Kiplinger's Personal Finance - October 2023

CONQUER YOUR
RETIREMENT FEARS
Giving up a paycheck can be
daunting. We’ll show you how
to retire with confidence. p 50
WE RANK THE ONLINE BROKERS p 18
October 2023
www.kiplinger.com
Investing in Japan
Momentum is building in
the world’s second-largest
stock market. p 28
Guide to State
Estate Taxes
Even if you’re not
wealthy, your heirs
may be surprised
by the bill. p 40
The Confusing
New World
of Tipping
How to respond to
proliferating requests
for gratuities. p 46

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October 2023 1
October
AHEAD
9 Topic A
The downside to declining
inflation ... The risks of sharing
personal info ... How retirement
could hurt your credit score.
16 Briefing
Airfares are coming back to
earth ... Inherited IRA relief.
INVESTING
18 How the Online Brokers
Stack Up
Finding the right broker isn’t
always easy. We evaluated
investment offerings, tools, apps
and more to help you choose.
28 Rediscovering Japan
Experienced investors are
revisiting Japan’s stock market.
31 The Skinny on Spin-Offs
Sometimes firms prosper by
breaking themselves into pieces.
33 Street Smart
Real estate: Down but not out,
by JAMES K. GLASSMAN.
38 Income Investing
Dividends hit a rough patch,
by JEFFREY R. KOSNETT.
32 More About Investing
ETF spotlight (32). News of the
Kiplinger 25 (35). Mutual fund
spotlight (39).
MONEY
40 Why You Should Care About
State Estate Taxes
Federal estate taxes aren’t a
concern for most people, but
state taxes are another story.
46 To Tip or Not to Tip?
Adding a gratuity has taken on
a new level of complexity.
48 Credit/Yields
Are IRA CDs right for you?
Kiplinger Personal Finance | Founded in 1947 | Vol. 77 No. 10
ʹ
You can conquer your
retirement fears.
18
A review of the online brokers.
GETTY
IMAGES

2 Kiplinger Personal Finance
RETIREMENT
COVER STORY
50 Overcome Your Fear
and Enjoy Retirement
Don’t let uncertainty stop
you from retiring when
the time is right.
59 Living in Retirement
How inflation hurts
retirees, by
JANET BODNAR.
FUNDAMENTALS
60 Practical Portfolio
Gauge a stock’s potential
with these next-level
valuation metrics.
62 Family Finances
A checklist for
newlyweds.
63 Basics
Get the best mortgage
rate.
REWARDS
64 A Guide to Choosing an
All-Inclusive Resort
We found great vaca-
tion destinations for
families, couples, foodies,
adventurers and wellness
seekers—plus snowy
getaways for a wintry
retreat.
Contents
All-inclusive
resorts have
seen a
renaissance
since the
pandemic.
64
IN EVERY ISSUE 5 Letters 6 From the Editor 72 Paying It Forward
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How All 50 States
Tax Retirees
If you're thinking about moving
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kiplinger.com/kpf/
50states-taxes
Bull Market vs. Bear Market
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Dear Client: Washington, July 16, 2021
Joe Biden’s latest goal as president:
Become a 21st-century trustbuster
and boost competition in the U.S. economy.
Much of Biden’s agenda is already clear:
Stronger enforcement of antitrust laws,
obviously, a goal he shares with the new head
of the FTC…Federal Trade Comm…Lina Khan.
Greater scrutiny of mergers and acquisitions
could not only discourage future dealmaking
(bringing MA activity down from record levels)
but also result in past mergers being challenged.
This worries many tech companies, especially those
accused in the past of acquiring upstart companies
before they can pose a threat. Think Facebook
acquiring Instagram or Google buying YouTube.
Knocking down barriers for workers
who want to switch jobs or enter new industries.
For example, Biden has proposed a ban or limits
on noncompete agreements, in which an employee
agrees not to start a competing business or work
for a competitor for a specified period of time
after their contract ends…a widespread practice.
Also, protecting consumers and businesses by shifting control of their info
to them and away from banks, Big Tech platforms, and others that now profit from it
and occasionally abuse it. One example: Online marketplaces, such as Amazon,
using the data of businesses that sell on their websites to launch competing products.
Furthermore, Biden’s antitrust focus extends far beyond Silicon Valley,
which has become a punching bag for both political parties in recent years.
Bank mergers are set to face greater scrutiny, with the administration
noting that Uncle Sam hasn’t blocked such a transaction in over 15 years.
The White House has also taken aim at the pharmaceutical industry
and the tactics brand-name drugmakers use to stave off generic competition.
Ditto, the meatpacking industry, where many processors have been accused
of colluding to lower the prices they pay to both poultry and livestock farmers.
Biden’s strategy is hardly a slam dunk. Federal agencies that are responsible
for overseeing antitrust issues, such as the FTC, already lack the staff and resources
to keep up with their current workloads. Many proposals could also face legal hurdles.
Plus, tougher antitrust enforcement may have negative consequences,
in some cases. Economic concentration has increased in three-quarters of industries
in the U.S. At the same time, growing global competition also requires many firms
to combine in order to survive, allowing them to take advantage of economies of scale.
Still, such efforts reflect a new way of thinking in D.C. about antitrust law
that will endure beyond Biden’s presidency and have a real impact on the economy.
1100 13th Street NW, Washington, DC 20005 • kiplinger.com • Vol. 98, No. 28
U.S. average: 9
1 to 2
Maine, Md., Mich., N.H., Pa., S.D., Vt.
3 to 4
Conn., Del., D.C., Iowa, Mass.,
Minn., Neb., N.J., N.Y., N.D., Ohio,
R.I., Va., W.Va., Wis.
5 to 6
Hawaii, Ill., Ind., Mont., N.M., Ore.
7 to 8
Calif., Ga., Idaho, N.C., S.C., Tenn.,
Wash.
9+
Kan., Ky., Texas (9), Colo. (10),
Alaska (11), Ariz. (12), Miss., Okla.
(13), Ala. (14), Wyo. (15), Utah (16),
Nev. (23), La. (24), Fla. (26),
Mo. (29), Ark. (33)
Seven-day average, July 9-15
COVID-19 Positive Tests
per 100,000 Residents
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next move.
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Contents
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October 2023 5
Letters
RETIREMENT HAVENS
FOR RENTERS
We enjoyed reading “8 Great Places
to Retire—for Renters” (Aug.), which
included Columbus, Ohio, and Ann
Arbor, Mich. But you also should
include the East Lansing/Lansing
area. Our region is the home of Mich-
igan State University, which
offers a world-class performing arts
CONTACT US: Letters may be edited for clarity and space, and initials will be used on request only if you include your name. Send to
Kiplinger Personal Finance, c/o Future US LLC, 130 West 42nd Street, 7th Floor, New York, NY 10036, or send an e-mail to feedback@
kiplinger.com. Please include your name, address and daytime telephone number.
UPDATE
After our September issue went to press,
the IRS announced that non-spouse heirs
who inherited a traditional IRA in 2020
or later will not be penalized if they forgo
a 2023 required minimum distribution
(“An Inheritance With Strings Attached,”
Sept.). For more, see page 17.
Gas Cars vs.
Electric Cars
I can appreciate the gas-powered
vehicle reviews in “The Non-EV
Buyer's Guide” (Aug.). However,
to those who say EVs have an
unfair advantage because own-
ers don’t pay gas taxes: Localities
are exploring a tax on EV regis-
tration or a mileage tax fairly ap-
plied to all vehicles. Some people
are concerned about the effects
of EVs on the power grid, but our
interconnected power grid is al-
ready perilously strained. Renew-
able energy can help contribute
to clean power generation by em-
ploying smaller, regional power
micro-grids that are less suscep-
tible to weather and mass failure.
Craig Lazinsky, Derry, N.H.
I was thrilled to learn that the
final Ford Mustang with an in-
ternal combustion engine could
still be as many as five years
away. I’m 70, and as long as my
knees and hips allow, I expect
another gas-powered Mustang
to be my last, best car.
Tom Ward, Cumberland, R.I.
One thing your article doesn’t men-
tion is that residents in the city of Co-
lumbus, Ohio, with earned income
have to pay a city income tax
of 2.5%. This is in addition to other
federal and state taxes on wages.
H.W., Flushing, Mich.
Editor’s note: The Columbus city in-
come tax doesn’t apply to retirement
income, but it does affect wages of
retirees who work part-time.
PERSONAL FINANCE
IN SCHOOLS
High school students need to learn
about finances (“An Advocate for
Financial Literacy,” Aug.). As a high
school senior in 1961, I took a class
called Problems of Daily Living. We
learned about managing finances,
dating, budgeting, renting an apart-
ment and acquiring transportation.
For Maryland students, it was re-
quired, and it benefited me greatly.
Robert Hoenes, Marietta, Ga.
TOP BANKS
The only banks in “The Best Bank for
You” (Aug.) that come close to meet-
ing my definition of offering good in-
terest rates on savings are Discover
Bank and TIAA Bank. Two credit
unions worth mentioning are Lafay-
ette Federal Credit Union and Quo-
rum Federal Credit Union.
Andy Hanna, Sunland, Calif.
We traded one of our three gas-
powered cars for a used 2022
Kia Niro EV, and we are pleased.
Electricity costs us about 4.1 cents
per mile (roughly equivalent to
85 miles per gallon based on a
fuel price of $3.50 per gallon),
and we can do a day trip to the
nearest larger city without need-
ing a charge in the middle. When
we replace one of our other cars,
we plan to buy a plug-in hybrid,
allowing us to use electricity
alone for driving around town
but providing gas-powered capa-
bilities for longer trips.
Thomas Vaughn, Lafayette, Ind.
center, museums, educational oppor-
tunities and college sporting events.
We’re also very proud of our region’s
diversity, quality health care facili-
ties, and green spaces and trails—and
proud that we house our state’s capi-
tal. All this with a cost of living lower
than other cities you listed.
Dennis Denno and Raina
Korbakis, East Lansing, Mich.

