Stackers Club

Researchers Exposed a Flaw in the CAPE Ratio. Are We Cooked?

Stephen Read — Tue, 16 Jun 2026 17:23:36 +0000

I’ve been writing about the CAPE ratio since 2018. A reader once pushed back and asked me to defend it. My answer then: it’s not a market timing tool, but it’s one of the few signals with a track record of predicting long-term returns. I still believe that. A new academic paper just made the case stronger, while also exposing a flaw in how CAPE has always been calculated.

I’ve covered the basics before: what CAPE is and why it works, and why it belongs in your investing toolkit alongside a healthy respect for what it can’t do. This research builds on both.

The Problem With Traditional CAPE

Researchers at La Trobe University, Auckland University of Technology, and Massey University identified a structural inconsistency at the core of the Shiller CAPE calculation. The traditional CAPE divides the S&P 500 price level by aggregate earnings, which implicitly weights each company by its earnings. But the S&P 500 itself is market-cap weighted. Two different weighting schemes can equal two different answers.

Apple (~5.9% of the index by market cap) and Nvidia (~7.2%) are two of the largest positions in the S&P 500. Both trade at P/E ratios well above the index average, around 33 and 41 respectively, versus roughly 25 for the broader market. That means their earnings will represent a smaller slice of total S&P 500 earnings than their market cap represents of the index. In the traditional earnings-weighted CAPE, they get underweighted. The traditional CAPE ends up understating how expensive the index is, because higher-valuation companies are currently dominating the largest positions.

The Fix: Component CAPE

The researchers built what they call a “Component CAPE” and calculate CAPE for each company individually, then weight by market cap to match how the S&P 500 index works. The Component CAPE averages around 29.7, versus 21.7 for the traditional version. The gap widens during periods of high valuation dispersion, like today, when mega-cap tech trades at multiples that are more expensive than the rest of the market.

The Component CAPE also predicted long-term returns more accurately, improving out-of-sample predictive accuracy by more than 10% over the traditional version across both 5- and 10-year horizons, holding up across different time periods, different earnings adjustments, and different methodologies.

What This Means for Stackers

This doesn’t change much for us because CAPE is not a market timing mechanism. It doesn’t tell us when the market will fall. It tells us that when valuations are elevated, expected returns over the following decade are lower. No version of CAPE, improved or otherwise, is going to help us call the next correction.

The Component CAPE is a more accurate version of the same signal. It reinforces the message rather than changing it.

If anything, today it suggests the market is even more expensive than the traditional CAPE implies today. The practical improvement in day-to-day investment decisions is minimal but the case for CAPE as a long-run return signal got stronger.

In my personal portfolio and advisory work, I use valuation indicators like CAPE to inform future expected returns, shape retirement income projections, and consider allocation tilts across asset classes and geographies. The Component CAPE didn’t change any of that because we were already tilted away from the S&P 500 and the more expensive stocks. The inputs got slightly more precise; but my conclusions stayed the same.

A more precise ruler doesn’t change what it’s measuring.

The Value Trap: Why a 2x EV/EBITDA Stock Can Still Be Expensive

Stephen Read — Tue, 02 Jun 2026 21:21:25 +0000

As we were preparing to leave for my daughters softball tournament on Saturday, HIT Capital’s investment software finished its latest ranking of 66,216 publicly traded companies. ALCIS (Catering International & Services) came back in the top ten at a 2x EV/EBITDA, one of the best opportunities I’d ever identified. So, rather than waiting until Monday, I grabbed my tablet and spent the drive, and every break between games, diving deeper into ALCIS.

For context, the S&P 500 trades around 16.1x today. A 2x EV/EBITDA is about as cheap as the screener ever surfaces, and usually it’s a mirage powered by bad or stale data. This time the data looked clean and the 2x looked real, so my excitement kept building.

But as the temperature heated up between my daughter’s softball games, my excitement started to cool. What I hadn’t caught before was that the EBITDA wasn’t flowing to the bottom line the way I’d expect. I’ve made this mistake before, losing money in the process, which is why I want to share this with you while it’s fresh.

This matters even if you never buy a single stock. EBITDA, minority interest, tax, and the bottom line are numbers that help tell us whether profit is real, whether it’s a business we own, the one we work for, or one we’re investing in. The gap between “looks profitable” and “is profitable” is where our money can quietly disappear.

What Is a Value Trap?

A value trap is a stock that looks cheap but isn’t. The thought pattern that gets us is always some version of:

“This trades at 2x EV/EBITDA. Competitors trade at 6x. I’m getting a 67% discount.”

That feels airtight and our bias for action kicks in, but it isn’t. It’s the start of a question, not the answer.

Two Red Flags Behind ALCIS’s 2x Multiple

Two structural issues explained almost the whole discount, and neither was going away. They’re also the two that quietly distort plenty of private businesses.

Red Flag #1: Minority Interest, or Who Actually Owns the Profit

EV/EBITDA compares Enterprise Value (market cap plus debt, minority interest, and preferred stock, minus cash) to Earnings Before Interest, Taxes, Depreciation, and Amortization. The catch with ALCIS: a chunk of those earnings belongs to other people.

