What the experts say

Better math for smarter shopping

Your brain on bargains isn’t very bright, said The Economist. Consumers often choose getting something extra for free over getting something cheaper, even when the discount is the better deal. Why? Because “people are useless at fractions,” and struggle to realize that 33 percent extra isn’t as good as 33 percent off the regular price. In a recent study, researchers at the University of Minnesota’s Carlson School of Management sold 73 percent more hand lotion when 50 percent more in quantity was offered than when the lotion carried a discount of 35 percent, which amounts to a better deal. This “numerical blind spot” is just one way that “retailers can exploit consumers’ innumeracy.” Consumers are also confused by double discounting, and are more likely to think that something discounted twice—by 20 percent, and then by an additional 25 percent—is cheaper than something reduced once by 40 percent, even though they are the same. When in doubt, pull out your calculator.

401(k) fees still buried

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New rules requiring better disclosure of 401(k) fees will likely disappoint investors, said Andrea Coombes in MarketWatch.com. The disclosure forms, which employers must provide to employees by Aug. 30, may run more than a dozen pages, and likely “won’t provide a simple figure for the annual cost you’re paying.” Instead, they will list operating expenses as percentages for each investment option in your plan, with separate lists for administration costs, requiring consumers to do their sums. “It’s a good start,” said Scott Holsopple of Smart401k, a firm that offers investment advice. “But it’s not going to be an easy-to-read one-page summary that says, ‘You’re paying this for your 401(k).’”

Government bonds that pay more

If you are finding returns from U.S. Treasurys too meager, look abroad for government bonds that offer more impressive yields without much extra risk, said Jack Hough in SmartMoney.com. Both Australia and New Zealand, for example, “have manageable debt levels and potential for healthy economic growth”; their 10-year bonds are yielding 3.0 percent and 3.3 percent, respectively. If you don’t mind a bit of risk, look at countries like Mexico, where the 10-year bond yields 5.5 percent, South Africa (7.2 percent), or Turkey (8.6 percent). Of course, such bonds can be volatile. “Those yields aren’t high for nothing,” says portfolio manager Tina Vandersteel.