Patrick Dempsey is Driven


Patrick Dempsey cut me off on La Cienega Boulevard. His 3-series BMW convertible was in my rearview mirror long enough for me to recognize the actor's face from his just-released film Coupe de Ville. At the intersection of La Cienega and San Vicente—a tangle of competing traffic lanes well known to Los Angeles body shops—he hit the gas and nipped in ahead of my bumper, forcing me to tap the brakes and watch his taillights speed north past the Beverly Center.

Now, 17 years later, Dempsey sits under the cold fluorescent lights in the cafeteria of the Petersen Automotive Museum, about half a mile from the scene of the infraction, pleading guilty with an explanation. "Oh, that's funny," he says sheepishly. "I did have a BMW convertible." He gives a slow spin to his cup of coffee and looks up. "Well," he says, "if I drive aggressively, I try to signal, so people know. It's irritating when people drive aggressively and they don't signal."

Patrick Dempsey Dempsey is no stranger to aggression. As a teenager growing up in Maine, he was a state champion downhill skier who trained for a place on the Olympic team. Today, his favorite method of relaxation, when he's not watching the Speed Channel, is driving pumped-up Mustangs and Mazdas that can hit 160 miles an hour. On the streets of L.A., he can be seen riding his Specialized Tarmac road bike, putting in 100 miles in a good week, he says—and then hitting the gym. And of course, on the TV series Grey's Anatomy, which has given him financial freedom and more fame than he's comfortable with, he plays Dr. Derek Shepherd, the most aggressive of specialists in the medical profession: a brain surgeon.

Dempsey has agreed to meet at Petersen's—better known in certain quarters as the scene of Notorious B.I.G.'s last earthly party than for its collection of classic automobiles—because he loves fast cars and racing history. When I arrive, he is already here, unaccompanied, at the Ferrari exhibit, studiously looking at a car called the Dino. Dempsey explains how the model was named by father Enzo for his son Alfredino, who'd helped him design the V6 engine. When his son died of muscular dystrophy at age 24, the elder Ferrari made this car a tribute to his son. "Enzo wanted them badged only as Dinos," says Dempsey. "Technically, it's a Fiat, but a very special car."

Dempsey rattles off the specs and story behind each of the 10 or so cars in the exhibit, knowledge he conveys unpretentiously and sotto voce as we stroll. Before we sit down to talk, he tosses in the histories of a couple of low-slung Fords. For a guy who struggled with dyslexia and never finished high school, Dempsey has ­managed to become a walking encyclopedia of model numbers, horsepower, and torque. He turned pro in 2005, becoming part owner and driver for a sports-car endurance-racing team. This is a passion that he has been better able to indulge since his celebrated comeback from obscure '80s actor to Dr. ­McDreamy. So, it's impossible not to ask a gearhead whose weekly paycheck recently went up to a reported $200,000: What's new in your garage?

"I recently bought a 1954 XK 120 SE, which is sort of, I think, the defining postwar Jag," he says. "Really an old-school elegance to it."

Dempsey talks that way, really, imparting a natural sophistication to even a tech-heavy conversation. He sounds a bit like a courtly millionaire about to be handcuffed for killing his mistress on Law & Order. But Dempsey, with his black-Irish good looks and laid-back—if alert—personality, is not that sort of lady-killer. Those who have worked closely with him, from race-car drivers to directors, tell me he is simply an old-school gentleman. He endures the publicity process attached to fame with a certain mellowness. Or maybe he's just a touch bleary from a combination of 14-hour shooting days on Grey's Anatomy mixed with film acting jobs. He's starring in a fresh take on the Disney movie tradition, Enchanted, in theaters now, and he spent the summer in England filming Made of Honor, in which he has a leading role. On weekends, he flies all over the country, keeping his auto-racing team in active competition. Most important, however, he has the duties and pleasures of helping his wife, Jillian, raise their twin boys—Darby and Sullivan, born in February 2007—and their daughter, Talula, now 5.
"I have not been this tired…ever," he says. "This weekend, it was nice not to leave the house and just be with my family. Newborns for men can be extremely difficult. It's not until the six-month period that you're getting more feedback and you're starting to see a personality and you begin relating a little bit more. It is fun to see that and feel it again. And I've been spending a lot of time with my daughter to help make that transition for her."

As for his day job, Grey's Anatomy is in its fourth season as one of the most highly rated and critically acclaimed series in recent TV history. "The show is like running a marathon," he says. "It feels like it never stops. The obligations you have for the show—it's relentless. The amount of exposure and the visibility…it was a big change for me. Coming to terms with it has been the real challenge."

Dempsey says he intends to slow down and not jump on the next movie offer until he has a chance to plot his future. "At the end of the day, family—and all of its joys and heartaches—is the grounding force," he says. "It's why you do everything. It's why you go to work, and why you put up with what you have to put up with, why you do what you have to do. Because you want a better life for them."

At 41, Patrick Dempsey has grown into the kind of man the younger, skinnier, brashly single guy in the Bimmer might barely have recognized. Back in 1990, he was costarring in Coupe de Ville, a road-trip picture about three brothers on a cross-country jaunt. But having begun his Hollywood career with teen-friendly fare such as Can't Buy Me Love and Loverboy, he eventually slipped into Hollywood's doldrums, marginally employable as the second or third banana and going on a lot of unsuccessful auditions. Even the chance to play the role of Dr. Shepherd on Grey's Anatomy came only after Rob Lowe turned down the part.

Patrick Dempsey "Oh," he says, the utterance revealing a history of bruised feelings. "Right before Grey's, I was getting to the point where I was thinking, I cannot do another audition and go in and be rejected. Auditioning is extremely difficult for everybody, especially if you've been around. What it teaches you is to let go of the end result. You are who you are, you stop trying to be other things, and you just own yourself. Once I came to that point and married and settled down and starting having a life outside of the business—this is around the time I started racing—I stopped making acting so precious. And I still don't make it precious. I'm professional, I come in and get my work done, but I think it's important to have things that allow you to take at least one or two steps back. When you become that attached, you're self-conscious. So you need to lose that in yourself. You have to have a certain attitude of like, F--k you, I don't care."

Dempsey has since been nominated for his own Emmy for a guest spot on a 2001 episode of Once and Again, and he shared in the awards recognition the Grey's cast has drawn. He has turned in quietly convincing performances on film, as in last year's Freedom Writers as the not-quite-committed boyfriend to Hilary Swank, who says he's "funny and down-to-earth and professional." His Enchanted costar Amy Adams says he was a real-life knight in shining armor when she had to do a nude scene. "He was my hero on set, always stepping up with a towel," she says.