LISA GERSTNER, EDITOR
LISA_GERSTNER@KIPLINGER.COM
harder to stash away money for the
future, and 62% of respondents to a
recent Schwab survey of 401(k) par-
ticipants said that inflation is present-
ing obstacles to saving for a comfort-
able retirement. Inflation concerns
hit those who are already retired, too.
As editor at large Janet Bodnar points
out in her column on page 59, retiree
confidence in having enough money
to live comfortably through retire-
ment is down significantly.
Similar worries are common even
among those who are reasonably well
prepared for retirement. To go from
collecting a paycheck to relying on
investments and other sources of in-
come is a significant leap mentally,
and concerns about running out of
money can cause workers to miss out
on what could be some of their most
enjoyable retirement years by unnec-
essarily delaying the transition. In
our cover story this month, which
starts on page 50, senior editor San-
dra Block walks readers through the
steps to retiring without fear.
As with just about any other aspect
of managing your personal finances,
preparation is key to keeping finan-
cial worries at bay. If you feel that
your savings are falling short—or you
want assurance that your retirement
stash will stack up—monitoring your
cash flow can give you a better sense
of control. Enlisting a financial plan-
ner who can take a holistic look at
your spending and saving patterns
can be a helpful exercise, too. You
can search for a fee-only, fiduciary
planner at www.napfa.org.
A different kind of financial anxi-
ety. In the early days of the COVID-
19 pandemic, many customers were
extra generous to service workers by
leaving tips in instances where they
normally weren’t expected—when
picking up restaurant takeout orders,
for example. In the years since, tip
jars and digital prompts for tips on
checkout screens have popped up
at a range of businesses—and that
has left many customers scratching
their heads as to whether they are
expected to tip, and if so, what the
appropriate amount is. If you find
yourself in that boat, read “To Tip
or Not to Tip?” on page 46, which
provides guidelines on setting a
tipping strategy.
ALLOWEEN
is just around
the corner,
and despite its
spooky theme,
the festivities
that come along with it—carving
jack-o’-lanterns, donning costumes,
handing out candy (or, in my case,
eating a cut of the treats that my kids
collect)—are usually more fun than
scary. What’s far more frightening
for many Americans is the prospect
of not having enough money for the
future. In the most recent Chapman
University Survey of American Fears,
54% of respondents shared that fear,
and the same percentage were afraid
of economic or financial collapse.
Those two fears tied as the seventh
most common. (Number one? Cor-
rupt government officials.)
Such worries often translate into
stress. A spring survey from CNBC
found that 70% of Americans felt
stressed about their personal fi-
nances. And having a decent income
doesn’t provide immunity—57% of
those earning $100,000 or more felt
stressed. Inflation was the top con-
tributor to financial stress.
Although inflation is slowing down,
consumers are still feeling the effects
of the substantial price increases that
started a couple of years ago. (And
while lower inflation is desirable in
many ways, it means that retirees can
expect a smaller cost-of-living in-
crease in their Social Security bene-
fits next year—for more, see page 9.)
Higher living expenses can make it
From the Editor
Gain Financial Peace of Mind
PHOTO
BY
MATT
STANLEY