2025 (€M)	Amount
Consolidated net income	10.2
Net income attributable to Group shareholders	9.1
Implied non-controlling interest share	1.1

Roughly 11% of the profit isn’t ours. It belongs to minority partners in the subsidiaries. But EV/EBITDA uses the full consolidated EBITDA, as if we owned 100% of it, which we don’t. Under IFRS 10, the company fully consolidates subsidiaries it merely controls, including CIS Yemen (50%), Support Services Mongolia (49%), and CSS Congo (49%), pulling in 100% of their EBITDA while owning half or less.

There’s a standard way to adjust for this. Because EBITDA is fully consolidated, the textbook fix is to add minority interest into Enterprise Value, so the top and bottom of the ratio cover the same business. In my case, it wasn’t. The EV behind that 2x left minority interest out. So, the denominator counted 100% of the EBITDA while the numerator quietly ignored the slice that belongs to someone else, making the multiple look cheaper than it really was.

If you own a business with a partner, a joint venture, or a part-owned subsidiary, this is your number too. The EBITDA on the consolidated statement isn’t the EBITDA you get to keep. Control is not the same as ownership.

Stacker rule: Always account for minority interest and preferred shares. Owning control isn’t the same as owning the profit.

Red Flag #2: A Sustained ~50% Tax Rate

The tax line was the bigger problem. ALCIS is French-listed, so the lazy assumption is that it pays France’s 25% corporate rate, but the reality is nowhere close. In 2025, €26.3M of operating profit, less €5.8M of net financial expense (leases, FX, and debt costing more than the cash earns), gave about €20.5M of pre-tax income. Actual tax came to €10.3M, a ~50% effective rate, leaving just €10.2M of net income.

2025 Tax Bridge	€M
Pre-tax income	20.5
Tax at French 25% rate	~5.1
Actual tax expense	10.3
Excess over French rate	~5.2

The reason is geography. ALCIS earns essentially all its revenue outside France, in places like Africa, Kazakhstan, Mongolia, Brazil, and Algeria, where rates are higher and losses in one country can’t offset profits in another. It isn’t a one-off, either; 2024 ran about 53.6%. And its peers don’t share the problem:

Company	Period	Effective Tax Rate
ALCIS	FY2025	50.24%
Sodexo SA	FY2025	22.20%
Compass Group	FY2024/25	~24.00%
Elior Group	FY2024	32.80%

This is what matters, whether you’re looking at a stock or your own business. EBITDA is a pre-tax number. Two companies with an identical EV/EBITDA can deliver completely different after-tax cash. ALCIS keeps about half its pre-tax profit; Sodexo and Compass keep three-quarters. If you run a company, you already feel this: you don’t live on EBITDA, you live on what’s left after the tax bill. A higher multiple on a lower-taxed business can be the cheaper one.

Stacker rule: EBITDA ignores taxes for a reason, but lean on it for a quick comparison and it misses the boat.

The Adjusted Scorecard

Factor	Headline View	Adjusted Reality
EV/EBITDA	~2x (deep discount)	Higher once minority interest is stripped out
After-Tax Cash	Invisible at the EBITDA line	Compressed by a ~50% tax rate
Capital Intensity	A potential concern	In line with or better than peers
Financial Expense	Possible debt drag	Net cash position; interest isn’t eating profit
Verdict	“67% discount to peers”	“Close to fairly valued”

Four Questions: From EBITDA to the Bottom Line

Whether you’re analyzing a stock, your own company, or the business you work for, run the headline profit through this filter:

Who owns the earnings? Minority partners, joint ventures, and part-owned subsidiaries all dilute your real claim on earnings.
What’s left after tax? Compare the effective rate to peers. Same EBITDA, potentially very different take-home cash.
What does it cost to keep running? Compare depreciation to actual capital spending. If real capex runs ahead of D&A, the cash picture is worse than EBITDA suggests.
How much interest expense? If the company has debt, what is the interest expense and cost of capital? If the business is burdened by interest, the operating profit may be going to the bank rather than you.

Pass all four and the profit is probably real. Fail one and you need to know why.

For the record, ALCIS passed the third and fourth tests: its capital intensity and financial expenses were in line or better than their peers. I’m not hunting for reasons to say no, just the problems that are really there. ALCIS had two, and two was enough to adjust my decision.

The Bottom Line

I passed on ALCIS. Not because cheap stocks are bad, but because this one wasn’t actually cheap: minority interests and a ~50% tax rate ate the discount the screener was so excited about. The growth and solid balance sheet were not enough to make it into our portfolio after the valuation came out in-line with its peers.

A headline number, whether a multiple, an EBITDA figure, or a “record profit,” is not the answer. It’s a question. That’s as true for the business you own or run as it is for my stock picking.

Working through your own numbers and want a second set of eyes? Reply or drop it in the comments. I’ve made these mistakes so we can catch them together. That’s what the Stackers Club and Financial Wellness Program is for.

Want to go deeper on the numbers that drive your finances and your business? Explore the Knowledge Stack or join the Stackers Club.

