NGPF Podcast: Tim Talks To Prof. Meir Statman About Behavioral Finance


I enjoyed my recent conversation with Finance professor Meir Statman of Santa Clara University, which is just down the street from the NGPF offices. Meir conducted some of the earliest research in what we now know as behavioral finance. He discusses his book, Finance for Normal People, and shares his insights about how investing should be taught in school (spoiler alert: Keep It Simple!). He also describes his approach to playing the stock market game and why fees matter so much when comparing investment options. You will know more about investing after you listen to Prof. Statman. Enjoy!

Think You Can Pick A Mutual Fund That Can Beat the Market? Think Again And Buy An Index Fund Instead!

Based on this recently analysis, go ahead and buy an index fund. Over any recent time period (1, 3, 5, 10 and 15 years) you would have trounced actively managed funds. Of course, “past performance is no guarantee of future results,” however, when you see the persistence of index fund success over short, medium and long-term periods, and the primary reason for it (they carry lower fees), I would put my money (and do) on this trend continuing.

Chart from SPIVA U.S. Scorecard Report (only first four lines, full analysis available by clicking on link):

Question: What Is Most Valuable Car Company In the United States?

a. General Motors

b. Ford

c. Tesla

Resource Lists for Financial Educators (courtesy of Barbara O’Neill of Rutgers Cooperative Extension)

What does a distinguished professor do during her sabbatical? Curate personal finance resources, of course! In this blog post, Barbara O’Neill shares the fruits of her hundreds of hours of labor in putting together three awesome resource lists (see bottom of post for links to her lists), including what what she considered the “best of the best” from the NGPF library. As she describes below, the purpose of her odyssey was to replenish her “well” of creative learning activities. I hope that your “well” overflows as you find resources that will work in your classroom. Thank you Barbara for this tremendous gift to the community! Your commitment and dedication to improving financial literacy in this country inspires us.

History Lesson: The Dow Jones Industrial Average Since 1896 In One Chart

Great infographic showing the price action for the Dow Jones Industrial Average over the past 130 years with historical milestones along the way (click on the graphic to enlarge it):

By |March 26th, 2017|Chart of the Week, Index Funds, Investing, Math, Research, Stocks|

Investing: What Can Investors Learn from Warren Buffett’s 2016 Letter to Shareholders?

I heard a great conversation today with Roger Lowenstein, former WSJ columnist and Author of Buffett: The Making of An American Capitalist, America’s Bank and When Genius Failed, on the Masters in Business podcast. When asked about how he learned about investing, he mentioned how much he had learned from reading Warren Buffett’s Annual Letter to Shareholders. I thought I would dissect his 2016 Letter and share his often folksy advice in an abbreviated format (the letter is 29 pages long).

I thought you might find these insights useful:

  • Two things to keep in mind during market declines which captures the psychology of investing (not his use of the phrase “sit for an extended period”):

Spreadsheet Math: Two Investments Walk Into A Classroom…

Ok, not the best title but let’s run with it. Let’s start with a question:

You have a choice between two investments of $100,000:

  • Investment #1: Earns a consistent 8% return every year (put aside the fact that an investment like this doesn’t exist at the current time; it’s been a while since you could buy a 30 year Treasury Bond with that kind of return).
  • Investment #2: Has an average return of 8% per year but has “lumpier returns” aka it has more volatile returns but the returns each year are in the top 10% of fund returns. Some years it is up, some years it is down, but overall it averages the same 8% return as Investment #1.

Which investment has a higher balance at the end of the 20 year period?

Web Quest: How Do I Buy A Stock (Or Better Yet, An Index Fund)?

A teacher at our recent FinCamp reminded me that we should not forget about the importance of the mechanics of personal finance transactions. What good is teaching students about the importance of investing if they don’t know how to go about setting up an account to buy/sell investments. While we have a activities on how to select a credit card and a bank account, we don’t answer the basic question that many young investors have which is “How do I buy a stock?”

Rather than answer this question for them, have students do their own online research to discover: