Hendrik Bessembinder has produced some of my favorite stock market research.

Bessembinder discovered that four out of every seven stocks in the U.S. have underperformed cash (one-month T-bills) since 1926. And just 4% of companies accounted for all the wealth gains for the entire stock market in that time.

The stock market runs on power laws over the long run.

Of course, there are stocks that do well over short time frames, but Bessembinder’s research highlights the benefits of diversification to ensure you take part in those big winners over time.

The most motivated and successful people take a problem, outline a solution, and relentlessly pursue it. This is a good model to achieve success. And following it creates momentum. It provides a sense of empowerment as obstacles are overcome. It is self-motivating as each milestone is achieved and each new one appears on the horizon.

Chances are, you’re not putting enough money aside for the retirement you want.

A recent Retirement Commission paper noted that while the KiwiSaver scheme had seen many more people saving for their retirement, there was still room for improvement.

The Commission’s policy lead, Michelle Reyers, told Breakfast last week it was still early days as to whether KiwiSaver would mean people save the money they needed for retirement.

Today’s story looks at two key factors that determine the answers to the big questions when planning retirement finances: ‘How much do I need?’, and ‘How much can I afford to spend?’ - in order to have confidence that you can maintain your living standards, not run out of money, and not have to rely on welfare.

These two factors are: your current age, and your likely life span. In particular, we highlight the four big problems when relying on ‘life expectancy’ tables that are used throughout the financial advice and retirement industry.

Ben Carlson's straightforward no-nonsense approach is exactly what you need when it comes to money advice. And the admiration of his many fans stems from his ability to deftly combine investor psychology and data in his narratives.

This is part of a series where I attempt to understand the behavioural traits and mindset of money managers and investors. At the end of this (slightly edited) transcript, I have listed the 20 individuals interviewed for this series.

A reader asks:

I am 60, retired and have a substantial portfolio ($14M not to brag) invested in index funds 60/40 at the moment. I have enough money to live off from defined benefit pensions for the rest of my life, but I keep swinging from one view to another depending who I read. Some famous passive advisors say don’t take any risk unless you have to while others say you should be invested all in stocks because you don’t need the money anytime soon and should be leaving a legacy. Depending on how I feel and what the market is doing I target somewhere between a 50/50 portfolio and a 75/25. How do I square this circle?

That’s a lot of money.

Tune in to the podcast below where the hosts interview our Managing Director, Nick Crawford as he explains what to do and what not to do as a lotto winner.

From the IMF cutting global growth forecasts to central banks withdrawing stimulus to eye-popping inflation figures and the emergence of a new virulent strain of the coronavirus, the December quarter provided plenty of worrying headlines.

Yet investors with diversified exposure to global equity markets still experienced solid returns in that period. Global developed markets delivered a return for the three months of just over 7% in AUD terms and nearly 30% over the year.

Human beings dislike uncertainty. It’s an adaptive trait that has helped us to navigate complex environments, make safer choices, and foster social bonds, all of which have contributed to our species’ survival and success. But this dislike of uncertainty can be unhelpful in certain areas of life, and particularly in investing. As DAVID BOOTH, co-founder of Index Fund advisors explains, investors would be better off, financially and emotionally, if they could learn to embrace uncertainty instead of seeing it as a constant threat.

A reader asks:

I get all the stuff Ben has been saying about inflation — wages have kept pace, economic growth has been higher than the 2010s, wages have risen the most for lower income people, etc. I get all that. My husband and I own a house and own stocks so we’ve benefitted in recent years. Having said all of that, I STILL CAN’T GET OVER HOW HIGH PRICES ARE!!!

The grocery store, home/auto insurance, restaurants, babysitters for the kids…everything is more expensive.

So how do I get over the sticker shock? Will it just fade eventually as we get used to higher prices?

Graham Hand’s update last week, five months on from his cancer diagnosis, understandably struck a chord with readers. It wasn’t just his battle with brain cancer. It was also his revelations of struggling with not being able to work, and in some ways, of losing his personal identity.

It brought home that in debates about retirement or semi-retirement, there’s a lot of focus on the financial aspects: income, tax, estates, wills, superannuation, and the like. Less attention is paid to the psychological challenges of retirement, which can be even more demanding.

It’s my favorite time of year again: March Madness, the NCAA competition held each spring to determine the national champions of college basketball.

Many fans look forward to predicting who’s going to win the whole thing—what’s become known as “bracketology”—but not me. In my mind, March Madness is captivating because it’s completely unpredictable. What I love is witnessing an arena full of athletes trying their absolute hardest, working together to achieve a common goal. Watching college basketball provides clear evidence that we, as human beings, can do so much more together than we’re capable of on our own.

A lack of consistency by active fund managers in beating their respective indexes has been a constant theme of S&P Global's SPIVA U.S. Scorecard. With roots tracing back to 2002, this benchmarking series — formally titled the "S&P Indices Versus Active" report — semiannually reviews data tracking performance of active fund managers against their respective indexes.

A wealth of academic evidence — from Nobel laureates such as Eugene Fama and Harry Markowitz to William Sharpe and Merton Miller — warns that trying to time markets as a reaction to stock price fluctuations is a foolhardy endeavor.

Many people start out managing their own investments. But as their earnings and assets grow, their financial needs and challenges become more complex—and continuing to go it alone could prove costly in terms of investing miscues. Consider three common mistakes that can reduce returns and increase anxiety:

1. Trying to Time the Market

Investors may be tempted to cash out of the stock market to avoid a predicted downturn. But accurately forecasting the market’s direction to time when to buy and sell is a guessing game. Missing only a brief period of strong market performance can drastically affect your lifetime wealth.

James Gruber: Welcome, Kunal. What brings you to Australia?

Kunal Kapoor: Well, I've been accused of following Taylor Swift around, but that is definitely not the case. I'm here obviously because Morningstar has a large presence in Australia and just an opportunity to meet clients, checking on our teams, that kind of thing.

Gruber: You've come as markets reach record highs. Is it a time for investors to rejoice or to be cautious?

A podcast listener asks:

How do you both manage to produce podcasts every week, handle your jobs, write, read, and raise families without burning out? How do you maintain this balance? What strategies do you use to recharge yourselves? Personally, when I go on vacation, I completely disconnect from work, yet I’ve noticed you guys continue podcasting even during your vacations.

A reader asks:

I am 73, my wife is 58 and I have a 15 year old son. We own a small farm and house in Iowa. We also own three properties in Spain where we spend most of the year. We have no debt and are sitting on 2 million in cash, most of it is short term bills. I deal in vintage guitars and will keep doing it as long as I can. We have a great life and are careful with our spending. I would like to have a plan to create generational wealth. Is this possible? Any suggestions?

I love this question because it shows there is no single path to wealth-building.

When trying to outperform an index, many investors will try to trade between funds focused on different market segments and asset classes. But such an active investment approach isn't without costs. In fact, market timing can increase return volatility and add unnecessary uncertainty to the overall experience of investing in stocks and bonds. (See "Market Timing: More Evidence Why It Doesn't Work.")

Take a look at every recession we’ve been able to measure. How did the stock market respond? What can we learn from the past that is predictive of this moment? The answer is almost nothing.