All-In-One Banking: Fidelity Cash Management vs Traditional Bank Accounts

Stephen Read — Tue, 03 Mar 2026 20:55:07 +0000

Last month, I watched three friends’ eyes light up, and then widen, when they realized they’d quietly lost $658 in bank fees and forfeited $57,045 in annual interest. Meanwhile, their investment accounts were at different institutions and sat disconnected, requiring separate logins, statements, and mental gymnastics to track their complete financial picture. This antiquated approach creates blind spots in our financial decision-making, generates unnecessary fees, and leaves money earning suboptimal returns. The traditional banking model, built for a pre-digital era, increasingly fails stackers who want integrated, efficient wealth management. I’ve been using Schwab and Fidelity’s Cash Management Accounts for over two years and it represents a fundamentally different approach. They combine banking services with a brokerage account to get an all-in-one account.Does bringing everything under one roof improve outcomes or introduce too many new risks? Let me walk you through their trade-offs, and practical implications below.

The Traditional Banking Model is Broken

Traditional banks operate on a business model that worked well in the 1980s but struggles in today’s low-margin, hyper-competitive, high-tech environment.

Fee structures that punish stackers

Most traditional banks generate significant revenue through fees. Consider these common charges I find in my friends accounts across major banks:

Monthly maintenance fees: $12-25 per month ($144-300 annually)
Minimum balance requirements: $1,500-25,000 to avoid fees
ATM fees: $2.50-5.00 per transaction outside network
Wire transfer fees: $15-30 domestic, $35-50 international
Overdraft fees: $35 per occurrence

A friend maintaining checking and savings accounts at a major bank might pay $200-400 annually in fees alone, before considering opportunity costs from low interest rates.

These fee structures particularly penalize young stackers who are close to the minimums. A professional with $30,000 in savings might face monthly fees while earning negligible interest, creating a double penalty for responsible financial behavior.

Interest rates that lag the market

Traditional banks consistently offer savings rates well below market alternatives. As of today 3/3/2026, major banks typically offer:

Savings accounts: 0.01-0.45% APY
Money market accounts: 0.05-0.60% APY
CDs (1-year): 0.30-1.50% APY

Compare this to the current federal funds rate of 3.64% and money market funds yielding 2.9-3.2%. The spread represents an opportunity for stackers.

On a $100,000 balance, this difference matters significantly:

Traditional bank savings (0.45% APY): $450 annual interest
Money market fund (2.9% APY): $2,900 annual interest
Opportunity cost: $2,450 per year

Over a decade, this $2,450 annual difference compounds to approximately $28,000 in additional earnings, assuming the spread remains consistent and earnings are reinvested.

Fidelity’s Integrated Approach

Fidelity Cash Management Account attempts to solve these problems by combining checking, savings, and investment services into a single account. Rather than operating as a traditional bank, Fidelity partners with banks to provide FDIC insurance while offering the SPAXX ETF as the primary cash vehicle for higher yields.

All-in-one account structure

The integration works through several key features:

Unified dashboard: All financial activity checking, savings, investment, HSA, and retirement accounts appears in one interface. This visibility helps with asset allocation decisions and cash flow management.

Automatic sweep functionality: Cash automatically moves into a higher-yielding SPAXX ETF or a FDIC insured account, optimizing returns without manual intervention.

Single account management: Since checking, savings, and investing can operate within one account, there’s no need to transfer money between the three or other institutions for various financial activities.

Single tax reporting: All activity generates consolidated 1099 forms, simplifying tax preparation and reducing paperwork complexity.

Feature comparison matrix

Feature	Traditional Bank	Fidelity Cash Management
Monthly fees	$12-25	$0
Minimum balance	$1,500-25,000	$0
Interest rate	0.01-0.45%	2.9-3.2% (SPAXX ETF)
ATM network	Bank-specific	60,000+ ATMs worldwide
ATM fee reimbursement	Limited/none	Unlimited domestic
Check writing	Yes	Yes
Bill pay	Yes	Yes
Mobile deposit	Yes	Yes
Wire transfers	$15-50	$0 domestic, $50 international
Investment integration	None	Full platform access
FDIC insurance	Up to $250K	Up to $1.25M (multiple banks)
SIPC insurance	N/A	Up to $500K for securities

Running the Numbers: Cost Analysis

Understanding the true cost difference requires examining both explicit fees and opportunity costs across different balance levels.

Annual fee comparison across account types

Traditional bank scenario (major national bank):

Checking account: $15/month = $180/year
Savings account: $5/month = $60/year
Wire transfers: 4 per year × $25 = $100/year
ATM fees: 12 per year × $3 = $36/year
Total annual fees: $376

Fidelity Cash Management scenario:

Monthly maintenance: $0
Wire transfers: 4 = $0
ATM fees: $0 (reimbursed)
Total annual fees: $0

Annual fee savings: $376

Interest earnings on $50K, $100K, $200K balances

The interest rate differential creates substantial opportunity costs that compound over time.

$50,000 balance comparison:

Traditional bank (0.45% APY): $225 annual interest
Fidelity SPAXX ETF (2.9% APY): $1,450 annual interest
Additional earnings: $1,225/year

$100,000 balance comparison:

Traditional bank (0.45% APY): $450 annual interest
Fidelity SPAXX ETF (2.9% APY): $2,900 annual interest
Additional earnings: $2,450/year

$200,000 balance comparison:

Traditional bank (0.45% APY): $900 annual interest
Fidelity SPAXX ETF (2.9% APY): $5,800 annual interest
Additional earnings: $4,900/year

Combined annual benefit (fees + interest):

$50K balance: $1,225 + $376 = $1,601
$100K balance: $2,450 + $376 = $2,826
$200K balance: $4,900 + $376 = $5,276

These differences compound significantly over time. A saver with $100K earning an additional $2,776 annually would accumulate approximately $31,678 more over 10 years, assuming earnings are reinvested at the same 2.9% rate.

Security and Convenience Trade-offs

Moving from traditional banking to an integrated investment platform involves important trade-offs around security, insurance, and operational complexity.

SIPC vs FDIC protection explained

Traditional bank deposits receive FDIC insurance up to $250,000 per depositor, per bank. This insurance covers bank failures but not investment losses.

Fidelity Cash Management provides FDIC insurance through multiple partner banks, extending coverage up to $1.25 million per account holder. Cash balances are automatically allocated across these banks to maximize insurance coverage.

However, SPAXX ETF investments receive SIPC protection rather than FDIC insurance. SIPC covers up to $500,000 per customer if the brokerage fails, but does not protect against investment losses. SPAXX and MMA’s are considered low risk as most underlying holdings are in government backed securities.

Risk assessment:

FDIC insurance: Absolute protection against bank failure up to limits
SIPC protection: Covers brokerage failure but not investment performance
SPAXX ETF risk: Extremely low but not zero probability of principal loss

Single sign-on benefits and risks

Consolidating financial services creates both conveniences and vulnerabilities.

Benefits:

Reduced password management complexity
Unified financial dashboard for better decision-making
Streamlined account monitoring and maintenance
Simplified tax reporting and record-keeping

Risks:

Single point of failure for account access
Increased impact if primary account becomes compromised
Potential service disruptions affecting all financial services
Reduced diversification of financial service providers

Mitigation strategies:

Enable two-factor authentication on all accounts
Maintain backup access methods (phone, email alternatives)
Regular monitoring of account activity
Keep an alternative account at a separate institution

Implementation Strategy for Stackers

Transitioning from traditional banking to integrated cash management requires careful planning to avoid disruptions while maximizing benefits.

Gradual transition timeline

Month 1: Setup and testing

Open Fidelity Cash Management account
Set up direct deposit
Test bill pay functionality
Verify ATM access and mobile app functionality
Transfer 25-50% of emergency fund

Month 2: Full consolidation

Redirect full direct deposit to Fidelity
Transfer automatic bill payments for major expenses
Move remaining emergency fund balance
Close primary traditional checking account (keep one small traditional account)

Which accounts to keep vs consolidate

Accounts to consolidate:

Primary checking and savings accounts
Money market accounts at traditional banks
CDs earning below 2% APY
Multiple checking accounts with monthly fees

Accounts to keep separate:

One small traditional bank account for accessing small bills, Zelle payments, cashier’s checks, notarization, or cash deposits
Business banking relationships
Local bank accounts for specific geographic needs (Alaska dividend)
Specialty accounts with unique benefits (global trading access)

Special considerations:

Evaluate existing banking relationships for any unique services you might need

What This Means for Stackers

The math strongly favors integrated cash management, adding roughly $1,600–$5,300 per year depending on balance levels, and those gains compound over time. The more powerful edge is structural: visibility, streamlined finances, and less friction in managing your finances.

In our Stacker’s Financial Wellness Program, we treat cash management as a core tool, strengthening our pillars of earning more and spending less.

Status Quo Bias: Why Our Money & Mind Get Stuck

Stephen Read — Tue, 02 Dec 2025 16:52:26 +0000

Status Quo Bias is our tendency to prefer things to stay the way they are, treating the current state as a sacred reference point from which deviation feels like a catastrophic loss, regardless of whether the current state is actually working.

It is the cognitive equivalent of me wearing the same pants year after year even though one pant leg is ripped, the legs are too short, and the elastic band is now non-existent.

Like it or Not We Get Stuck in Our Ways

While we can laugh about my old pants, I cry when I see the damage it does to our finances. As Stacker’s we have goals and a purpose, and status quo bias continuously works to hold us back.

Consider my Discover savings account that I had opened back in college. The interest rate had been slowly deteriorating year after year and I knew it. But still, switching the bank account felt like a nuisance, and convincing my wife who does our day to day finances was going to be even harder. So for years, we didn’t change.

Loss Aversion Amplifies the Delusion

When our Status quo bias is really rolling it teams up with loss aversion, where losses feel roughly twice as painful as an equivalent gain. Opening a new cash management account meant 30 minutes of “hassle” (a loss). Earning some extra $ meant nothing to my emotional brain, or my wife, because the future money was abstract, but the 30 minutes of hassle was real.

It wasn’t until I did what I do for other stackers, and that is calculate the exact amount of money that we were going to lose. It was $871 a year! Well I didn’t want to lose $871 every single year, and neither did my wife, so we changed.

Two More Examples

The Credit Card Crap Trap: The majority of our members have had the same credit card for a decade. It earns points, miles, or may just look cool. I’ll share multiple 2% cash back card options, but not everyone switches. Why? They tell me:

“I know this card well,”
“I like the rewards,”
“closing might hurt my credit score”
“I like to use the airport lounge”.

