Should gold be part of my portfolio?

[Editor's note: This is Part I of a two-part series on whether it makes sense to include gold in your portfolio. Part II is "Why gold should be part of your investment portfolio."]

Humans have valued gold for several millennia, and that will likely continue. It is understandable, then, that a human such as yourself might consider trading some green for gold. I say, "Don't bother," and here's why….

1. Gold isn't a consistently good investment Continue reading...

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How to prevent mobile phone theft

Modern technology is amazing. For example, thanks to the wonders of Find My iPhone -- an application which allows you to use another device to locate a phone on a map -- I was able to watch my stolen iPhone travel northward until the signal stopped deep in the heart of Washington, D.C. I haven't heard from it since, so I don't think the person who has my phone was just taking it for a day trip to the Smithsonian.

According to Consumer Reports, 3.1 million smartphones were stolen in 2013, which was nearly a 100 percent increase from 2012's number. Another 1.4 million were lost.

We call them phones, but they are really pocket-sized computers. These devices are bought primarily for texting, surfing, music, and apps. We use them as phones less than 30 percent of the time, according to a study by Experian. (Android users spend just 28 percent of their time actually talking on their phone; for iPhone users, that figure is 22 percent.)

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How to evaluate mutual funds to boost your returns

I'm a bit of a nut about Christmas; I even have a daughter named Noelle. So this time of year can be a bit of downer for me. The tree gets disassembled, the Bing Crosby CDs get packed away, and the holiday cards stop coming. Regarding that last one, however, the void in my mailbox will soon be filled by a different type of tiding -- in the form of annual statements from my investment accounts.

OK, so they're not as jolly as cards with pictures of friends and relatives. But using your year-end statements to give your portfolio a thorough checkup can pay off, especially if you discover ways to increase your chances at higher returns. To see the potential benefit, check out this table, which shows how much $10,000 could amount to, given different rates of return and time periods. As you can see, earning another two percentage points a year can add thousands of dollars to your net worth.

Annual Return 5 years 10 years 15 years 20 years
6% $13,382 $17,908 $23,966 $32,071
8% $14,693 $21,589 $31,722 $46,696
10% $16,105 $25,937 $41,772 $67,275

Alas, you can't just snap your fingers and pump up your returns. Most investments involve taking on risk, which many people think of as volatility -- the ups and downs you'll experience -- but I prefer to think of it as uncertainty, as in you generally don't know exactly how an investment will perform, which can make things like retirement planning a bit of a challenge.

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Heed the Ghost of Yourself Yet to Come

Back in July of 2013, I decided to move on from the turtle-logoed pages of Get Rich Slowly in order to devote more time to other professional and familial responsibilities. However, a few months ago I managed to find time to once again join this merry band of bloggers, which gives me the opportunity to pass along the results of a survey I included in my "farewell" post from 2013.

At the time, the members of The Motley Fool 401(k) committee (of which I am a member) had recently decided to auto-enroll new employees into the plan. That decision was made after significant debate. Some committee members argued that most Americans aren't saving enough for retirement and auto-enrollment is a way to "nudge" people toward saving more. Others said it was meddling too much in our colleagues' financial lives, especially since the Fool 401(k) has an above-average participation rate. Many years ago, I would have been more inclined to side with the latter camp. However, I had since seen too many people start too late with their retirement savings, so I sided with the pro-auto-enroll camp, which eventually triumphed.

However, we then had to decide on a default savings rate. According to Deloitte, the average deferral rate for auto-enrollment plans was 3 percent in 2012 -- and that is a good start, but not high enough for someone who wants to retire in her 60s. Since auto-enrollment got Uncle Sam's blessing in the 2006 Pension Protection Act, the evidence indicates that auto-enrollment has increased the number of workers contributing to their 401(k)s, but the average savings rate has gone down. That's because many of the auto-enrolled folks stick with that low deferral rate, whereas people who actively enroll in their plans tend to choose to sock away 8 percent or so of their salaries. Some of us on the Fool's 401(k) committee argued that 8 percent was a good default rate for our colleagues-to-be because the Fool matched contributions up to that point. (We have since increased the match to 9 percent.) Others thought that was way too much, arguing that we don't know enough about peoples' finances to assume they can afford to forgo that much of their income.<

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How to Save for a House

How to save for a house? It's a common question among newly married couples, but this was not our first marriage milestone. My wife and I didn't wait too long after our wedding to create a family.