So the dough is there and the recognition as well. And yet his default mode—though he smiles easily enough and clearly enjoys the parenthood syndrome—is a kind of informed pessimism. "It's like the Sinatra song," he says, laughing. "'Flying high in April and shot down in May.' In the back of your mind, you realize that at any point this can all go away. Then, what at the end of the day is going to be fulfilling to you?"


05:20 | Posted in | Read More �

John Mayer's Best List

John Mayer's Best List

Best Antique Watch
”Rolex Daytona, Ref. 6263, Paul Newman dial.”

Best Acoustic Guitar
“Martins.”

Best Blues Album or Artist
“Stevie Ray Vaughan, all of ’em.”

Best Restaurant in L.A., New York, or Tokyo
“Park Hyatt Tokyo’s restaurant.”

Best Car
“Ford GT Heritage, blue.”

Best Jeans
“Anything Wrangler!”

Best Life-Changing Trip
“The womb to the vagina.”

Best Stand-up Comedy Influence
“Scotch.”

Best Rock-Star Move
“Pay for that."

Best Kind of Workout Routine
“‘Routine.’ I have a problem with that. Cardio, upper body, lower body, and then something Fosse-esque.”

Best Jazz Guitarist
“Wes Montgomery.”

Best Advice He Got From His Father
“Wu-Tang Clan ain’t nothin’ to f--k with.”
 

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10 Essential Style (and Survival) Rules for Fathers

The smart man’s guide to making parenthood look easy.
A few months back, I awoke early in the morning and began to prepare for a big meeting. I put on my go-to suit, the one I always felt at my best in. In front of the mirror, as I took a mental meander through the day’s agenda, I finished the knot on my tie, taking care to caress the dimple to perfection. I made sure to take a lap in front of my wife, just to give her a subtle reminder of what I can look like on one of my best days. Feeling prepared to face the world, I ducked into the kitchen to grab a bottle of water.

What happened next seemed to transpire in cinematic slow motion. I flinched…too late. And suddenly, as if in one of those anxiety dreams where you show up for the big exam in a bathrobe, my attire had changed. I was now dressed head to toe in imported silk, fine wool, pressed cotton…and pureed vegetables.

As my suit lay in ruins, more Jackson Pollock than American Gigolo, I glanced across the room at the high chair. Sitting there in his furry blue suit, with Ping-Pong eyeballs perched atop his head (a very convincing Cookie Monster), my 1-year-old son, Ronan, howled in hysterical laughter.

For a new father, reconciling one’s sense of self, not to mention one’s sense of style, with the new responsibilities and epic sloppiness of parenthood is a daunting task. Regrettably, most other fathers aren’t much inspiration to fight the good fight. Glancing around the playground, I am usually confronted with a bunch of dads who seem all too content to look like Bill Belichick on game day.

Friends, I recommend adopting the attitude of the Godfather. Many a dapper don, in the course of conducting family business, stained plenty of articles of their prized wardrobes (and no, that wasn’t ketchup). Did they try to salvage that favorite shirt? Did they say, “I love this shirt, and after all, it’s only a couple of powder burns on the sleeve”? Absolutely not. They culled the weaklings from their wardrobes, and later they walked into that courtroom dressed to the nines, and many a jury smiled kindly upon their natty attire.

Believe me, you face a jury of your peers every day, and your appearance, as much as how you comport yourself, will determine your success. Remember, your child will love you no matter what you look like. Your boss, colleagues, and clients won’t.

1 Don’t eat the left­overs. A man’s risk of becoming obese increases 4 percent with each child he has. The reason is that men, as a gender, are cheap. Buy the kid a hot dog, the kid eats half the hot dog, and what are you gonna do? Same thing with the mac ’n’ cheese, ice cream, and applesauce. Throw it down the garbage disposal under the sink, not the one under your nose. (Chances are, you may have also gained weight just waiting for the baby to be born: In one study, 47 percent of expectant fathers gained weight during their wives’ third trimester, a phenomenon known as Couvade syndrome.)

2 Remember, you’re in the picture too. If your wife follows standard operating procedures, your kid has already been photographed more than Britney Spears in a hair salon. Well, guess who else is showing up in those snapshots? Some of my most treasured photos are of me as a child with my parents and grandparents. They looked young, vibrant, and well dressed. Remember, those photos are your legacy too. Do you want to be immortalized looking like you are ready to paint the garage?

3 Get into leather. Whether it’s your sofa, your car seats, or your jackets, you’ll find leather cleans off more easily than most traditional cloth. Microfiber is also an excellent choice. Suede or velvet jackets, on the other hand, should leave your closet only after the last reading of Goodnight Moon.

4 Barricade the clutter. Encroachment from plastic toys that flash and break into song can turn your once-serene space into a showroom for chaos. Don’t think you can fight the clutter: You are weak, and your child is strong. She knows that doe-eyed glances, whimpers, and begging will result in your bringing home yet another SpongeBob-themed product. Your only solution, then, is to practice containment. What’s helped my wife and me keep our sanity is that we’ve carved up our home into zones that allow us to claim certain areas as our own, where we can lie down without checking first for spit-up, and where walking across a dark room doesn’t put us at risk for an unexpected backflip off a toy truck. The best solution, square footage permitting, is the upstairs/downstairs approach, where by anything child-related is quarantined in the domestic equivalent of steerage.

5 Take the trauma out of coming home. After a tiring day at work, you stroll through the front door hoping for a moment of calm. Instead, you are greeted by a meteorite of mashed potatoes and mucus screaming your name and racing at you at 100 miles an hour, and then it’s yet another trip to the dry cleaner for Dad. Take contraceptive measures. Some guys keep a pair of jeans and sneakers in the garage or mudroom for just such a collision. I have a beat-up trench coat that I keep in the hall closet right next to the front door. When I come home, I reach inside and throw on the coat, so I can receive all the love my son wants to share…without all the slobber.

6 Lose the logos. When it comes to casual style, you could do worse than to imitate Brad Pitt. This guy has so many kids I lost count, but he manages to look pretty at ease whenever he is photographed with them. He plays it safe with denim, T-shirts, and work boots, and he keeps it simple. To emulate his vibe, go for darker denim with a classic straight-leg cut and steer clear of T-shirts emblazoned with slogans. (Do you think the world’s greatest dad really needs to advertise that fact? Does Nelson Mandela walk around with a T-shirt that reads "World’s Greatest Human Rights Leader?" I don’t think so.) Instead, opt for solid T-shirts in white or black when it’s time to hit the playground.