The inertia to move is difficult. They are happy paying an annual fee and losing 2% to avoid thinking about the potential losses.

Today I shared with a member that he is losing $633 a year using his debit card. He made the switch and signed up right there on the spot.

The Forgotten Retirement Account: The majority of us are not still working for our first employer. But when I do my investment reviews I still see money sitting in previous employer’s 401k, 403b, or RRSP. When that happens we pay an extra admin fee and sometimes inflated fund expenses, up to 30x more than elsewhere.

I can see the pain in my members eyes when I recommend making a change. Transferring the old account feels like a project. I’ve heard:

“Where do I find my password?”
“Who would I even call?”
“Where would I start?”

In a recent review, the fee difference I found was costing her 30x, or $113,226. Status quo bias was literally going to cost her more than a Model X, of which she regularly jokes about wanting to purchase.

How do Stacker’s Break Free From Status Quo Bias

I’ve found the counter to status quo bias isn’t willpower, it’s reframing.

We Have Alternatives – Treat the status quo as one option among many, not as the default winner. If I was starting fresh today, what would I choose? If the answer is “something different,” our status quo is already losing.
What is the Cost – Quantify the cost of inaction. This is the most important thing for me. I’m a numbers guy so instead of me thinking “maybe I’ll save a little money,” I just calculate it: “My savings account is costing me $871 per year compared to this cash management account. Make the abstract obvious.
It’s a Loss, Not a Win – Reframe the cost of inaction as a loss. Use our aversion to loss as a positive force. It’s not a hassle to prevent someone from stealing what’s yours. Does that bank deserve to keep your cash? Hell No it doesn’t!

Beating Status Quo Bias Takes Vulnerability

In all three examples of beating status quo bias, none of us were happy when we did it. Yet all of us are better off for having made the change. Sarah and I have already made more than $2,000, Jake is making $633 more a year, and Jackie is getting her Model X (per say).

But it took step 3, reframing it as a loss, to get us all across the finish line. Only now, multiple years later, am I happy thinking about it. When Sarah and I made the change I was pissed and embarrassed, and I can see that is exactly how other stackers feel at the point of discovery too.

The Stacker Bottom Line

Status quo bias is not a quirk, it is a silent drain on our goals, and it keeps compounding until someone calls it out. Now that you know how it works, treating “how things are” as harmless is no longer an option.

It is always easier to see the holes in someone else’s financial pants than in our own. So if you hear me say, “I’ve always done…,” or notice me sticking with an obviously worse option, stop me and call it what it is: a costly status quo.

If you want the same accountability, invite it. Reply, comment, or send me a note with where you suspect you are “stuck,” and I’ll run the numbers with you to find the real cost of staying put. Together we will turn “this is how I’ve always done it” into “this is the best option for me now.”

The Lost Decades: Why Your 60/40 Portfolio Might Be Headed Nowhere

Stephen Read — Thu, 06 Nov 2025 15:34:03 +0000

Lately, I’ve found myself devoting more hours than ever to social media platforms like Facebook, LinkedIn, and Twitter. Sharing my opinions, connecting with colleagues, and even lending a helping hand to friends and strangers alike. What starts out as a genuine effort to engage and contribute sometimes snowballs into something else entirely. I’ll glance at my clock, only to realize that what felt like a quick check-in has turned into one or two hours, swept away by algorithm-driven videos and the endless scroll of trending topics. It’s in those moments, as I snap back to reality, that I’m reminded just how easy it is to surrender an hour of precious time without even noticing. I get upset at myself for losing an hour and can only imagine how pissed I’d be if I lost an entire decade.

Recent research indicates that investment portfolios have “lost decades” 6 times in the last 100 years. These lost decades are prolonged periods in which the traditional 60/40 investment portfolio (60% U.S. equities, 40% U.S. bonds) fails to deliver inflation adjusted returns. The chart below highlights multiple historical periods (1900–2025) where 60/40 portfolios experienced extended stretches of flat or negative real growth, often starting with high valuation levels on stocks (CAPE above 26, or bond yields below inflation).

Current State: CAPE (Shiller PE) is 40 and Real Yield is 1%

1910–1929: 19 years yielded a cumulative real return of -1.8%.

1929–1942: 13 years, +0.2% annualized.

1942–1949: 7 years, +0.4%.

1968–1977: 9 years, +0.5%.

1977–1988: 11 years, +0.7%.

2000–2010: 10 years, -1.6%.

2025 – 2035: real return estimates for the S&P 500 based on CAPE is -2% and real yield is 1%.

These “lost decades” occurred during periods with elevated CAPE ratios and/or low real bond yields, similar or better than today’s market conditions.

Potential implications for traditional investors and advisors:

Risk of Stagnation: Extended periods of low or negative real returns may reoccur, especially given currently high equity valuations (CAPE = 40) and low real yields (1.0%).

Domestic Diversification Alone Is Not Protection: A domestic balanced portfolio may suffer when both stocks and bonds are highly valued.

Planning for Volatility: Investors should be prepared for the possibility of stagnating real returns, especially if future market conditions mirror historical precedent.

Recommendations

Review Your Portfolio: Assess your reliance on traditional 60/40 allocations; consider alternative strategies with better expectations in a high CAPE, low yield environment.

