Making money: What the experts say

Bad for savers, good for the U.S.

As low global interest rates continue to hit savers hard, governments in the U.S. and abroad are reaping the benefits, said Catherine Rampell in The New York Times. When interest rates are below inflation, governments can “refinance, erode, or liquidate their debt” without having to resort to unpopular spending cuts or tax increases. The U.S. government, for instance, has saved trillions of dollars in interest payments on its debt in the four years the Federal Reserve has set its benchmark interest rate near zero. For savers or seniors living on a fixed income, the reality is very different. Bill Taren, a retiree in Florida, pulled his money out of his local credit union when he realized that his savings account offered him only 0.4 percent interest, though inflation has averaged 2.8 percent over the past year. With his savings now under his mattress, he and his wife can at least “see the cash when we want,” he said.

The end of beating the market

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Professional fund managers have lost their edge, said Dan McCrum in the Financial Times. Thanks to the rise of high-frequency trading and the mass availability of market data, “it has become harder, perhaps impossible, to beat the market consistently through active management.” The old information advantage fund managers once had has largely disappeared. And while the increasing sophistication of stock databases makes it easier than ever to analyze the market, it means that even the most experienced fund managers find it “harder to gain an edge over peers by acting faster, or more smartly.” Many experienced investors find themselves “baseball players in a world suddenly playing cricket.” The skills they needed to pick stocks and bonds “have simply become out of date.”

Wade in with a windfall?

Investors who find themselves with a windfall may wonder whether it’s smarter to invest all at once or to dribble their money into the market over time, said Carolyn T. Geer in The Wall Street Journal. “Mathematically, you are better off diving in,” since markets have historically risen more than they’ve declined. Returns for someone who invested a lump sum of $1 million in a 60/40 stock-bond portfolio for 10 years, for example, outpaced those of an investor who waded in over 12 months by 2.3 percent on average, according to a recent Vanguard study, which looked at 10-year scenarios going back to 1926.