Saving for Descendants

Comments on “Investing for a Child’s or Grandchild’s Lifetime,” by Paul Merriman, in the April 2023 AAII Journal:

This fails to consider the costs associated with college. Filing the FAFSA college financial aid form would require disclosing these assets. Assets in the student’s name would reduce available aid and student loans by 20% of those assets per year. If there is no other source to offset these reductions, the student would be required to contribute from their savings.
—Peter P. from Illinois

As Merriman points out, even with the best intentions of a grandparent, this investment account will be very tempting to a young adult who wants a shiny new car. I read how the grandparent or successor adviser will be educating along the way, but have any of us grandparents devised a simple method to increase the likelihood that the account stays intact? Trusts would be expensive and impractical.
—James F. from Florida

The Path to Retirement

Comment on “A One-Page Wealth-Building Plan to Reach the Goal of Retirement,” by Charles Rotblut, CFA, in the April 2023 AAII Journal:

This is a good one-page description of the PRISM process. It gives a framework for a successful path to wealth but depends on you supplying details and decisions for your own situation. An excellent resource to guide your participation recently came up in the PRISM community discussion, the JPMorgan 2023 Guide to Retirement.
—Hugh P. from Washington

Investing Advice

Comments on “A Glimpse Into How AAII Members Built Their Savings,” by AAII Staff, in the April 2023 AAII Journal:

My best strategy was to persist in investing, and even invest at a greater rate, during market downturns. It can be psychologically stressful, but the endorphin rush that comes when the market starts to recover is well worth the preceding stress!
—Jeff S. from Minnesota

My experience has been that the primary impediments to successful investing are the same as in the rest of life: acting on emotion and buying into the hype of the 24-hour news cycle. Use discipline, patience and reason to design your investment strategy and then stick with it. I wish I could go back and tell this to my 20-year-old self.
—Andrew D. from Pennsylvania

This was quite reassuring. I had neither parental guidance nor a mentor, but I did develop a savings mentality quite early. Unfortunately, I started my investing phase with a stockbroker in Alexandria, Virginia, who I now realize was churning. I didn’t know what it was called but within a year I realized I wanted no part of it.
—Donald S. from Pennsylvania

More Ways to Assess a Bank

Comment on “Key Metrics to Help Assess a Bank,” by Charles Rotblut, CFA, in the April 2023 AAII Journal:

The metrics you list for assessing a bank are definitely the standard ones. They may become more important as this banking crisis rolls on.

However, with the latest failures there are some new things to worry about: How much of the bank’s assets are invested in long-term bonds? What percentage of the bonds have been classified as “hold to maturity”? How big is the unrealized loss on those securities? How much of the bank’s deposits are uninsured?

The information is in a bank’s U.S. Securities and Exchange Commission (SEC) filings, but it takes some digging.
—John T. from South Carolina

High Bond Yields

Comment on “Stock and Bond Yields Are Converging,” by Charles Rotblut, CFA, in the April 2023 AAII Journal:

The risk/reward equation is currently strongly in favor of bonds. Short-term bonds are even more attractive than the 10-year bond yield of 4.01% quoted in this article. As an example, today (April 14), I can buy a Treasury bill with a maturity date of August 31, 2023, and a 4.93% yield. That is at the high end of the stock market range of 4.54% in February 2023 to 5.02% in October 2022.
—David D. from the U.S.

Oil & Gas Environmental Impact

Comments on “Drilling for Opportunities in the Oil & Gas Industries,” by Jack Gilleland, in the April 2023 AAII Journal:

I was dismayed to read this article. Fossil fuels are the primary cause of the atmosphere and ocean heating up, causing heat waves, droughts and more severe storms that are killing people today. That will only get worse if we don’t rapidly switch to other energy sources. We are increasingly less reliant on fossil fuels than the fossil fuel industry would have us believe.
—Thomas K. from Washington

The solutions are not economically viable. Fossil fuels will be with us for the indefinite future.
—Foster N. from Virginia