Scenario Planning: Run stress tests for portfolios under different valuation and yield assumptions to understand potential real return paths and how it will affect your life and financial goals.

Be Honest with Yourself: Ask yourself if you are on track or are being led astray by your own bias, maybe… recency bias, home bias, ambiguity bias, herd mentality, illusion of control, availability bias, attention bias, or overconfidence bias

Conclusion

Historical evidence suggests that “lost decades” in portfolio performance are not rare anomalies, but recurring features during periods that begin with high stock or bond valuations.

It’s up to us as a stacker to learn, plan, adjust and prepare.

Stack, Swipe, Succeed! Don’t Fall for Dave Ramsey’s No-Card Advice

Stephen Read — Thu, 23 Oct 2025 12:55:45 +0000

Is the credit card the cigarette of the stacker’s world? Dave Ramsey certainly thinks so.

Stacker Myth or Stacker Truth

Cutting up credit cards may help some people avoid temptation, but for a stacker it could cost us hundreds of thousands of dollars. If the temptation to spend more is not a problem the cash back credit card becomes a tool to be used, not a burden to be broken. We can use a credit card to pay for our necessities, build credit, give cash back, prevent fraud, provide convenience, and earn interest.

To put Dave’s advice into perspective, I looked at my credit card expenses last month and calculated what I’d lose if I followed his advice for the next 25 years. I could hardly believe my eyes……….

$193 Cash Back In Just One Month

Last month, my wife and I spent $7,443 on our Fidelity Visa cash back card, $1,804 on our Citi Double Cash Back business card and $157.56 on our Sam’s Club gas card, totaling $9440. Fidelity and Citi give us 2% cash back and the Sam’s Club card 5%. This resulted in $193 of cash back, fraud protection, and the convenience of leaving my cash, check book, and credit cards at home (I use Google Pay).

$41 Interest

The credit card benefits don’t end there, because I charged $9,440 but the money didn’t leave my cash management account for 40 more days. In that timespan I earned an additional $41 in interest from the money sitting in my cash management account earning 4% interest.

$2,808 Per Year

So I received $192 in cash back and earned $41 in interest totaling an additional $234 last month, just for using my credit cards. If I annualize that, it comes out to $2,808 per year.

$192,844 In 25 Years

So being a stacker, I plan on doing this for the next 25 years. Investing that $2,808 each year with an estimated 7% annual return, my credit card rewards come out to a 25 year value of $192,844.

Cash Back and Stack!

Let Dave do Dave. We will Stack and Cash Back!

Why Stackers Need Their Own Rules: Rethinking Personal Finance

Stephen Read — Fri, 19 Sep 2025 21:45:42 +0000

Have you ever felt a sour taste in your mouth after listening to someone’s financial advice? If your answer is yes, you may be a stacker.

What is a Stacker?

Stackers build wealth intentionally by practicing discipline, learning continuously, and making smart, forward-thinking choices, year after year

More specifically, stackers’:

Why Are the Rules Different For Stackers?

Mainstream financial rules, repeated by gurus from Tik Tok to Dave Ramsey, aren’t tailored to us. We’ve developed strong habits, think rationally, and can resist temptations today in exchange for a better tomorrow. Instead, these rules are in place to help the average consumer control their bad habits at their best, and are part of a sales pitch at their worst.

For example, here are 7 financial rules that are shared regularly but are defunct to us:

“Never use a credit card.”
“Pay off your mortgage before investing in your 401k.”
“Expect 12% returns on your investments.”
“Use commission based mutual funds.”
“Protect your family with Universal Life insurance.”
“You can time the market.”
“The 4% rule guarantees lifelong income.”

The Stackers’ Dilemma

As we stack higher, there comes additional freedom, complexity and responsibility. That means more tax planning, risk mitigation, decision fatigue, intergenerational planning, account management, investment selection, charitable giving, and greater demands on our time and influence.

The Stacker’s Payoff

As a lifelong stacker, if done right, we can manage the dilemmas and continue to build one learning on top of another until we have so much social, physical, financial, spiritual and time wealth that we are free to live our best life.

I worked in the corporate world for 14 years, getting paid and stacking away. In 2020, my wife and I achieved what we deemed “enough” and began to transition away from working for someone else. We have matured into the stacker stage of spending more time doing what we love: like coaching our kids’ sports teams, visiting family and friends, going on adventures, focusing on our health, and empowering HIT’s stacker community through this newsletter and our firm’s mission to democratize wealth.

What to Expect From HIT Investments, Stacking, and This Newsletter Going Forward

Myth-Busting Deep Dives: I’ll expand on our viral piece, “7 Pieces of Dave Ramsey Advice That Don’t Hold Up for Stackers,” with transparent, number-backed analysis.
Spot Sneaky Fees: Learn how paying just 1% more in investment fees can cost you tens of thousands over your career, and how to spot the sneaky fees most people miss.
Behavioral Bias Superpowers: Turn human bias into a winning advantage.
Stacker-Only Tools: Unlock calculators and checklists you won’t find anywhere else.
Strengthen and Grow: Strategies to boost returns and lower risk, even as you scale.
Slash Your Tax Bill: Take advantage of an overly complex tax code to lower your tax burden.
Next-Level Earnings: Discover the latest and greatest resources to help you earn more.
Optimized Spending: Learn about communities, deals, and sites that will save you more.