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EDITORIAL
EDITOR Lisa Gerstner
EXECUTIVE EDITOR Anne Kates Smith
MANAGING EDITOR Frederic Fane Wolfer
SENIOR EDITOR Sandra Block
SENIOR ASSOCIATE EDITORS Kim Clark, Nellie S. Huang
EDITORS AT LARGE Janet Bodnar, Mark K. Solheim
CONTRIBUTING EDITORS James K. Glassman, Jeffrey R. Kosnett
SENIOR WRITER Emma Patch
STAFF WRITER Ella Vincent
ART
ART DIRECTOR Will Tims
ART EDITOR Steven Mumby
GROUP ART DIRECTOR Nicole Cobban
SALES
VICE PRESIDENT SALES, WEALTH NEWS Stevie Lee (stevie.lee@futurenet.com)
SENIOR ACCOUNT DIRECTOR Maggie Kinsky (maggie.kinsky@futurenet.com)
ACCOUNT DIRECTOR, WEALTH Dominick Cerritelli (dominick.cerritelli@futurenet.com)
ACCOUNT MANAGER Rebecca Haber (rebecca.haber@futurenet.com)
ACCOUNT DIRECTOR, WEALTH DIRECT RESPONSE Anthony Smyth (914-409-4202; anthony@smythps.com)
ADVERTISING OPERATIONS
ADVERTISING OPERATIONS EXECUTIVE Mike Roche (Mike_Roche@kiplinger.com)
MEDIA PLANNING MANAGER Andrea Crino (Andrea_Crino@kiplinger.com)
CREATIVE SOLUTIONS
CREATIVE DIRECTOR, WEALTH Michael Holstein
ASSOCIATE DIRECTOR Megan Harmon
SENIOR EDITOR Eileen Ambrose
KIPLINGER.COM
SENIOR DIGITAL EDITOR Alexandra Svokos
SENIOR EDITORS Esther D’Amico, Kelley Taylor, Alexandra Twin
CONTRIBUTORS EDITOR Joyce Lamb
INVESTING EDITOR Karee Venema
STAFF WRITERS Erin Bendig, Dan Burrows, Donna LeValley
ASSOCIATE EDITOR Ellen Kennedy
AUDIENCE ENGAGEMENT MANAGER Ben Demers
DIGITAL PRODUCER Quincy Williamson
CIRCULATION
SENIOR CIRCULATION MANAGER Roseann Ciccarello
DIRECTOR, COMMERCIAL ART Lori Smedley
EXECUTIVE STAFF
SENIOR VICE PRESIDENT, FUTURE PLC Sarah Rees
MANAGING DIRECTOR, WEALTH PRINT Shaun Inglethorpe
CONTENT DIRECTOR, WEALTH Louise Okafor
VICE PRESIDENT, CONSUMER MARKETING – GLOBAL SUPERBRANDS Nina La France
VICE PRESIDENT, MARKETING Christopher Moffa
FOUNDERS
W.M. Kiplinger (1891–1967), Founder
Austin H. Kiplinger (1918–2015), Former Chairman and Editor
Knight A. Kiplinger, Editor Emeritus
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October 2023 9
T
HE decline in the inflation
rate is welcome news for
anyone who needs to pay
for groceries, gas or rent. But if
you’re retired, you may be disap-
pointed to learn how this devel-
opment could affect your Social
Security benefits.
The Kiplinger Letter forecasts that
Social Security beneficiaries will re-
ceive a cost-of-living increase of 3%
for 2024, down from 8.7% in 2023
and 5.9% in 2022. A 3% cost-of-living
adjustment will increase the average
monthly benefit for retirees to about
$1,892, up from $1,837.
THE DOWNSIDE TO DECLINING INFLATION
After two years of big cost-of-living increases, retirees will likely
receive a more modest Social Security raise in 2024. BY SANDRA BLOCK
The forecast is based on the
Consumer Price Index for Urban
Wage Earners and Clerical Workers
(CPI-W), which rose at a 12-month
rate of 3% in June, down from 4%
in May and 4.9% in April. The 2024
cost-of-living adjustment is based
on the CPI-W in the third quarter
ILLUSTRATION BY JOHN TOMAC