7 Say good-bye to old friends. The suit you wore to that job interview four years ago? The shirt your wife bought you for Valentine’s Day 2002? Toss ’em. As a dad, you’re going to be harder on clothes than ever before. Love is a battlefield, and the battle starts in your closet. Be merciless.

8 X out the XL. Something in the male psyche whispers that bigger is better, but baggy clothes tend to make you look sloppy and heavier than you are. Worse still, when you bend over at the playground to pick up your child, you may be giving some of the other parents and children an unsolicited anatomy lesson. Learn to downsize. Ask yourself these two questions: When I sit down, do I have enough extra material below my waist to make a second pair of pants? And if I tuck in my shirt, does it look like I’m smuggling a loaf of sourdough? If the answer to either is yes, your clothes are too damn big.

9 Don’t wear running shoes unless you’re running. Don’t wear Crocs unless you’re working in the garden, don’t wear Tevas unless you’re whitewater rafting, and don’t wear flip-flops unless you’re…well, just don’t wear flip-flops. You are living in a golden age for casual footwear. Whether it is the Y-3 Yamamoto for Adidas, driving moccasins from Tod’s, or a pair of Prada sneakers, there are plenty of options that offer both comfort and style.

10 Respect rites of passage. My grandfather was, without a doubt, the most stylish man I’ve ever known. He was a craftsman, an artist, and a deadly dresser. I was always amazed by how impeccable he looked, even when he had come straight from his work studio. He always made it a point to involve me and expose me to stylish and artistic things. He was very matter-of-fact with me: “This is how you tie a tie,” and “When you wear a dress shirt, it is French cuff.” As if to say wearing cufflinks was just something you did, just like shaving. Anytime he came through the door, he would hand me his overcoat and fedora, and I would take pride in hanging them neatly in the closet. It was a subtle way of teaching me to respect things and take care of them. In the end, it seems learning to attend to the finer points of style can actually teach the finer points of life.

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How I Stay in the Game

These athletes share their longevity secrets

Tom Glavine, 42
Two-time Cy Young Award—winning pitcher for the Atlanta Braves

"When I was younger, working out was about seeing how strong I could get.
Today, it's about muscular endurance. So instead of, say, maxing out after a couple of sets on the bench press, I'll do three sets of 12 to 15 reps with lighter weights. The result is that my muscles don't fatigue as quickly, and I feel like I have more staying power on the mound. I've also reduced the amount of running in my routine. It was beating up my knees.

Instead, I'll divide 30 to 45 minutes of cardio among the elliptical machine, the spin bike, and walking briskly on the treadmill. I've also started doing Pilates. I was a little skeptical at first, but it strengthens my core and enhances my flexibility. Other than that, I try to limit my two vices--pizza and french fries--to a single serving every other week."

Randy Couture, 44
Current UFC heavyweight champion and the only fighter in UFC history to win the title five times

"In my twenties and thirties, I thought more was better. My workouts were intense, and I was notorious for overtraining. Learning how to taper properly and allow my body to recover for competition is one of the greatest adjustments I've had to make. Now I have a longer taper. During the training cycle, I'll do a combination of core lifts, circuit weight training, and plyometrics. But 10 days before a fight, all the hard running, lifting, and sparring ceases. No workout lasts longer than an hour, and I simulate fights in a very controlled way with partners I know. I enter competitions feeling like I've peaked at the right time. That's not to say that I win all of my fights, but physically, I feel great. I feel unstoppable."

Vinny Testaverde, 44
The only NFL quarterback to have thrown a touchdown pass in 21 consecutive seasons

"My goal has always been to get stronger. In practice, that means working out smarter, not harder, and reducing the wear and tear on my joints. Take squatting, for example: I went from doing a straight-bar squat to a safety-bar squat, which takes the stress off my back and knees but still delivers pretty much the same strength gains as a traditional barbell squat. I've cut back on outside roadwork for the same reason. Now I use a treadmill, or I alternate running outside with exercising on a few different indoor cardio machines. Over the years, I've noticed that the less time I wait between the end of a season and the start of my postseason training, the quicker I'm able to get back into my routine. Flexibility is a big part of that, so I incorporate 15 to 20 minutes of stretching into each workout."

Dikembe Mutombo, 41
Center for the Houston Rockets and four-time winner of the NBA Defensive Player of the Year Award
"My priority is protecting my joints—my knees, in particular. I do exercises that are low impact, such as swimming. I even run in the pool, something I rarely do on the treadmill or the road. I split my cardio sessions between the spin bike and the elliptical machine, and I spend a lot of time developing my leg strength by doing step-ups, leg presses, and squats. The more stable my legs are, the less stress will be placed on my knees. I always warm up for 30 minutes before each game. A lot of the younger guys just wake up, throw on a uniform, and step onto the court. Not me. I hit the gym and do just enough to get my blood flowing and my mind humming. That translates to a few sets of step-ups, some light dumbbells, and 15 minutes of spinning."

Karch Kiraly, 47
The winningest player in beach-volleyball history, and the only player to win Olympic gold medals in both indoor and beach volleyball

"About five years ago, I started working with plyometric coach Mike Rangel. At first I thought, I'm too old for this if it's anything like the plyos I did in my twenties with the Olympic team, but I saw that his exercises—short sprints, knees-to-chest jumps, ankle hops, bottle hops—were very low impact and performed on soft grass, which appealed to me as an older athlete. We also lowered the impact further by moving to the sand, where all of my competition is anyway. I'll do a series of sprints with changes of direction for 20 seconds, rest for six to eight seconds, and then do it again, going hard for a total of about 30 to 45 minutes. Doing this makes me a more explosive athlete. I'm also more limber now than I was in my twenties, thanks to a dynamic stretching program from Adrian Crook, developer of the InFlex movement program."

Pat Onstad, 40,
Goalkeeper for the Houston Dynamo. Last season, Onstad allowed, on average, less than one goal per game, an MLS single-season record.

“Ten or 15 years ago, I’d go out and break 40 minutes during a 10K training run, and I’d lift three times a week. It kept me in good shape, but the movements didn’t mimic soccer. Today, I do more lateral movements, plyometrics, core exercises, lunges, and shoulder exercises with resistance bands that condition my body for what I do on the field. Now that I’m 40, I also need more recovery time. It usually takes a full two days to recover completely from a game or hard practice, but if I implement regeneration workouts—such as 20 minutes of aerobic activity followed by 30 minutes of light lifting and 10 minutes of stretching—the day after a game, I’m able to go hard again the next day. Stretching plays a big role in that recovery process. I always stretch for 10 to 15 minutes before and after a workout.”