We were parents one week before our first anniversary. Our apartment was too small for a third human, so we endeavored to buy a house. Unfortunately, we didn't have a lot of cash on hand since we moved from Florida to Virginia six weeks before we got married, and we footed most of the bill for the wedding.

A couple on move-in day

However, we were still able to buy a house, though barely in time for the birth, but amassing a down payment relatively quickly. If you're also scrounging for a down payment, here are some ways you can save and reach that goal faster.<

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More about...Budgeting, Frugality, Home & Garden, Retirement

Indexing vs. stock-picking: You don’t have to choose sides

A discussion about personal finances can be a polite, congenial affair. Few people come to blows over insurance or budgeting. But some topics inflame financial passions, and one of them is investing. Fellow GRS e-scribe William Cowie encountered this a couple weeks ago when he advocated for investing in individual stocks in certain situations. I thought I would pass along a few thoughts of my own, given that 1) William cited the success he's had with a newsletter from The Motley Fool (my employer for the past 15-plus years), and 2) my own portfolio has big holdings in index funds but also some actively managed funds and individual stocks.

This is a huge topic, with enough books written about the subject to create an entire wall of books. But for today's post, I'll question one of the main arguments against individual stocks, then conclude with a few parting thoughts. And as my posts have traditionally been sprinkled with cat pictures, I'm including this cool "peace" cat as inspiration.

People Aren't Actively Managed Funds

The evidence is clear: Most actively managed funds underperform similarly invested index funds. The Standard & Poor's Index vs. Active (SPIVA) mid-2014 report says that more than 70 percent of actively managed funds lost to their respective benchmarks over the previous five years. The cheerleaders of index funds have plenty of hard evidence to power their pom-poms.

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Average 401(k) balance by age

Saving for retirement isn't easy, but 401(k)accounts are a universally popular way to save thanks to hands-off investing features and contributions drawn directly from your paycheck.

But how do you know if you've saved enough? How is your retirement savings plan shaping up against people your same age?

Here's the Data:

Average 401(k)balance up to age 25: $4,048 Median: $1,385

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5 key retirement factors your financial plan may not address

If you love cat pictures, today is your lucky day. Because I'm back!

As longtime readers will recall, I contributed to Get Rich Slowly from 2009 to 2013. I often wrote about more "technical" (i.e., boring) topics, such as taxes and IRAs. In order to provide a reprieve from the technical-ness, J.D. occasionally sprinkled in cat pictures. I tried not to take it personally.

Photo: ZUMA Press
Photo: ZUMA Press

But for the record, I think other creatures would have been more appropriate. Such as the blob fish.

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Five factors for your asset allocation

When you think of your portfolio, visions of stocks, bonds and cash likely dance in your head. Generally, the mix of those investments is based on some measure of When you'll need the money

The conventional wisdom is that the farther you are away from your investment goal, the more risk you can take. While that's generally true, discussions of investment time horizon usually focus on one point in time, and that's usually when someone will retire. However, a retiree won't need all the money all at once. She'll take a bit out the first year -- let's say 4 percent, since that's the safe withdrawal rate that most studies hover around (though there's plenty of debate about it) -- but the rest will remain invested. Then she'll take out a bit the next year, and then a bit three years later, and so on… for decades. Retirement isn't a single financial goal, but a series of 30 or so (depending on life expectancy) progressively longer goals that must be met each subsequent year.

These goals must meet two criteria: 1) The money must last as long as the retiree does, and 2) provide income that keeps up with inflation. The implication is that retirees should still have money in stocks, since a portfolio dominated by bonds and cash would have trouble accomplishing both of those criteria. Continue reading...

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Is the Roth right for you?

This year, it happened -- something many have been predicting for years: Taxes went up. And most likely, the hikes will just keep coming. There's no other way to pay off the country's debt and fund the ballooning entitlements due the baby boomers as they retire. The increases may not affect everyone, and those who earn more will pay more, but someone's gotta pay.

One way to hedge against higher tax rates is to contribute to a Roth retirement account. Your contributions aren't tax-deductible, but the withdrawals are tax-free once you turn 59 ½ and you've had a Roth account for at least five years. Who wouldn't want tax-free money if tax rates are just going higher?

Well, as attractive as the Roth can be, it's not always the best choice for everyone. You see, a contribution to a Roth means you are forgoing a contribution to a traditional retirement account, which might give you a tax-deduction today in exchange for paying taxes in retirement. So the choice is: Should you pay taxes today or in retirement? Continue reading...

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