Reading List: Low-Risk Investing, Free Accounting Software, Limited Willpower, Flexible Withdrawal Rates

I run across a lot of articles that may not merit an entire blog post but are worthy of sharing. Let me know if you like this format with short summaries or if you’d rather me just tweet links.

Playing It Safe as a Long-Term Strategy
For a while, Professor Zvi Bodie has written books and articles about low-risk investing and encouraging the purchase of Treasury Inflation-Protected Securities (TIPS) and I-bonds. If you bought them when he was first saying that, you’d have TIPS paying 3%+ real yield and doing quite well. But now you’re looking at 0% or negative real yield unless you go decades out to eek out 1%.

He still says that stocks are too risky regardless of time held and should not be bought unless you already have enough assets to cover the bare necessities. You won’t like the alternative options: spend less, save more; plan on retiring later; work a second job. He and Taqqu have a new book called Risk Less and Prosper.

Berkshire Hathaway Letter to Shareholders
Warren Buffett sent out his annual letter to shareholders over the weekend. As usual, the letter contains some of his insights and opinions on issues like the housing market recovery, investing in gold, and the current dangers of bonds. He also lays out his argument for why owning equities (at least BRK) is actually low-risk over a long time horizon.

There has never been a better time to be an individual investor
From the Abnormal Returns blog. I agree that there are better tools out there now at a lower cost, but with the death of pensions there will also be a lot more responsibility and pressure placed on individual investors. If they mess it up, it’s not going to be pretty. That makes it a stressful time to be an individual investor!

Wave Accounting: Free online accounting software for small businesses
The price is right at free, as they intend for it to be ad-supported. Includes free import of transactions from your bank account. I signed up but haven’t taken it for a test run yet. I currently use Intuit Quickbooks and haven’t had to upgrade for 5 years.

Your Mistaken Belief in Financial Willpower
I have come around to support the idea that willpower is more of a finite resource, or at least it has to be built up like a muscle. Don’t use it up when you don’t have to. Carl Richards of the NY Times points out ways that we can conserve our willpower for other things using automation for paying bills and savings.

Should Your Retirement-Portfolio Withdrawals Fluctuate With the Market?
What is the best way to withdraw from your portfolio in retirement in order to make sure it lasts? This Morningstar article looks at the research on ways to implement flexible withdrawal rates. I agree that numbers like 4% withdrawal rates should be a guideline and not a rigid rule.