In what may be our last quiz, ever, Tom turns the tables and puts Don in the hot seat with a Wall Street Journal high-school personal finance quiz—covering the Magnificent Seven, Roth IRAs, TIPS, efficient markets, yield curves, market risk, and dollar-cost averaging. Don does reasonably well, but not without protesting a dubious “debt avalanche” question and getting tangled up in a couple of accounting and risk terms. After the quiz-show nonsense, the guys tackle a listener question from Joseph in Pennsylvania: should your stock/bond alloc...
In what may be our last quiz, ever, Tom turns the tables and puts Don in the hot seat with a Wall Street Journal high-school personal finance quiz—covering the Magnificent Seven, Roth IRAs, TIPS, efficient markets, yield curves, market risk, and dollar-cost averaging. Don does reasonably well, but not without protesting a dubious “debt avalanche” question and getting tangled up in a couple of accounting and risk terms. After the quiz-show nonsense, the guys tackle a listener question from Joseph in Pennsylvania: should your stock/bond allocation be based on a fixed percentage of your portfolio, or should it be driven by how many years of spending you want buffered in safer assets? Tom and Don explain why the answer depends on more than just income needs—it also depends on your emotional tolerance for volatility, your need for growth, and the role fixed income plays in helping you stay invested when markets get ugly.
0:22 Tom becomes quizmaster and introduces the Wall Street Journal high-school personal finance quiz
2:12 Question 1: Which stock is not part of the Magnificent Seven?
3:47 Question 2: Which retirement account does not require withdrawals at a certain age?
5:09 Question 3: TIPS, STRIPS, Series I bonds, and inflation-adjusted principal
6:58 Question 4: Debt payoff strategies and the disputed “debt avalanche” answer
9:13 Question 5: Efficient market hypothesis
10:12 Question 6: What an inverted/downward-sloping yield curve says about future rates
11:25 Question 7: Return on equity math and a heavily leveraged company
12:56 Question 8: What it means when net present value equals zero
14:44 Question 9: Why putting your emergency fund in stocks creates market risk
16:52 Question 10: Unsystematic risk versus broad market risk
18:57 Question 11: Dollar-cost averaging
20:06 Tom and Don wrap up the quiz and revisit the “debt avalanche” controversy
21:11 Listener question from Joseph in State College, Pennsylvania
21:34 Should bond allocation be based on a fixed percentage or on years of spending?
22:07 Risk tolerance vs. risk profile: why income needs are only part of the equation
23:26 Why a 5-year spending buffer in safer assets can make sense in retirement
24:13 The emotional role of bonds and fixed income during market declines
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