received only a 0.3% increase in
2017 (see the box below.) Still, the
more modest cost-of-living adjust-
ment will likely renew concerns
among some advocates for seniors
that the annual increase doesn’t
reflect retirees’ actual costs, espe-
cially because health care expenses
tend to rise faster than overall in-
flation. Seniors who rent are also
vulnerable, Johnson says. Rents
have started to flatten, but average
rents were still up more than 8% in
June from a year earlier, and rents
have risen even more in some high-
cost areas, she notes.
Now for the good news. Though con-
sumer costs have been declining, the
Federal Reserve has signaled it’s not
ready to shelve its inflation-fighting
arsenal. At its meeting in July, the
Fed increased short-term interest
rates by a quarter percentage point
to the highest level in 22 years. In
comments after the meeting, Fed
Chairman Jerome Powell said it’s
too soon to determine whether the
Fed is done hiking interest rates
and that it will make that decision
based on how the
economy performs
in the coming months.
For retirees and
others who have
funds in low-risk
investments, there’s
an upside to the Fed’s
decision to keep in-
terest rates elevated.
After years of paying
little more than air
on low-risk accounts,
financial institutions
are paying interest
of about 5% on money
market accounts and
high-yield online
savings accounts.
The Fed isn’t ex-
pected to cut rates
this year, so you
should be able to earn
Ahead
of 2023, so if inflation rises before
October, the COLA will be adjusted
upward.
While the forecast gives retirees
a preview of what could happen to
their benefits next year, they won’t
get the total picture until this fall,
when the Centers for Medicare and
Medicaid Services (CMS) announces
Medicare Part B premiums for 2024.
Most retirees have their Part B pre-
miums automatically deducted from
their Social Security payments, so
a big increase in premiums can sig-
nificantly dampen any cost-of-living
increase. That tends to hit people
with the lowest Social Security ben-
efits the hardest, says Mary John-
son, policy analyst for the Senior
Citizens League.
In its annual report released in
March, Medicare’s board of trustees
predicted that standard Medicare
Part B premiums will increase about
6% in 2024, to $174.80 a month, up
from $164.90 in 2023. But recent de-
velopments could increase the pre-
mium cost, Johnson says. Medicare
recently announced plans to cover
the medication Lecanemab (brand
name Leqembi) for
eligible Alzheimer’s
patients, which has
an estimated cost
of $26,500 per year.
The Senior Citizens
League estimates the
cost of administering
the drug and mon-
itoring it for side
effects will increase
overall Part B premi-
ums by $5 a month.
At 3%, the 2024
COLA would still be
an increase over the
average COLA before
the pandemic ignited
the inflation rate.
In 2016, for example,
seniors received no
increase in their
benefits, and they
these rates for a few more months.
But if inflation begins to decline in
2024, the Fed will likely cut rates,
says Ken Tumin, senior industry an-
alyst at LendingTree. And when the
Fed cuts rates, banks typically are
quick to lower rates on their savings
accounts, which means it’s not too
soon to start looking at ways to lock
in rates on your savings.
Certificates of deposit are federally
insured for up to $250,000 per de-
positor, per institution, and provide
a way to lock in an interest rate for
three months to five years or more.
They typically pay more than bank
savings accounts, but in exchange
for that premium, you pay a penalty
if you withdraw money before the
CD matures. (For information on
CDs for retirement savers, see “Are
IRA CDs Right for You?” on page 48.)
Ordinarily, longer-term CDs pay
a higher rate than their lower-term
counterparts, which makes sense be-
cause you’re locking up your money
for a longer period. But these aren’t
ordinary times. Recently, top-yield-
ing one-year CDs paid interest of up
to 5.6%, compared with 4.7% for a
top-yielding five-year CD. Still, if
you think interest rates will fall—
and you don’t need the money in
the near future—you may prefer the
certainty of a five-year CD.
One strategy that lets you have it
both ways is to invest in a series of
CDs of different maturities, known
as laddering. For example, you could
spread your savings among CDs that
mature in one, two, three, four and
five years. When your first CD ma-
tures, you can cash it out or reinvest
it in a new three- or five-year CD and
do the same with subsequent CDs.
In the current environment, you’ll
capture the higher rates shorter-term
CDs are paying, but if rates decline,
you’ll still have some of your funds
locked up in higher-paying CDs.
“One nice thing about a ladder is that
you don’t have to guess where inter-
est rates are going,” Tumin says.
YEAR COLA
2023 8.70%
2022 5.90
2021 1.30
2020 1.60
2019 2.80
2018 2
2017 0.30
2016 0
2015 1.70
2014 1.50
2013 1.70
Source: Social Security
Administration
COLA ANNUAL
ADJUSTMENTS

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marketing purposes,
which means you may
receive a lot of spam.
They may also sell them
to third parties that
collect and barter them
on the dark web. You
can end up getting a
lot of calls and texts
from scammers who
are trying to trick you
into giving up personal
information or down-
loading malware. Scam-
mers may also try to use
your cell phone number
to access your online accounts.
How can we protect ourselves
when using new technologies such
as ChatGPT and other forms of gen-
erative AI? Never give one of these
programs your personal informa-
tion, such as your Social Security
number, date of birth, mother’s
maiden name or even your work
history. If you provide this kind of
information to ChatGPT and ask it
to write you a résumé, for example,
you never know where the informa-
tion will go or whether it’s going to
be used for a nefarious purpose. And
with artificial intelligence, there’s
even more proliferation of informa-
tion that could be hacked or stolen.
How can we safeguard our informa-
tion, especially when companies
say they need to verify our identity
to protect themselves from fraud?
Get a reusable digital identity that
you can use over and over again,
either in person or electronically with
businesses that offer it. A reusable
verified digital identity, like the one
my company offers, is an “all-in-one”
ID proofing and authentication solu-
tion. Users provide some basic infor-
mation and Trua verifies it—using
government-issued identification, So-
cial Security numbers, dates of birth,
names, aliases, addresses and so on—
and issues a reusable TruaID.
sonal information.
Not only does that put
you at risk if the data is
hacked, but companies
may turn around and
sell it to third parties.
Some of this informa-
tion is then stolen and
bartered on the “dark
web”—where users and
website operators are
anonymous and un-
traceable. Companies
are supposed to get
your consent before
sharing your informa-
tion with third parties, but it’s on
13 to 15 pages of fine print that 99%
of people can’t understand, so they
agree to the terms.
Given those risks, what should
you do if a company asks for your
Social Security number? It depends
on the company. Social Security
numbers were created to record
wages and earnings for the IRS and
to determine eligibility for govern-
ment benefits. Somewhere along the
line, people started using them to
establish an individual’s identity, and
it has proliferated. If the entity ask-
ing for your Social Security number
isn’t a financial institution, govern-
ment agency or employer, you should
ask why they need it, what they are
going to do with it, how long they’re
going to store it and whether they
share it with any third parties. If
they’re using your Social Security
number for identity verification only,
you should ask whether there’s an-
other way to establish your identity.
Is there a risk to giving a company
or provider your cell phone number?
Yes, because it may be used to com-
mit fraud. These days, cell phone
numbers are being used as a piece
of verification data to prevent
fraud in digital transactions. In addi-
tion, as online vendors collect cell
phone numbers, they use them for
Ahead
The Risks of
Sharing Your
Personal
Information
Crooks are finding new
ways to pilfer your data.
INTERVIEW BY EMMA PATCH
INTERVIEW
RAJ
ANANTHANPILLAI
is founder and
CEO of Trua, an
identity verification
and screening
company.
PHOTO
BY
NOAH
WILLMAN
Why do you call this the new golden
age for identity theft? Everybody
is giving away their Social Security
number, date of birth or where they
live, whether it’s to sign up for a gym
membership or for discounts on gro-
ceries, because they think they’re
getting something of value. But these
companies are collecting your per-

