year Treasury Bonds.

And that leads to one of the most common questions I’ve received over the last year: if cash (and other super-short-term fixed-income options) actually pays more than longer-term bonds, why would I use longer-term bonds at all?

In a recent article, David Blanchett dove into one such reason: reinvestment risk. With cash and similar, you know what rate you’re getting today, but there’s no way to know what rate you’ll be getting in even the intermediate-term future. And as Blanchett found, the way an inverted yield curve often “fixes” itself is by cash yields falling.

Other Recommended Reading

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Investing Blog Roundup: “Catching Up to FI” Podcast, Discussing Social Security

I was recently a guest on the Catching Up to FI podcast — a show for late starters on the journey to financial independence. We discussed a variety of Social Security planning topics, such as the impact of differing ages and earning histories between spouses, spousal and survivor benefits, delaying benefits as opposed to a “take the money and invest it” strategy, and more.

You can find the episode here:
https://podcasts.apple.com/us/podcast/catching-up-to-fi/id1664430924?i=1000640796504

Or on YouTube:

Other Recommended Reading

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Investing Blog Roundup: 2023 Bogleheads Conference Videos

Happy Holidays and Happy New Year!

As of last week, the videos from the 2023 Bogleheads Conference are available.

The videos and slides from Friday’s “Bogleheads University” event (both the 101 and 501 tracks) can be found here:
https://boglecenter.net/bogleheads-university/

And the videos and slides from the Saturday and Sunday sessions can be found here:
https://boglecenter.net/2023conference/

As far as my own involvement, my primary contribution was a session titled What the Less-Involved Spouse Needs to Know About the Financial Plan. The goal of the session was to help bring the less-involved spouse up to speed on the household finances, in case they have to take over at some point — as well as to empower that spouse to play a more involved ongoing role.

As a reminder, the Bogle Center is a 501(c)(3) non-profit. Donations to the Center pay for these efforts as well as our other educational endeavors, such as the Bogleheads on Investing and Bogleheads Live podcasts.

Other Recommended Reading

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Investing Blog Roundup: When to “Wing It” With Financial Decisions

Aside from the technical discussions here on the blog (e.g., how various tax or Social Security rules work), there are a handful of messages that I try to deliver pretty regularly. One of those is that there’s a lot more to financial planning than just investing. Fortunately, most financial planning decisions don’t require any sort of complicated, in-depth analysis.

In a recent article, Harry Sit gave some guidance on which financial decisions really merit a careful decision process — and when it’s fine to “wing it.”

Other Recommended Reading

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Investing Blog Roundup: the Hottest (also Safest and Most Boring) Investment

Housekeeping note: there will be no article this upcoming Monday (11/27), as I’ll be taking a few days off for Thanksgiving. I hope you all enjoy the holiday.

Based on my email inbox as well as discussions at last month’s Bogleheads Conference, Treasury Inflation-Protected Securities (TIPS) are the hottest investment topic right now. There’s something inherently funny (to me) about the safest, most boring investment being the current “hot” trend. But as John Rekenthaler notes, high TIPS yields are a tremendous boon for retirees or near-retirees.

Other Recommended Reading

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Investing Blog Roundup: “We Need to Talk About Your Retirement Spending”

One of the most important messages of my recent book More Than Enough is the idea that smaller gifts made to loved ones earlier in life can be dramatically more impactful than large inheritances left later. This week Christine Benz shared exactly such a story from her own life. Benz also questions the idea that spending at an extremely low rate from a retirement portfolio should really be a badge of honor, as it’s so often treated in the personal finance world.

Other Recommended Reading

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