October 16, 2014


Dear Friends,

“Bond King” Bill Gross has gotten a lot of press lately. Seems he has missed some very important calls in the bond market for several years. Gross is one of the best-known timers in the industry, and missing important turns in the market is always the risk of market timing. Sometimes you’re “the king,” and other times you’re a goat or worse.

For traditional market timers it not uncommon to throw a poor performing system out and start anew. It’s not that easy to simply start over with a multibillion-dollar fund. But, in a sense, Bill Gross is starting over with a brand new fund at Janus and that’s probably a smart move for him. With a new fund there is an opportunity for the Gross followers to start over as well. Most investors love to get rid of a dog that is making them question their decision to be in a fund that is out of step with the market. So Gross’ move solves a problem for both his investors and himself.

What is the lesson in this? When you own actively managed funds, and they stop producing as expected or the boss leaves, investors are left with a big question of what to do next. However, when you use passively managed index funds, you don’t need to scramble and wonder, “what next?” You either believe that the asset class represented by the fund is worthy of owning long term or you conclude it’s a failed asset class to be dropped from your portfolio forever.

I receive dozens of emails a day from you, my readers, and am pleased to say I have not heard from anyone asking, “What do I do now that Bill Gross is leaving Pimco?” I want to pat you on the back for following the sound buy-and-hold advice that protects you from the madness of putting all your eggs in the actively managed, count on one guy, basket of funds.

Update on Western Washington University Personal Investing Course 

Last week I had a wonderful time presenting a new two-hour talk prepared especially for the incoming class, which is again at capacity with 45 students. I had hoped that since the course was now approved as a General Undergraduate  Requirement (GUR), the class size could double, but due to academic policy that will not happen at this point.

Between this new talk and the one I gave last month to AAII, I feel I’m finding more powerful and memorable ways to present this information. There is no way to know the impact of my work short term but, hopefully, we will see these sound investing principles applied many years from now as we track these students’ investment decisions.

More About 401(k) Plans 

I encourage you to listen (and share) this week’s podcast where I’m interviewed by Ken Roberts on his“Bulls and Bears” radio show. The entire interview is focused on how to get the most out of your 401(k).
To your success,


“Top 100+ U.S. Company” 401(k) Plans

New Plans:
St. Jude Medical
Updates to Plans:
Microsoft – Vanguard Value Index changed to 8% in Moderate Portfolio

Bond Bears Are Right- and Wrong
People learned a long time ago that it’s a lot easier to control a horse if the animal is wearing blinders. Think about it: The horse “knows” what he sees, and he sees only what’s right in front of him.


Opinion: A Half Percent That Can Change Your Retirement
In my workshops and classes, I’ve started including a presentation on the lifetime impact of gaining an extra 0.5% of annual investment return. For most investors, this added return is easy to achieve.



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