Medicare enrollment
begins and runs through
December 7. During this
window, you can join, switch or
drop a Medicare plan based on
your needs and financial situa-
tion. Visit www.medicare.gov
to learn more about your options
and how Medicare may help meet
your needs. For more on how
much you can expect to pay
in Medicare Part B premiums
in 2024, see “The Downside to
Declining Inflation,” on page 9.
The Free Appli-
cation for Federal
Student Aid
(FAFSA) for the 2024–25
school year should be re-
leased today. You have until
June 30, 2024, to submit
the form for federal student
aid, but fill it out as soon
as possible because some
states and schools award
financial aid on a first-
come, first-served basis.
Ahead
R
ETIREMENT may rep-
resent a fresh episode of
your life, but a surpris-
ing twist might be a drop in your
credit score. Even if borrowing
isn’t on your agenda, your credit
score could affect other aspects
of your life, ranging from how
much you pay for auto insurance
to whether you’ll be admitted to
an assisted-living facility.
Average credit scores tend to
increase as consumers get older,
peaking in their seventies (see
the box on the facing page).
To understand why your own
credit score might drop after
you retire, it’s important to know
how credit scores are computed.
While your history of paying
on time is the largest element
of your score, other factors in-
clude the amount you owe on
your credit cards as a proportion
of your card limits (known as
your credit-utilization ratio) and
the length of your credit history,
says Ted Rossman, senior indus-
try analyst at Bankrate.com. In
addition, if you don’t use a credit
card, the issuer may close it be-
cause of inactivity. “Retirees’
credit scores often go down be-
cause they’re not using credit
as actively as when they were
younger,” he says.
Polish your credit. To
keep your score in good
shape, use a credit
card to make small,
regular purchases.
This approach will
ensure that your
credit card re-
mains active and
contributes positively to your
credit score, Rossman says.
Diligently pay the bills on time
because that’s the most power-
ful weapon in your credit score
arsenal. On-time payments
demonstrate financial responsi-
bility and reliability, which are
highly regarded by credit scor-
ing models.
Think twice before closing old
or unused credit card accounts.
While this may seem like a tidy
financial move, it can lead to
reduced available credit and an
How Retirement Could
Hurt Your Credit Score
Just as you need to take care of your physical health,
you need to monitor your credit fitness. BY ASHLYN BROOKS
Through 2023, you can review your credit reports
from the three major credit bureaus—Equifax,
Experian and TransUnion—once a week for free
by going to www.annualcreditreport.com.
CALENDAR
OCTOBER 2023 1 15
1
GETTY
IMAGES

error on your re-
ports, file a dispute
with the credit-re-
porting companies.
The Consumer Fi-
nancial Protection
Bureau provides
instructions and a
template letter you
can use at www
.consumerfinance
.gov/ask-cfpb/
how-do-i-dispute-
an-error-on-my-
credit-report-
en-314.
AnnualCreditReport.com
doesn’t provide credit scores,
but there are several ways to get
a free score. Visit www.myfico
.com/free to check and monitor
your FICO score, based on data
drawn from Equifax, for free.
Plus, your bank or credit card
issuer may provide you with
regular score updates.
Alternatively, you can use
a service such as CreditKarma
.com, which offers VantageScore
credit scores from your Equifax
and TransUnion reports, or Ex-
perian’s FreeCreditScore.com,
which provides a FICO score
based on Experian report data.
unfavorable credit-
utilization ratio,
which can have a
negative impact on
your credit score.
You should also
think twice about
cosigning a loan
for a friend or fam-
ily member. Even
if you aren’t the
main financier,
any late or missed
payments can be
tied to you as a
cosigner, which
could tarnish your otherwise
stellar credit score.
Finally, make sure your score
isn’t damaged unjustly by errors
or identity theft. Keep an eye
out for any discrepancies or sus-
picious activities—say, a credit
card account in your name that
you never opened—that may
have crept into your credit
history and hurt your score.
Through 2023, you can
review your credit reports
from the three major credit
bureaus—Equifax, Experian
and TransUnion—once a week
for free by going to www.annual
creditreport.com. If you find an
If you got a filing exten-
sion on your 2022 tax
return, today is the dead-
line to file your return. If you’re
due a refund, you can speed up
the process by filing electroni-
cally and opting to have direct
deposit. If your 2022 adjusted
gross income was $73,000 or
less, you’re eligible to use IRS
Free File to prepare and file your
return. Find it at www.irs.gov/
filing/free-file-do-your-federal-
taxes-for-free. EMMA PATCH
16
DEAL OF
THE MONTH:
Brands such as Pit Boss
and Char-Broil will be on
sale this month. You could
pay as little as $30 for a
portable charcoal grill,
$110 for a smoker and
around $130 for a gas grill.
You can find deals on grill-
ing accessories, too, says
Julie Ramhold, consumer
analyst for DealNews.
AVG.
FICO
AGE SCORE
18-29 679
30-39 692
40-49 706
50-59 724
60-69 747
70-79 762
80+ 756
Source: FICO

GETTY
IMAGES
Ahead
Brieﬁng
INFORMATION ABOUT
THE MARKETS AND
YOUR MONEY
ʾ After soaring in 2022, prices
for domestic airline tickets are
on the descent. In June 2023,
airfares had dropped by 8.1%
from May and by 18.9% over
the previous 12 months, accord-
ing to the June Consumer Price
Index report from the U.S.
Bureau of Labor Statistics.
Booming supply and changing
demand are the two key drivers
of the decrease, says Scott
Keyes, founder of Going, a web-
site that provides airfare alerts
and information. “While 2022
was characterized by pilot and
plane shortages, airlines have
been making steady progress
on both fronts this year. More
capacity is getting added to
the flight system every month,
and because aircraft have
gotten significantly larger
on average over the past decade,
the number of available seats
is already higher today than
pre-pandemic,” says Keyes.
And passengers are less willing
to pay inflated ticket prices
than they were in the summer
of 2022, when many of them
were embarking on their first
trip in years following the
pandemic.
International travel is another
story. Over the summer, the aver-
age airfare to Europe was nearly
$1,200 per ticket—the highest
price in the past six years, ac-
cording to travel-booking site
Hopper. Flights to Asia had an
average ticket price of more
than $1,800. To save money,
Hopper advises flying midweek,
vacationing in the fall shoulder
season, and traveling to more
off-the-beaten path destinations,
such as Reykjavik or Dublin.
Planning holiday travel. It’s
likely that domestic airfares
will continue to sink through
the rest of 2023, says Keyes. But
prices still tend to run higher
in peak holiday periods. To
watch for low fares, you can en-
ter your itinerary at sites such
as Google.com/flights and
Kayak.com and receive e-mail
alerts when prices drop. You
may be able to get the best fares
for flights near Thanksgiving
and Christmas by booking them
early in the fall.
If your plans change, you can
rest easy knowing that the major
U.S. airlines no longer charge
ticket-change fees for most fare
classes, although you may be
charged for same-day requests
and some international flights.
(Basic economy tickets are
typically not refundable or
changeable.) LISA GERSTNER
AIRLINE TICKET PRICES ARE
COMING BACK TO EARTH