Ready to stack? Sign up for our newsletter, and stay tuned for our first mythbuster: “7 Pieces of Dave Ramsey Advice That Don’t Hold Up.”

The Pain of Selling Your Investments – The Endowment Effect

Stephen Read — Wed, 11 Jun 2025 13:36:36 +0000

Why I hate to be a “Sell Out”

Selling something you love, even when it makes sense, can feel like losing a limb. I just finished a multi-year, multi-step plan, of converting my pre-tax 401k account to a Roth IRA, and while I should be celebrating the accomplishment, I feel more like licking my wounds.

Selling Out, Wounds, What? The Background.

Since retiring from ConocoPhillips in 2021, I began to convert my 401k and Sarah’s Traditional IRA to a Roth IRA. So in 2022 through today our living expenses + taxes have been more than our income. Each quarter our taxes would come due and I would have to sell some investments.

Every single time I waited until the last minute. Every. Single. Time. Why? It wasn’t because I wanted to eke out a few more dollars in dividends, stock appreciation, and interest, it was because selling the stock hurt!

Why Did It Hurt?

It stung. More than it logically should have. The stocks weren’t just words on a screen, they were carefully chosen investments. Ones I handpicked, nurtured, and believed in (I still believe in). Selling them felt like amputating a part of my financial identity. And yet, the math was clear, converting to a Roth would save money and add flexibility. I knew it was the right call, but that didn’t make selling the investments and paying the taxes any easier.

The Endowment Effect

One of the most powerful biases I’ve experienced thus far, is the endowment effect. The Endowment Effect is the tendency to value something more, simply because you own it.

I see it in my investments, the way I price my bike, my house and why I struggle to give away clothes cluttering my closet that I no longer wear.

Seeing Through the Bias

That’s the endowment effect in action; I value things more, simply because I own them. Sarah, my wife, didn’t feel any attachment to the investments we sold. She did, however, feel the stress when I waited until the eleventh hour to sell and transfer her the money to pay the tax bill.

The truth is, whether you’re managing a portfolio, converting to a Roth, hanging on to fine china, or cleaning out your closet, it’s easy to mistake emotional attachment for financial wisdom. As savers, investors, and good decent human beings, it’s vital to recognize when our emotional attachments cloud our rational judgment.

Create and Follow the Plan

Sometimes the smartest financial moves will feel impossible. That’s not a personal flaw, it’s human nature. But if your goal is to build and sustain wealth to live a fruitful life, you will need to practice separating your emotions from your actions.

Even when it hurts.

Break the Bias: A Simple Practice

Have you ever held on to an investment or a hoodie longer than you should have?

Next time you find yourself hesitating to let go, try asking for help. Reach out to someone you trust and has no emotional attachment.

For myself and breaking my own endowment effect bias, I am asking my partner Kristin to get more involved in my investments, and for my wardrobe, I’m trying to listen to my wife the first or second time she tells me to let go.

More Information on the Endowment Effect:

Here are direct links to source reports and key studies on the endowment effect for the insatiably curious:

The mug experiment from Kahneman, Knetsch, and Thaler’s 1990 paper here
The Endowment Effect and Beliefs About the Market” (2020, meta-analysis and experiments) at PubMed Central
The endowment effect in the future: How time shapes buying and selling prices” (2023, Judgment and Decision Making) here.
Possession, feelings of ownership and the endowment effect” (2007, Judgment and Decision Making) at Cambridge.
The Endowment Effect: Loss Aversion or a Buy-Sell Discrepancy?” (2021, working paper) here.
Research and Application of the Endowment Effect here

The Hidden Cost of Keeping Cash In Your Bank Account – Breaking Status Quo Bias

Stephen Read — Fri, 28 Feb 2025 17:55:32 +0000

Why settle for 0.01% on your savings when you can do better?

At today’s rates of 4%, $50,000 would earn an additional $2,000 per year.

Recently, I advised three of my financial wellness clients and two friends to move their idle cash into an interest-earning account. Their potential gains were significant, up to $48,000 more per year!

It seemed like a no-brainer, who wouldn’t want “free” money? Plus, I knew these extra earnings would help accelerate their financial goals that we had previously discussed.

Yet, only three out of the five made the change. Why?

Status quo bias? We have a behavioral tendency to prefer things as they are, even when a better alternative exists.
The effort wasn’t worth the reward, they believed their time was more valuable than the interest they’d gain.
They didn’t fully trust or understand the opportunity.
They didn’t take the action immediately, weren’t in the financial wellness program, and have since forgotten about it.

I am not sure why they didn’t all make the change, but I do know why I had not yet made the change. I was so focused on researching cash management solutions for others that I forgot to share my research with my wife. I’ve since corrected my mistake and we are in the process of closing our Discover online savings account, and zeroing out our Schwab checking account.

This move will earn us an additional $871 per year from $15,000 in checking at an additional 4.09% and $35,000 in savings at an additional 0.39%.

If you are ready to break free from the status quo and optimize your cash management, below is a list of popular bank accounts and money market funds. Click on the account name to check current yields, as ETF-linked rates fluctuate with the market and banks adjust rates at their discretion.