Ian Adamson, 43
The most successful adventure racer of all time, with seven world-championship wins. He is also the current world record holder for endurance kayaking (262 miles in 24 hours).

“I’m all about cross training with outdoor sports. My girlfriend and I live near a national forest, so we’ll jump on our mountain bikes or put on our hiking shoes and hit the trails. I also love to snowshoe, telemark ski, and Nordic ski, all of which have become a part of who I am after 40 years in the outdoors. But anytime I run or ski or hike, I make a point of doing two sets of 50 pushups and 50 sit-ups when I get home. This helps me maintain a balanced musculature. I hadn’t even considered adding yoga to my routine until last year, but now I go once a week. Elongating muscle fibers and training fine motor skills are incredibly important to athletic longevity, and you don’t usually get those benefits from activities like biking or running or kayaking.”

Dave Scott, 54
Six-time Ironman world champion and the first inductee into the Ironman Hall of Fame

“The older I get, the more I realize that consistency is the name of the game. When I was younger, I would train every day for four to six and a half hours. But if I didn’t have time to do the whole thing, I’d get discouraged and bag the workout. Since then, I’ve realized two things: First, something is always better than nothing, even if it’s just 20 minutes of exercise. Second, you have to schedule a backup time to work out. Life happens, and if you establish a contingency plan, it doesn’t have to affect your fitness. Recently, I’ve started to concentrate on multimuscle exercises, including squats with the bar held above my head, and single-leg Romanian dead lifts. Building and maintaining muscle mass becomes increasingly difficult as you age, and compound movements give me a boost in that regard by triggering the production of growth hormone and testosterone.”
Chris Chelios, 46
Defenseman for the Detroit Red Wings and the oldest active player in the NHL who has appeared in the playoffs 22 times—a league record.

“I train to prevent injury, and that means targeting the body’s stabilizing muscles. A lot of guys will go to the gym and just hammer the larger ‘beach muscles’—the chest, legs, upper back, and arms. Sure, they look good in the mirror, but they don’t help that much on the ice. Instead I work the abs, hip flexors, rotator-cuff muscles, and the smaller support muscles in the legs and trunk. Shoulder rotations, lying leg raises, and balance-board drills hit those muscles. I also focus on strengthening the body’s weakest links, such as the knees. It might sound counterintuitive, but the best way to protect your knees is to strengthen your hips. To build hip strength, I sit in a 45-degree leg-press machine and squeeze a stability ball between my thighs as I extend my legs. Three sets of 10 reps once a week.”

06:32 | Posted in | Read More �

An Institution of Higher Yearning

Connie Nielsen: An Institution of Higher Yearning You may not recognize the name, but you may recognize the face (and the body). The Danish actress seduced Keanu Reeves in The Devil's Advocate and Russell Crowe in Gladiator. Here she provides cinematic advice to spice up a real-life romance
I do not care about looks.
I do not care about career.
I do not care about anything as long as you are happy with what you are doing. If you're a lazy bastard and you're happy being a lazy bastard, then by all means..."

— Connie Nielsen

So says Connie Nielsen who also seduces Renata, the owner of a strip club in Harold Ramis' new film, The Ice Harvest.

"I play the classic femme fatale," she says Nielsen. "My character is very mysterious, but I show the way the wheels are turning in her head, which gives a little bit of a comic effect, as well."
We asked Nielsen, 40—who lives with her boyfriend, Metallica drummer and fellow Dane Lars Ulrich—how a mere mortal man can make a woman like her happy. She explains.
Don't be scared
That whole thing with fear of commitment is old. With European guys, I never hear this thing "fear of commitment." I didn't hear that until I came to America. Maybe it's because in America the commitment is so set in stone: You get married, you move into the suburbs, you buy a car and have dogs. It does not have to be that. It can be something else. Even in the midst of all this Bible thumping and warmongering, and all these old-fashioned so-called family values, you can so totally choose to make your life the way you want it.
Confess, repent, and beg forgiveness
And if you've done nothing wrong, confess, repent, and beg forgiveness for everything everybody else has done before you met her.
Reassure her that you're in no way like every other man
Whenever your friends say, "Let's go and see a ball game," pretend you don't want to go with them but they are forcing you. That in reality you are that one sensitive guy who somehow gets along with all the insensitive guys. That you have to be there to help them out, because think of the trouble they would get in with their wives if you weren't. That makes you the good guy.
Never buy a pre-made bouquet of flowers
Go to the florist and select the flowers that you actually like.
Don't be her savior
I don't think that it's right for a woman to expect a man to be able to take care of shit if she's not able to take care of her own shit. You know, go out and get your f---ing career—I'm talking to women—take care of yourself, pay your own bills, and stop looking for some guy who's going to do it for you. And that will probably change a lot of the "fear of commitment" thing.
Stick together
If you travel a lot, then you should find somebody who has absolutely no job and can travel with you. Not being together is the recipe for not having a relationship. Sooner or later, it's not going to work, unless you find somebody who doesn't need love and affection. And if she doesn't need love and affection, I'd worry about other things.
When your mother calls, try to sound happy
When her mother calls, try to sound ecstatic.
Surprise her
For an ideal date, take her to do something she's never done before. That can be anything from a boxing match to mud wrestling to some classical Greek theatrical music that no one has ever played before. But preferably it should be something you know something about. Also, at least one dinner out a week. That's a must.
Disagree
Whenever she says, "Oh, look at my arms" or "Look at my legs," or if she says she has a fat ass, never say it's true. You never, ever say, "I don't care." You never ever say, "I know, but you can work on it." And you don't say it doesn't matter to you. You say you love tallness, you love skinniness, you love big noses, small noses—whatever it is she's got a problem with; you say you just happen to be a guy who loves that very thing she thinks is horrible. And if it's not true, then lie.
Make her feel beautiful, and she will become beautiful
There's nothing like being loved and cared for to make a woman feel beautiful. And a woman who doesn't appreciate that—let her go.

02:51 | Posted in | Read More �

The Keys to Paradise

With a methodical approach to saving and a strategy for cutting costs, you can go from zero to second-home hero in just 5 years. Here's your 15-step action plan for making it happen. You love your house. But let's face it, the passion has waned.
Sure, the old ball-and-chain is fully functional: It's close to work, in a good school district, and big enough to contain all your stuff. It's your physical shelter and a great tax deduction. But after a tough grind at the office or during lunch, when your mind wanders, you might find yourself fantasizing about something sexier, more exotic. Admit it: You're mentally cheating on your house. Embrace it: Buying a second home is the only form of betrayal that your lovely lady will ever endorse.

So let's cut to the chase: Can you make this happen? Yes, you can. In fact, with a little discipline, you can get there in 5 years. By earning just 4.5 percent on your money, you'd be able to secure a 10 percent down payment on a $500,000 dream home by socking away just $25 a day.

That's the price of 7 gallons of gas and a cafe latte.

Why the 5-year target?
Economic reality, that's why. You've got a retirement to prepare for, and you probably have kids to educate. You also need to be ready for any unforeseen financial challenges that crop up. Just as rising interest rates are helping cool home-price appreciation and discourage real-estate speculators, rising rates will boost the return on your savings. A 5-year runway enables you to leverage compound interest to get to your down payment without disrupting your other financial goals. Five years is also plenty of time to explore your second-home alternatives, find ways to trim costs, and turn your real-estate fantasy into reality.

If Lenin could muscle the entire Soviet economy in 5-year time spans, you can marshal your resources and achieve your second-home dream. Here's how to make it happen.

Lay the Groundwork
When you miss a few sessions at the gym, you have to work twice as hard the next time to make any progress. Your motivation might even slip. The same goes for your goal of owning a second home: Relentless dedication is everything. Your strategy begins with a realistic savings plan.

Create your down-payment strategy
To stay focused, open a separate account and call it your "sunny day fund." To enforce discipline, set up a monthly electronic transfer so you can move funds into the account without ever having to think about it. Then drop extra money into the account whenever you can. That's what Ethan and Renee Chandler did.

The Richmond, Virginia, couple started putting money away before they had settled on a location -- or even agreed that they would buy a vacation home. "Over six years, we hoarded any stock options, any bonuses, any pay increases," says Renee, 35. "We reduced all our debt, didn't do big upgrades to the house, and didn't sell those stock options to splurge on something unnecessary." When the time came, the Chandlers easily had enough cash for a 10 percent down payment on a $300,000 two-story gem on the bay in Vieques, Puerto Rico.

Invest your sunny-day fund wisely
There's another good reason to keep your down-payment money separate from funds you sock away for other goals: Your investing strategy should be radically different. As a rule of thumb, you should avoid stocks if you need the money in fewer than 7 years, says financial advisor Shashin Shah, president of SGS Wealth Management, in Dallas. The reason is simple: The market might be slumping just when you need to withdraw funds, forcing you to lock in a loss. Thankfully, rising interest rates mean boring is once again beautiful: A nearly risk-free, high-yield money market account, such as the one offered by online bank HSBCdirect, pays that magic 4.5 percent annually.

One-year certificates of deposit, which are slightly less liquid, are also market beaters: ING Direct, another online bank, offers 5.25 percent with no minimum deposit. If you're in a high tax bracket, adds Harold Evensky, chairman of wealth-management firm Evensky & Katz, in Coral Gables, Florida, you can bump up your returns by moving a portion of your money into a low-cost mutual fund that invests in tax-free, short-term municipal bonds.

Factor inflation into your savings equation
A big variable that affects your down-payment goal is the rate of appreciation in markets where you want to buy. Get a feel for what you're up against by doing some price sleuthing on specialty second-home Web sites like EscapeHomes.com or generalist real-estate sites like HomeGain.com. You can also buy intelligence from an outfit like the Local Market Monitor, a consultancy in Wellesley, Massachusetts, that calculates average prices for more than 100 markets.

With an estimate in hand, back into your savings goal by projecting what a home that you like in today's dollars will cost you down the road. Last year, for example, the median-priced vacation home climbed 7.4 percent. At that rate, a half-million-dollar retreat today would cost upwards of $700,000 in 5 years. If your goal is to finance 90 percent, your inflation-adjusted savings target should be $70,000, not $50,000.

Buff up your credit rating
As you launch your savings strategy, check your credit rating. Although lenders will typically look for a bigger down payment on a second home, it's entirely possible to front only 5 to 10 percent -- or even nothing at all -- if you're a good credit risk. Scrutinizing your credit report will enable you to correct errors early on that could derail you later. You should also take steps to improve your credit score by paying bills on time and reducing credit-card balances. A good score will ultimately decrease the interest rate on your mortgage, too.

Think Like a Developer
Last year, prices in Tucson, Honolulu, and Miami/West Palm Beach rose by about 25 percent. In Sarasota and Bradenton, Florida, prices were up 30 percent. To get more second home for your money and set yourself up for greater price appreciation after you're an owner, you need to start thinking like a real-estate developer. The pros make money by spotting bargain locations that will be raging in popularity years down the road.

Identify your ideal echo market
The key to finding a more attractively priced market that works for you is to isolate and replicate what you truly love about your first-choice location, says Dave Hehman, president of EscapeHomes.com. Make a list of your second-home must-haves and nice-to-haves, taking into account the setting (beachfront or mountaintop), amenities (fireplace or swimming pool), and recreational goals (boating or snowboarding).

Then test-drive a few alternative locations by renting there at different times of the year. You may find that less-trodden locales -- call them "echo markets" -- offer far better deals, enabling you to get the best of what you love at a fraction of the price (see "Affordable Escapism," on page 97).

Target the worst home on the best block
This developer-inspired strategy may enable you to buy for less money and bring your property into line with the nicest homes in the area, converting sweat equity to home equity. That's what Ted and Brenda Ginsberg did. The Houston-area couple bought a beachfront fixer-upper on Galveston Island, Texas, for $340,000. They took out a mortgage for $414,000 and rolled the difference into much-needed repairs. Today, their beachfront retreat is worth nearly $1 million.

Consider a historic fixer-upper
A certified historic property in need of significant work may be an especially good deal: Under the Fed- eral Historic Preservation Tax Incentive Program, you might be eligible for a 20 percent tax credit if you complete a "substantial" rehabilitation. To qualify, you must be willing to rent out the property and meet a host of other requirements.

For instance, in most cases your rehab expenditures in a 24-month period must exceed the price you paid for the home less the value of the land, after accounting for depreciation and any improvements that were already made. Additional local tax credits vary by state but are usually more substantial. In Arizona, you can cut your property taxes in half by signing a 15-year agreement to maintain a property; in most parts of Hawaii, historic properties are fully exempt from state property taxes.

Become a landlord
The thought of somebody stomping through your vacation pad probably seems sacrilegious, but the difference between hope and reality is an enticing income stream. "More and more people these days are renting out their property to defray operating costs, which have gone up considerably," says EscapeHomes.com's Hehman. Shop strategically. Homes with views and amenities tend to offer better rental prospects than secluded properties, says broker Ken Libby, who chairs the National Association of Realtors' Resort and Second Homes Committee.

In Stowe, Vermont, where Libby is based, a $500,000 home that is centrally located can deliver $35,000 a year in rental income, versus $20,000 for a more private home that is just a half mile away. But don't plan to use it during peak periods: In Stowe, says Libby, "the 10-day period from Christmas to New Year's is a third of your income." If you're willing to settle for nearby towns, says Libby, you could get a $500,000 home for $300,000, but you couldn't count on the rental check.

Buy raw land and build a prefab
Rather than acquiring land and then paying $300 to $700 a square foot to build a high-end residence from scratch, you could spend roughly half that on a prefab home. Once the domain of trailer parks and drab postwar housing, prefab designs now headline museum exhibitions and architecture competitions. "It's the most affordable way to get modern architecture," says Rocio Romero, a Chile-born architect whose LV series of prefab homes start at $120 a square foot.

Any buy-and-build strategy involves risks. Raw land has historically been a solid investment and can sell for a relative pittance, but local zoning rules and a lack of road access and utility lines can create headaches. John McAllister, president-elect of the Realtors Land Institute, a trade association, says buyers should stick with "improved land," which has been plugged in to the local electricity and water grids. Even with prefab, one big wild card remains: the cost of the foundation, which Romero says can run from $5,000 to $100,000, depending on the quality of the ground and the local price of labor.

Conduct a Reality Check
Once you've done some browsing in your preferred location, you need to get a handle on hidden expenses. "People become enamored of the gorgeous beach view and tend to forget about all the costs involved," says real-estate investor Christine Karpinski, author of Profit From Your Vacation Home Dream. To avoid a panic attack at your closing, explore ways to trim costs.

Reevaluate your love of the water
One largely unshakable truth is that waterfront property is going to cost you dearly. Besides the huge price premium, coverage for flooding or hurricane damage, repairs for sun or salt corrosion, even beach-erosion problems will all add to your ongoing expense. "Insurance [for a home] directly on the beach can be $3,000 and up," says Karpinski. "But for the exact property across the street, it might be only $500 to $700."

Don't remind the Ginsbergs. They love watching the sunset over the Gulf of Mexico, but they could do without the hurricane risk: Insurance against flooding, windstorms, and other coastal perils runs them about $10,000 a year on top of their mortgage payments.

Choose a condo
If you're targeting a second home locale that is hours away from your primary home, consider buying a condominium. Yes, it'll cost you more in association fees. But since the price of major repairs is shared and there is usually an on-site staff to handle maintenance matters, the trade-off can be worth it. "The majority of the big stuff that can go wrong -- roofing, siding, windows -- is all covered," says Karpinski. Condos have also proven to be the better investment: Over the past 5 years, for example, they've delivered 14.5 percent appreciation, compared with 8.3 percent for homes.

Consider collective ownership
Buying property with a friend or family member enables you to acquire an ownership share without having to bear the full cost of the purchase or the upkeep -- and you can pass your share to an heir ("tenants in common") or to the other person on the deed ("joint tenancy"). Of course, mixing family or friendship with real estate can be risky. So the first order of business is to hire an attorney to draft a detailed letter of understanding that lays out the ground rules.

"Whether it's who gets to go up this weekend or what happens if you want to paint a room blue, you want an agreement that covers a lot of ground," says Andy Sirkin, a San Francisco real-estate lawyer who specializes in co-ownership arrangements. Be sure your agreement gives you an out. One approach is to guarantee each owner the right of first refusal on the sale of a share after a predetermined standstill period, says William Baldwin, a financial advisor and attorney in Waltham, Massachusetts, who has drafted several arrangements. You could also agree to put the property on the market if neither party wants to buy the other out. "Each party gets a put option," says Baldwin.

Ace the Home Stretch
Lenders typically charge a premium of an eighth to a quarter of a percentage point on second-home mortgages. If you need rental income to make the numbers work, "you've moved over to the investment side of the ledger," says Keith Gumbinger of mortgage tracker HSH Associates. It'll likely cost you another half point. Look for any leverage you can when shopping for a loan.

Play lenders off against each other
Working with the lender who financed your primary home may streamline the application process -- and you're more likely to get a break on fees. Still, experts recommend shopping online and approaching at least two other banks and mortgage brokers to gain negotiating clout. You should also check in with local banks and brokers who can steer you to special deals. Get a preapproval letter for a mortgage from your bank a few months before you are ready to bid on a property.

Immunize your finances
When you finance property with somebody else, you risk losing it if your partner is no longer able to shoulder his or her portion of the mortgage payment. Traditionally, joint buyers have secured a single mortgage together, but the "new wave" in vacation-home financing, says Sirkin, is for each owner to obtain a separate loan backed by his or her fractional interests.

Although the interest rate will be higher to reflect the added complexity, your credit rating and your mortgage payments won't be affected by your partner's financial misfortune. Depending on the arrangements in your letter of understanding, you may still have to buy out your partner or take on a new one if he or she runs into money troubles. Regardless of the loan you choose, cut your risk by checking out your partner's financial qualifications well in advance.

Hire a good accountant
If you rent out your new home fewer than 15 days a year, you don't have to report the income to the government. But if you rent for longer, the IRS categorizes your home as a rental property, not a private getaway, and you must log those extra dollars on your tax return. The good news is that you can write off a portion of major expenses against the income you generate, including electricity, housekeeping costs, and property taxes. These expenses could eat up as much as 30 to 50 percent of your rental dollars, so it's important to maximize your deductions by working with an accountant who knows what he's doing.

Nobody said plotting your second-home strategy would be a walk in the park. It's a task that seems especially daunting given those double-digit real-estate price gains of the past few years. So here's some inspiration: Even amidst the frothiness, the typical second-home buyer is no Rockefeller. According to the National Association of Realtors, Mr. Typical earned $82,800 last year and paid $204,100 for a median-priced vacation pad. If he can make it happen, you can, too. After all, you're no Mr. Typical. And now you're much better prepared. Enjoy the hunt.

02:47 | Posted in , | Read More �

The New Rules of Building Wealth











Beat the S&P (and your hedge-fund buddy) with 8 simple tips from the most trusted financial brains in the game


Mark Adamle remembers the exact moment when he strayed from the rules of investing. It was December 1999, the world was still giddy with dot-com millionaires, and he had just come into his tidy Christmas bonus. Who could blame him for reading a business-magazine article about which stocks to own for the next decade?

So half of his bonus went straight into WorldCom, and the other half into Lucent Technologies. You can guess how this story turns out. "I was smacked around pretty good," says Adamle, 47. "I thought I was a gunslinger, and I got burned."

That's when he rediscovered his humility, stuck to some core principles of investing, and got his portfolio back on the right track. After all, Adamle—a senior VP of Intersport, a sports-programming producer for networks like ESPN—had been a pretty good saver over the years, ever since marriage and his two kids entered the picture. Now, by sticking to his rules, and with the help of his financial planner, Ray Evans, he's been able to rack up solid 16 percent annual gains.
 


By opting for a long-term time horizon, improving his asset allocation, avoiding the turkeys with sketchy earnings reports, and keeping his emotions out of his investment choices, he's been able to secure his retirement and prepare himself for those upcoming college bills. "I've always been involved in sports, and in sports there's a win-or-lose mentality," says Adamle. "The same goes with investing...and no one likes to lose."
 


To help you win the investing game over the long haul, we sought out the wisdom of some of the most brilliant financial minds in the country—not just any mutual-fund managers, for instance, but individuals who collectively manage about $20 billion and consistently outperform their peers year after year. We asked each finance guru for one important rule that has guided him, and that you can bank on yourself. The result is a master course in investing. Class begins now.
 


Forget performance; look at fees
So you've done your mutual-fund screens, crunched the Morningstar ratings, and come up with the top performers. Now take all that data and throw it out the window, because it's not past performance but low fees that will likely determine your ultimate financial success.
 


"Any economist will tell you that in terms of predictive power, there's no comparison," says Mercer Bullard, founder of investment-world watchdog Fund Democracy and a visiting professor at Washington University in St. Louis. "In a given investment category, if you're to pick a single factor to go on, you're going to do better in a fund with lower costs."
 


We're not just talking about load funds: No-loads have the seemingly tiny expense ratios that can make a massive difference to your retirement kitty. Take this example from fund giant Vanguard: Consider $5,000 investments into two funds—one with a 1.3 percent expense ratio, the other with 0.3 percent—and subsequent annual investments of $5,000, with an 8 percent annual return. After 20 years, that minuscule fee spread is going to cost you more than $28,000.
 


But you might not learn this from Morningstar fund research, says Bullard, since it doesn't break out fees as a separate factor for fund evaluation. Nor does the Securities Exchange Commission help with legislating more fee transparency. Still, investors are catching on, directing more and more of their asset flows to low-cost funds over the last 10 years. ETFs, or exchange-traded funds, are another way to get a basket of securities and chop expenses back. "Every basis point matters," says Bullard. "If I had to choose between eliminating mutual funds that are the most expensive or those that are the worst performers, I'd eliminate the most expensive ones."
 


Invest when a stock's earnings estimates are being revised upward
Sorry to say, but when it comes to investing, the deck is usually stacked against the individual. Big institutional money moves markets, leaving the scraps to the rest of us.
 


In certain rare cases, it's the individual who actually has a leg up. And one of those instances, according to portfolio manager Mitch Zacks, of Zacks Investment Management, is when a stock's earnings estimates are consistently being revised upward. "It's the most powerful force affecting stock performance," says Zacks, who's headed up the Chicago-based firm for 10 years. "Not only will improved earnings increase the intrinsic value of the stock, but also companies receiving upward revisions are more likely to receive them again in the future."













But why does Joe Average hold the upper hand in this scenario?

Because the institutional players—such as a huge Fidelity mutual fund—are lumbering organisms that don't move all that quickly in reaction to earnings news. "Their decisions are made by committee," says Zacks. "They think about it, they meet, they discuss, they get analysts to review the situation, and only then do they decide to purchase." Meanwhile, you've hopefully scooped up the stock and seen some quick gains.
 


For an easy way to find out whether a company has a history of upward revisions and positive earnings surprises, check out zacks.com, a free site that also has a premium "Advisor" service. Zacks ranks stocks based on a five-point system, and sample portfolios based on this metric have racked up 30 percent annual gains for the past 25 years. We'll take it.
 


Monitor cash flow to find winners
Earnings numbers are the definitive blueprint for figuring out how a company is doing. So why are so many money managers these days looking at another, but related, marker?

It's free cash flow, and it's an extremely honest indicator of company fortunes. Basically, it reveals how much money remains in corporate coffers after the bills are paid and all the dividends are distributed. It's much harder for a firm to get away with financial shenanigans and a questionable quality of earnings reports when you're looking at the hard facts of how much scratch is left at the end of the day. Finance.yahoo.com, for instance, has a helpful "cash flow" option that separates out that information for you when you're researching a stock. "It's what the true value of a company is," says Bob Smith, vice president of fund giant T. Rowe Price and manager of its Growth Stock Fund.
 


It also helps narrow down your universe of potential investments, because extremely few companies are able to increase their free cash flow at double-digit annual rates. If you find that, you've identified a winner, and a metric that's going to move that stock upward in the future, not necessarily in the short term, when stock movements can be wildly unpredictable, but over a long-term horizon, when looking at free cash flow becomes essential for making money.
 


A few stellar companies that have pulled off the double play of generating lots of free cash and putting it to good use, according to Smith: Wal-Mart, Citigroup, General Electric, and Microsoft. "Usually you have to pay a premium for these franchises, and now you don't. They're all very attractive right now," he says.
 


Put the right investments in the right places
You might think that the big challenge of investing is picking the right stock or fund to add to your portfolio. But you'd be only half right, according to asset-allocation king Roger Ibbotson, chair of Chicago's Ibbotson Associates and a professor at the Yale School of Management. Where you slot that investment is what's really going to determine the quality of your retirement.
 


That's because Uncle Sam will want his cut of your gains, and how you manage that eventuality is the most critical move of all. That cut may be nothing, or it may be 35 percent or more. It all depends on what you put where. "The issue of taxes completely swamps the question of what particular stocks you might have bought over the years," says Ibbotson. "It dominates over the long term."
 


His advice: Hold highly taxed assets—such as taxable bonds, equities that throw off plenty of dividends, and mutual funds with lots of trading activity—in your tax-deferred or tax-exempt accounts, such as an IRA. Max out contributions to those accounts, and when you make your withdrawals, you'll likely be in a much lower tax bracket. In your taxable accounts, house investments like your tax-free municipal bonds. Frequent traders should keep in mind that capital gains on investments held for less than a year are taxed at the full 35 percent rate. "People might have the right investments but in the wrong accounts," says Ibbotson, "and they don't even know it."
 


Forget 1-year outlooks; plan at least 5 or 10 years ahead
Chess grand masters don't think about just the move of the moment. They're thinking about what the chessboard is going to look like seven or eight moves down the line. You should look at your personal- wealth situation in the same way, says Dan Fuss, vice chairman of investment firm Loomis Sayles. "It's human nature to look at a 6-month to 1-year time horizon," he says. "But you have to look much farther out than that and figure out the longer-term trends."
 


Fuss, widely regarded as one of the top bond-fund managers on the planet (he heads up the Loomis Sayles Bond Fund and has been tapped by Morningstar for his outstanding performance), says his advice applies to any asset category you'd care to think of. Real estate? Consider trading in your adjustable-rate mortgage for a 30-year fixed, because the Federal Reserve Bank is continuing to hike interest rates, and it could hit you right in the pocketbook when your rate begins to float.











TIPS, or Treasury Inflation-Protected Securities? They might look attractive right now because of inflation fears, but keep in mind that the Treasury is planning on rolling out more and more TIPS, so beware of oversupply. Stocks? Earnings for your widget manufacturer may be stellar now, but if the Chinese are starting to make widgets (and you can bet they are), then your financials 5 years down the road may turn into a horror show.
 


And for Fuss' comfort zone of credit, the same principle of longer-term thinking applies. Consider emerging-market bonds, since the fundamentals abroad are improving, thanks to a white-hot commodities market. And in a rising-rate environment, focus on investments with shorter maturities. "Be careful of taking on long-term risks," he says. "It's better to avoid it right now."
 


Don't be afraid to hold cash
It might seem bizarre for one of the top money managers to counsel hoarding cash. After all, equities have a long-term average of 10 percent annual gains, while your cash will do little more than sit in a bank.
 


But look at Bob Rodriguez's record, and it pays to listen to what he's saying. As a portfolio manager at FPA Capital, his fund has returned an eye-popping average 17.9 percent over 20 years, according to research firm Lipper. This is one of the best all-time records of any fund, anywhere. "The most aggressive asset I've been acquiring in the last year is cash," admits Rodriguez. In fact, his fund is now up to 46.7 percent cash.
 


Why? Because the value-oriented Rodriguez just doesn't see any attractive buys out there. So he's perfectly content to sit and wait for an opportunity to offer itself. Such was the case a few years ago, when he and his analysts thought that the energy sector was supremely undervalued—some companies were selling at less than the value of their drilling equipment alone—and bet heavily on it. Looking at today's gas prices, that bet has paid off for him handsomely.
 


Patience is actually the most rare of investor virtues, says Rodriguez. If you find an out-of-favor company that is in an unloved sector but is a market leader and has solid executives in place, then by all means, buy it. But if not, it's no sin to hoard your money. In fact, Rodriguez's favorite place to put his money right now is short-term T-bills, and he feels that yields are not yet high enough, given the deteriorating U.S. balance sheet—loaded down with the costs of the Iraq war, drug benefits, and Katrina reconstruction.
 


Follow the outstanding shares
Traditionally, stock buybacks were a solid indicator of a company's encouraging financial future. If a firm spent its free cash snapping up its own shares, it demonstrated the executives' faith in the company, and their belief that the stock was undervalued and would prove to be a terrific investment.
 


Indeed, buybacks can still be positive. But beware of the bandwagon. It seems everyone is engaging in the practice these days—Wachovia, Exxon, Cisco, Wal-Mart, and so on—and it's getting harder to tell who's doing it for the right reasons and who's doing it simply because they don't know where else to put their cash.
 








One marker, though, is a helpful tip-off: a company's number of outstanding shares. A key rationale for buybacks is to reduce that number, thereby increasing earnings per share and boosting the company's overall valuation. But only 39 percent of companies buy back stock for that reason, according to Howard Silverblatt, Standard & Poor's equity-market analyst. Others might do it to boost mergers-and-acquisitions activity, like buying another company with stock. Firms such as Dell have been gathering stock for years without reducing the total number of outstanding shares, says Henry McVey, chief U.S. investment strategist at Morgan Stanley.
 


So if you're tempted by a buyback announcement, consider sticking to those companies that have been reducing their total outstanding shares. The resulting increased earnings per share should hold you in good stead.
 


Don't rely on your instincts; they're probably wrong
It's kind of like George Costanza's famous dilemma on Seinfeld. Every natural instinct he possessed was terrible, which meant the opposite instinct had to be right. And so it is, unfortunately, with our investing behavior. "If people always acted rationally, then no one would ever make mistakes," says Markus Brunnermeier, a behavioral economist at Princeton University. "But once you introduce human judgments, then you're in the area of irrationality. And when it comes to investing, people have many biases."
 


The foremost example: overconfidence in one's own stock-picking abilities. We all think we're the second coming of Warren Buffett, when we most certainly are not. And the more complicated a task gets (such as deciphering a dense earnings report), the more overconfident we become. We also tend to engage in "feedback trading," or buying stocks that have done spectacularly well in the last quarter, though history has shown that chasing recent returns is absolutely the wrong way to invest. We tend to sell our winners and hold on to our losers, because we don't want to admit we were wrong (called "cognitive dissonance" in the psych world). We ride the most ridiculous bubbles, even when we know the assets are way overpriced, because we don't want to miss out on the gains. And the list goes on.
 


Given that we're all imperfect beings, how do we get past all this and make smart decisions? Invest a large fraction in index funds, for one, which takes our terrible stock-picking abilities out of the equation. Brunnermeier, for instance, has part of his own money in index funds; Vanguard is the most prominent index player with excellent cost efficiency. Diversify to get away from our tendency toward "narrow framing," or focusing on one aspect of our portfolio and forgetting about the total picture. And write down your goals in advance—for example, your plan to sell a stock when it drops below $40—so your emotions don't run the day. Mark Adamle learned the hard way: "In the past, I jumped on the bandwagon," he says. "Now I don't invest emotionally or get caught up in the mania."

02:37 | Posted in | Read More �

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