October 2023 17
Expect the inventory of existing
homes on the market to remain
low. Supply has ticked up over
the past year but remains his-
torically thin. And no wonder:
About 60% of outstanding
mortgages have an interest
rate of less than 4%. In early
August, average rates for new
mortgages hovered near 7%.
This makes many homeowners
FROM THE KIPLINGER LETTER
A Tight Supply for Home Buyers
ʾ Some adult children, grand-
children and other non-spouse
heirs who inherited a traditional
IRA will have more time to take
required distributions.
A 2019 law requires non-
spouse heirs who inherited a
traditional IRA in 2020 or later
to deplete the account within
10 years after the death of the
original owner. Financial planners
initially thought non-spouse heirs
could wait until year 10 to drain
their accounts. However, in early
2022, the IRS released guidance
stating that if the original IRA
owner died on or after the date
he or she was required to take
minimum distributions, non-
spouse heirs must take RMDs
based on their life expectancy
in years one through nine and
deplete the balance in year 10.
Because this guidance created
Inherited IRA Relief
The average salary increase that organi-
zations are budgeting for workers in 2024,
according to a survey from benefits con-
sultant WTW. That’s lower than the actual
4.4% average salary increase for 2023.
4%
ʺ The U.S. Treasury became a little
less creditworthy in August after
Fitch Ratings cut its rating on U.S.
government debt a notch from the
top triple-A rating to AA+. Stocks
swooned briefly following the news,
but Treasury yields moved little, and
most experts did not adjust promising
outlooks for U.S. financial markets.
Fitch cited a high and growing debt
burden for the U.S. government and
said in its announcement that “re-
peated debt-limit political standoffs
and last-minute resolutions have
eroded confidence in fiscal manage-
ment.” Limited progress in tackling
the challenges of rising Social Secu-
rity and Medicare costs was another
consideration, according to the rating
agency. Standard Poor’s marked
down U.S. debt slightly (for similar
reasons) in August 2011. Stocks were
already in a pullback and fell further
after the downgrade, but later rallied
to finish the year flat. There was no
wholesale dumping of U.S. Treasuries.
“We continue to advise investors
to buy quality bonds, including U.S.
government bonds,” said UBS global
wealth management chief investment
officer Solita Marcelli. A stock market
breather would not be surprising
after a strong couple of months, said
strategists at CFRA Research. Still,
CFRA’s 12-month target of 4820 for
the SP 500 implies a 5% gain from
its July 31 close. ANNE KATES SMITH
U.S. Credit Rating
Gets a Downgrade
confusion, the IRS waived penal-
ties for RMDs that should have
been taken in tax years 2021 and
2022. That relief was expected
to end this year, as we stated in
our September article “An Inheri-
tance With Strings Attached.” But
in mid July—after our September
issue went to press—the IRS said
it will waive penalties for heirs
who forgo a distribution in 2023.
Although this guidance allows
non-spouse heirs to delay taking
distributions, they’ll still be re-
quired to empty their accounts
within 10 years of the original
owner’s death. Financial plan-
ners say non-spouse heirs who
inherited an IRA after 2019 may
want to withdraw just enough
each year to remain within their
tax bracket to avoid a distribution
that could trigger a large tax bill.
SANDRA BLOCK
reluctant to sell and give up
their low interest rates.
Mortgage rates will likely fall
below 6% by year-end, driven
by a drop in the yield of the 10-
year Treasury note and declin-
ing spreads between Treasuries
and what lenders charge on
home loans. That should lead to
slightly better affordability for
buyers and a pickup in selling.

INVESTING

October 2023 19
NVESTING
has become
more accessible
to more people,
but that hasn’t
made finding the
right broker any
easier. If anything,
brokerage firms
look more alike.
Low commissions,
for instance, are no longer a differen-
tiator—all firms have low costs now.
Figuring out which broker is right
for you depends on what you need
and what you value. You may want
a broker that has an array of no-
transaction-fee mutual funds at the
ready. Maybe you need technical
reports on stocks or charting tools
that let you slice and dice a stock’s
moves. If you’re just getting started,
you may want the ability to invest
in partial shares of stocks. Or if you
don’t know much about investing,
a firm with a good robo adviser may
suit you best.
To help you choose, we rounded
up data from 10 brokers who agreed
to participate in our annual survey.
Every year we invite a number of
firms, but to be included, a broker
must offer online trading in stocks,
exchange-traded funds, mutual
funds and individual bonds. Half
of this year’s participants are well
known: E*Trade, Fidelity, Merrill
Edge, Charles Schwab and TD
Ameritrade. Three are online brokers
with affiliated banks: J.P. Morgan
Self-Directed Investing (Chase
Bank), WellsTrade (Wells Fargo)
and Ally Invest (the online-only Ally
Bank). The remaining two, Firstrade
and Interactive Brokers, focus more
on trading and are popular with ac-
tive investors. Siebert didn’t respond
to our invitations; T. Rowe Price and
Vanguard declined to participate.
Each participant answered dozens
of questions in seven categories:
commissions and fees; investment
choices; smartphone app; tools;
HOW THE
ONLINE
BROKERS
STACK UP
We compared investment offerings,
tools, apps, advice and more to
find the best broker for you.
BY NELLIE S. HUANG