My recommendation, pay a small fee to capture market rates instead of relying on a bank’s goodwill. Based on my research, aside from Bask Bank, whose rate I estimate to move lower soon, your best options for cash are money market and treasury bill funds.

Ticker/Account	Fund/Bank Name	Expense Ratio	Yield
Savings	Bask Savings Account	0	4.35%
SNAXX	Schwab Value Advantage Money Fund	0.19%	4.33%
SGOV	iShares 0-3 Month Treasury Bond ETF	0.09%	4.28%
BIL	SPDR Bloomberg 1-3 Month T-Bill ETF	0.14%	4.19%
VMVXX	JPMorgan Prime Money Market Fund	0.48%	4.15%
SNVXX	Schwab Government Money Fund	0.34%	4.10%
NOGXX	Northern US Government Money Market	0.35%	4.08%
SPRXX	Fidelity Money Market Fund	0.42%	4.07%
AFAXX	American Funds® U.S. Government Money Market Fund	0.51%	4.01%
Savings	Marcus Bank	0	3.90%
Savings	Ally Bank	0	3.80%
Savings	Discover Bank	0	3.75%
Savings	Citibank	$4.50/month	3.73%
Savings	Capital One Bank	0	3.70%
JNSXX	Edward Jones Money Market Fund	0.71%	3.10%
Savings	Truity Credit Union	0	0.10%
Savings	Advancial Credit Union	0	0.10%
Savings	Sandia Laboratory Federal Credit Union	0	0.10%
Savings	U.S. Bank	$5/month	0.05%
Checking	Schwab	0	0.05%
Savings	Santandar	0	0.03%
Savings	TD Bank	0	0.02%
Savings	JPMorgan Chase	0	0.01%
Savings	Bank of America	0	0.01%
Savings	Wells Fargo	0	0.01%
Savings	First Bank	0	0.01%
Savings	PNC Bank	0	0.01%

If you want the interest but are worried about losing features like bill-pay or debit cards, check out these all-in-one accounts!

Reducing Regional and Political Risk in Your Investments: Overcoming the Backfire Effect

Stephen Read — Fri, 20 Dec 2024 21:29:41 +0000

Reducing Regional and Political Risk in Your Investments: Overcoming the Backfire Effect

When it comes to investment decisions, our brains often cling tightly to existing beliefs, even when faced with conflicting evidence. For example, my daughter’s basketball team lost 18-0 last night, no joke, they didn’t score a single point ! But when I think about their team this morning, I still cling to my belief that they are great, a team capable of winning the league.

This behavioral phenomenon is known as the backfire effect, it causes us to double down on familiar but flawed ideas rather than reevaluate them. In investing, this effect can exacerbate biases to keep our investments close and local. Home bias, availability bias and overconfidence bias direct us to keep our portfolios exposed to unnecessary regional and political risks.

Recognizing and overcoming these biases is an essential key to building and sustaining a resilient investment portfolio.

The Dangers of Home Bias

Home bias, the tendency to invest predominantly in one’s home country, is deeply ingrained. We trust what we know and are drawn to our local market because it feels right. But as I discussed in my article, Home Bias: Is it Time to Take a Global Look?, this approach leaves us exposed. For example, a single change in leadership, tax policy, or trade regulation can make ripples across our entire portfolio.

Do you think the citizens of Ukraine, Russia, Mexico, Myanmar, Palestine, Syria, or Sudan thought they’d be at war? Are we any different than them?

In the last two days Vladimir Putin threatened the USA with a missile “duel” and our president elect, Donald Trump, stated he wants Canada to be state #51.

Availability and Overconfidence Biases Amplify the Problem

Availability bias is another culprit. We tend to focus on markets and news stories that are readily available or memorable, leading us to overestimate their importance. Meanwhile, overconfidence bias, which I explored in Investors Avoid Winners: Availability, Attention & Overconfidence Bias, can make investors believe they have superior knowledge of their home market, discouraging global diversification.

These biases create blind spots, leaving our portfolios vulnerable. Even sophisticated investors like myself aren’t immune, just this week my research focus was on a growing Israeli company trading at less than 5x price to earnings. While I was translating Hebrew and diving in, I somehow found myself unintentionally researching multiple domestic micro-caps.

How to Reduce Regional and Political Risk

To mitigate these risks, we can take a purposeful and proactive approach:

Diversify Globally: Expand your portfolio to include equities, bonds, and alternative investments across multiple regions. This reduces reliance on a single economic, regional or political environment.
Embrace Objectivity: Use data-driven analysis to evaluate opportunities outside your comfort zone. Lean on tools and experts that can provide insights into markets and regions you’re less familiar with.
Question Your Biases: Regularly review your portfolio and challenge your assumptions. Are you over-invested in your home country? Are there opportunities abroad that you’re overlooking?
Rebalance When Needed: As markets shift, ensure your portfolio remains globally diversified. Don’t let short-term performance or news cycles sway your long term decisions.

By staying pro active and overcoming your behavioral biases, you can strengthen your investments and be better prepared for the unknown.

If that is you, but you don’t know where to start, check out this list of financial resources, of which now includes a free investment portfolio review.