Sound in­vest­ing

Los Angeles Times - - BUSINESS - By Liz We­ston Ques­tions may be sent to Liz We­ston, 3940 Lau­rel Canyon, No. 238, Stu­dio City, CA 91604, or by us­ing the “Con­tact” form at askl­izwe­ston.com. Dis­trib­uted by No More Red Inc.

Money Talk colum­nist Liz We­ston sug­gests sev­eral books on stock trad­ing that have stood up over time.

Dear Liz: I in­vest in real es­tate and have a se­cure pen­sion, but I also have a man­aged stock ac­count worth about $250,000 and would like to get more in­volved in in­vest­ing that.

Can you rec­om­mend some good books on how the mar­ket works and per­haps a cou­ple of good mid­dle-of-the-road web­sites? Ev­ery­thing I see is ei­ther overly bullish or bear­ish. An­swer: The prin­ci­ples of sound stock mar­ket in­vest­ing aren’t ex­actly “click bait” (Web speak for catchy links that gen­er­ate views and ad­ver­tis­ing in­come). So you’d be smart to read a few books that have stood up over time.

Leg­endary stock picker War­ren Buf­fett says “The In­tel­li­gent In­vestor” by Benjamin Gra­ham is “by far the best book about in­vest­ing ever writ­ten.” Gra­ham is con­sid­ered the fa­ther of value in­vest­ing, which in­volves fo­cus­ing on the un­der­ly­ing per­for­mance of com­pa­nies rather than on spec­u­lat­ing in their share prices.

Buf­fett also says, how­ever, that the vast ma­jor­ity of in­vestors are bet­ter off tak­ing a pas­sive ap­proach — one that in­volves buy­ing and hold­ing low-cost in­dex funds that seek to match the mar­ket rather than beat it.

To un­der­stand why, you should read “A Ran­dom Walk Down Wall Street” by Bur­ton G. Malkiel, which dis­cusses how the ac­tive ap­proach to in­vest­ing typ­i­cally fails and drives up costs that doom a port­fo­lio to un­der­per­for­mance.

Although both books have been up­dated re­cently, they were first pub­lished in 1949 and 1973, re­spec­tively. A must-read book pub­lished this cen­tury is Ja­son Zweig’s “Your Money and Your Brain,” which uses dis­cov­er­ies in neu­ro­science, be­hav­ioral fi­nance and psy­chol­ogy to ex­plore how we mess up in­vest­ing and fi­nance and how we can do bet­ter.

If you’re look­ing for a web­site with solid in­vest­ing ad­vice, ex­plore Ki­plinger, a per­sonal fi­nance pub­lisher in busi­ness since 1920.

Max­ing out So­cial Se­cu­rity benef its

Dear Liz: I was told by a staff per­son at our So­cial Se­cu­rity of­fice that be­cause I am seven years older than my hus­band (he is 58, I am 65), “file and sus­pend” wouldn’t work for me and that be­cause I am wait­ing un­til 70 to claim benefits, it was a non-is­sue.

Is that cor­rect? How does the “lump sum” op­tion fig­ure into the equa­tion? How quickly would I have to file and sus­pend not to be pe­nal­ized for the process? An­swer: The “file and sus­pend” op­tion al­lows you to file for your So­cial Se­cu­rity ben­e­fit and then im­me­di­ately sus­pend that ap­pli­ca­tion.

The sus­pen­sion means your ben­e­fit con­tin­ues to earn de­layed re­tire­ment cred­its that boost the amount of your checks 8% each year un­til age 70, when your ben­e­fit reaches its max­i­mum.

The file and sus­pend op­tion is avail­able only once you’ve reached your full re­tire­ment age (which is cur­rently 66 but which is ris­ing to 67 for those born in 1960 or later).

There are two main rea­sons to file and sus­pend. The first is to al­low your spouse to claim spousal benefits based on your work record. The sec­ond is to give you the op­tion to change your mind.

If you file and sus­pend, then dis­cover you need the money, you can ei­ther start benefits at the larger amount you’ve earned with de­layed re­tire­ment cred­its, or give up those cred­its and in­stead re­ceive a lump sum pay­ment of benefits back to the date you suspended your ap­pli­ca­tion.

There’s no rea­son for you to file and sus­pend for spousal benefits since your hus­band would have to be 62 be­fore he could file for those checks. By that time, as the So­cial Se­cu­rity rep­re­sen­ta­tive points out, you’ll be close to age 70, when you plan to start your ben­e­fit any­way.

You could still file and sus­pend as an in­sur­ance strat­egy — in case you need the money later. If that’s your plan, then do­ing so at your full re­tire­ment age of 66 would give you the op­tion of re­quest­ing the largest pos­si­ble lump sum if you do change your mind.

De­ci­sions about when to start So­cial Se­cu­rity benefits and how to co­or­di­nate benefits when you’re mar­ried (or di­vorced, or wid­owed) can be ex­tremely com­plex.

Please read the in­for­ma­tion the AARP pro­vides on its site about max­i­miz­ing So­cial Se­cu­rity benefits and con­sider us­ing one of the avail­able cal­cu­la­tors to ex­plore your op­tions.

Spencer Platt Getty Images

BIL­LION­AIRE War­ren Buf­fett rec­om­mends “The In­tel­li­gent In­vestor” by Benjamin Gra­ham.

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