INVESTMENT CHOICES
More is definitely more in this cate-
gory, which accounted for 20% of the
final score. We asked the firms to
pony up information on the breadth
of investments they offer, including
individual corporate and municipal
bonds; how many mutual funds cus-
tomers can buy without a transac-
tion fee; and whether the firms offer
fractional-share purchases of stocks
and ETFs. Because interest rates are
higher this year, we also asked about
the income you can earn on cash. In-
teractive Brokers won the top spot
overall in this category, but Fidelity
and E*Trade weren’t far behind.
Interactive Brokers offers access
to markets in the U.S. and 150 devel-
oped and emerging countries. Cus-
tomers can choose among 4,610
U.S. mutual funds and pay no trans-
action fee. (Schwab comes close
to that, with 4,406; E*Trade offers
4,278.) But Interactive’s fractional-
share trading in stocks and ETFs
stood out. The firm lets its customers
buy fractional shares in thousands
of stocks and 3,125 ETFs for as little
as $1. (Fidelity offers similar access
to fractional stock and ETF shares.)
Interactive also offers the ability to
set up recurring stock and ETF
trades—much like regular 401(k)
contributions.
Fidelity’s sweep accounts (where
uninvested cash sits) shone. Among
the firms surveyed, the average
sweep account interest rate was be-
low 1.0% as of the end of May. Low
rates from J.P. Morgan Self-Directed
Investing and Merrill Edge (both
pay 0.01%) and WellsTrade (0.15%
for balances under $1,000,000),
among others, were a drag on the
average. But at Fidelity, the default
sweep account paid 4.75%.
Highlights at E*Trade include
a gigantic menu of bond choices.
The firm reported it has more than
100,000 unique corporate and muni-
Investing
Figuring out which
broker is right for
you depends on
what you need and
what you value.
GETTY
IMAGES
research; advisory services; and user
experience. The user experience cat-
egory measures how well a company
interacts with customers, including
via its website or mobile app. Scores
in each category depend on informa-
tion provided to us by the brokerages,
vetted to the best of our abilities.
This is a year of transition for
some of the firms in our survey.
Schwab and TD Ameritrade com-
pleted their merger in 2020, but
the process of combining their
operations continues. By the end
of the year, the vast majority of TD
Ameritrade customers should be
transitioned to Schwab. But because
that process was incomplete at press
time, the firms asked to be reviewed
separately, except in the category
of advisory services. E*Trade is also
nearing the end of its operational
merger with Morgan Stanley, but
for the most part this did not impact
its responses to our broker survey.
And the winner is… Fidelity came
out on top in three categories—
smartphone app, advisory services
and fees—but it won second or third
place in every other measure except
user experience. E*Trade was an
impressive second-place finisher.
Though that is a step down from its
first-place finish overall last year,
E*Trade topped the charts in re-
search and finished strongly in the
investment choices, smartphone app,
user experience and fees categories.
Schwab came next, followed by Inter-
active Brokers and Merrill duking it
out for fourth and fifth (the two firms’
final scores differed by 0.1 point).
Below, we provide highlights and
lowlights for each category. To see
how each firm ranks in individual
categories, see the table on page 24.
ʾ
Fidelity came out on top in three
categories: smartphone app,
advisory services and fees.

October 2023 21
cipal securities on offer. E*Trade
customers can also sign up for its
automatic investing program for frac-
tional purchases of 100 ETFs; the
minimum recurring purchase is $25.
Firstrade doesn’t offer partial-
share trading or money market
funds, which hurt its score this year
because those criteria were heavily
weighted. And its sweep account
pays 0.45% in interest—not the low-
est of the group, but below average.
TOOLS
Calculators, charts and screens can
make investing easier, more accessi-
ble and fun. They don’t have to be
graphically snazzy, but they do have
to be informative. In this category,
which accounted for 20% of the final
score, Schwab and Merrill Edge
ranked best. Fidelity came in third.
Schwab’s breadth of offerings stood
out. Schwab checked off nearly every
box for the 30-odd questions in this
category, from a risk-tolerance ques-
tionnaire to a monthly budgeting tool,
a calculator for required minimum
distributions and a tool to help build
a ladder of certificates of deposit.
Merrill Edge and Fidelity offer
hearty tools for screening ETFs,
bonds, mutual funds and stocks.
They each have crafted predefined
screens for all of these securities,
too, which makes it easier for inves-
tors who don’t know which criteria
to choose among the hundreds avail-
able. But, as in years past, Merrill
Edge got extra credit for its Idea
Builder tool, which helps investors
winnow investment ideas for stocks
(and sometimes funds and ETFs).
The laggards in this category were
Firstrade, Ally Invest and Interac-
tive Brokers. To be fair, Firstrade
and Interactive Brokers have robust
active-trader platforms, which we
didn’t include in our survey, that
are packed with tools. But their
main website offerings are more
spare. Ally Invest caters more to
novice investors. Its stock, ETF and
bond screeners aren’t as hardy as the
Investing
We keep an eye on smaller
brokerage firms, in part
because they’re shaking
up the industry. If not for
Robinhood, for instance,
we might still be paying
commissions on stock and
ETF trades.
This year, we looked at
Betterment, M1 Finance,
Robinhood, SoFi and
tastyworks. All are digital-
only, with no brick-and-
mortar branches. Two of
them have amassed bil-
lions in assets already (the
others wouldn’t say). We
homed in on investment
offerings, mobile apps
and tools. Here’s how they
stack up in each category.
ʾInvestment choices.
Overall, SoFi and Robin-
hood stood out in this cat-
egory, but it was a close
race. None of these firms
offers mutual funds or
bonds, but most allow you
to buy fractional shares of
stocks and ETFs. Better-
ment is an outlier: It’s a
robo adviser, and it doesn’t
offer the option to buy in-
dividual stocks or ETFs.
All five firms offer cryp-
tocurrency trading, but
SoFi provides access to
more than 20 digital cur-
rencies, including Bitcoin
and Avalanche, and Robin-
hood has 15 on its roster.
The pickings at tastyworks
(eight) and M1 Finance (six)
were slimmer. (A handful
of the big brokerage firms
in the main survey offer
access to cryptocurrency,
but we didn’t give this
much weight in the invest-
ment choices category.)
Only one firm, Robinhood,
offers a sweep account
for uninvested cash to
earn interest (as much as
4.65% for premium Gold
customers; 1.5% for non-
Gold customers).
ʾSmartphone app. Rob-
inhood and tastyworks
sparkled in this category,
in part because of their
apps’ bells and whistles,
such as education on in-
vesting and trading strate-
gies, as well as the ability
to download account state-
ments. If you are looking
for investing functionality,
however, M1 Finance and
tastyworks win. Both apps
offer screeners for ETFs
and stocks (Robinhood’s
app has a stock screener
but no ETF screener). At
Betterment, you can’t
trade stocks or ETFs.
ʾTools. You won’t find
the panoply of tools that
bigger brokerage firms
have, but certain firms
stood out in small ways.
At M1 Finance, there’s a
mock portfolio tool that
allows you to see past
performance. Robinhood
and SoFi offer lists of
stocks in certain thematic
investment categories,
which investors can use
as a starting point for
more research. And M1
Finance, Robinhood and
tastyworks have a ques-
tionnaire that can help
investors pin down their
tolerance for risk. Perfor-
mance in this category
was a mixed bag. Tasty-
works won, Robinhood
and M1 Finance were tied,
and Betterment was the
laggard. Its only tools are
a retirement “How am I
doing” tool and a risk-
tolerance questionnaire.
UP-AND-COMERS
Smaller Shops Worth a Look
PREVIOUS
SPREAD:
GETTY
IMAGES

Investing
screeners offered by the bigger bro-
kerage firms. And it doesn’t have
a mutual fund screener, bond lad-
dering tool or retirement account
calculator for required minimum
distributions, for instance, which
are de rigueur at outfits such as
Schwab, E*Trade and Fidelity.
SMARTPHONE APP
According to some firms, brokerage
customers check their accounts on
a mobile app as often as they do on
a computer. But can you do every-
thing on your smartphone that you
can do on a computer?
For instance, can you pay bills?
Not at Interactive Brokers, Firstrade
or J.P. Morgan, among others. Can
you track your spending? Only at Fi-
delity, Merrill Edge and J.P. Morgan.
Trade stocks and mutual funds? Not
at Ally or Firstrade, and only on an
Android phone at TD Ameritrade.
We asked each firm about whether
those transactions and dozens more
could be done within their app. The
firms that offered the most function-
ality fared well in this category,
which accounted for 20% of the final
score. Fidelity, Interactive Brokers
and E*Trade earned the top marks.
A couple of differentiators: Fidelity
customers can buy and sell CDs on
its app. No other firm we surveyed
offers this. And anyone looking to
trade bonds using their smartphone
app will be disappointed unless they
have an Interactive Brokers account.
We gave extra points to apps
with nimble portfolio-performance
reporting—whether each account in-
dividually and in the aggregate could
be compared with a broad-market
benchmark. Only E*Trade, Fidelity,
Interactive Brokers, Merrill Edge
and TD Ameritrade measured up.
Schwab lost points in comparison
with its peers because it doesn’t have
screeners for stocks, ETFs, mutual
funds or bonds within its smart-
phone app (unlike Ally, E*Trade
Interactive and J.P. Morgan).
RESEARCH
Having access to high-quality re-
search can help investors make in-
formed decisions. We tried to figure
out how much accessible research
was available to investors at each
firm—from in-depth reports by ana-
lysts who pore over balance sheets
and income statements and talk
with company executives to easy-to-
decipher technical and quantitative
research. This category accounted
for 15% of the final grade.
E*Trade’s merger with Morgan
Stanley helped E*Trade rise to the
top of this category. Customers have
easy access to any research report
from the investment bank, from top-
ics such as why India is booming to
whether Apple’s revenues are on the
rise in emerging markets. You’ll also
get a current take on the market
from Morgan Stanley’s lead stock
strategists and other “thought lead-
ers,” says an E*Trade spokesperson.
Schwab took second place here.
A quick search for info on several
stocks, including Apple, Goldman
Sachs and Honeywell, turned up
a number of detailed reports from
analysts at Argus Research, CFRA
Research, Morningstar, Thomson
Reuters and MSCI, among others.
Firstrade didn’t make the grade
in this category relative to the other
firms, however. Its customers have
access to Morningstar’s thorough
analysis for stocks and funds, but that
was the only fundamental research
available. And it doesn’t offer any help
with ESG (environmental, social and
corporate governance) research.
As a subsidiary of Bank of America,
Merrill Edge can offer its customers
access to high-quality research from
BofA Global Research, which gives
the firm an advantage over all the
other firms but E*Trade. But only
certain customers get the reports.
“Edge clients need to meet certain
relationship qualifiers” to see the
research, says a spokesperson. For
instance, you qualify if you have at
least $100,000 in eligible accounts
and are enrolled in the bank’s Pre-
ferred Rewards program (which is
available to select banking custom-
ers with at least $20,000 in an eligi-
ble Bank of America account).
ADVISORY SERVICES
In recent years, demand for invest-
ment advice—from the all-digital
kind to the old-school, dedicated-
adviser kind—has climbed. And
firms are jockeying for your dollars.
ʺ
Charles Schwab ranked first
in the tools category.
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The more robust the offerings, the
higher a firm ranked in this cate-
gory. Firstrade doesn’t offer any
advisory services, so it came in last.
This category accounted for 10%
of the final score.
Robo-advisory services made up
the biggest chunk of this category’s
score. All firms offer one (except the
aforementioned Firstrade), which
we define as a service offering auto-
mated investment plans that use
algorithms to create and manage
a diversified portfolio—typically
made up of exchange-traded funds—
appropriate for your time horizon
and tolerance for risk. Half the firms,
including E*Trade, Fidelity, J.P.
Morgan, Merrill Edge and Schwab,
have an enhanced tier of service that
allows customers to talk to a human
being if necessary—in many cases, a
certified financial planner. And all
but Firstrade and Interactive offer
more-personalized, hands-on advice
from a dedicated expert. This level
of advice requires higher stakes—
between $100,000 and $1 million in
investments, depending on the firm—
and typically involves a portfolio that
holds individual stocks, bonds (in-
cluding municipal bonds) and real
estate investment trusts. We awarded
extra points to firms with these
types of enhanced advisory services.
Fidelity and Schwab/TD Ameri-
trade won the day in this category.
The robo-advisory offerings from
the two firms were standouts. Fidel-
ity’s automated investing offering,
Fidelity Go, has a $10 minimum to get
started, the lowest of the group, and
an advisory fee of zero for accounts
with less than $25,000 in assets (it
charges 0.35% a year for accounts
with more than $25,000). Schwab’s
robo product, Intelligent Portfolios,
is free of annual advisory fees, too,
but the minimum is a heftier $5,000.
Fidelity’s armada of advisory ser-
vices for clients with heftier assets
lifted its score in this category, too.
Schwab and TD Ameritrade’s wealth
advisory offerings (reviewed in com-
bination) are equally robust. But the
combined firm lost a little ground to
Fidelity because its minimum re-
quired to have a dedicated adviser,
$1 million, is considerably beefier
than Fidelity’s minimum, $250,000.
Investing
1
Fidelity
fidelity.com
73.0 2 1 3 3 1 7 1
2
E*Trade
etrade.com
67.2 3 3 5 1 5 4 4
3
Charles Schwab
schwab.com
62.9 4 8 1 2 2* 3 5
4
Interactive Brokers
interactivebrokers.com
56.3 1 2 8 9 4 8 9
5
Merrill Edge
merrilledge.com
56.2 8 4 2 5 8 1 3
6
TD Ameritrade
tdameritrade.com
51.8 6 5 7 6 2* 5 6
7
J.P. Morgan
Nl I
51.4 7 6 6 4 6 2 2
8
WellsTrade
wellstrade.com
49.1 5 7 4 7 9 6 10
9
Ally Invest
Nl
31.1 9 9 10 8 7 9 7
10
Firstrade
firstrade.com
23.6 10 10 9 10 10 10 8
Rank Broker
Overall
score
(1-100)
Investment
choices
Smartphone
app Tools Research
Advisory
services
User
experience Fees
HOW THE BROKERS SCORE IN EVERY CATEGORY
The score in each of the seven categories impacts the overall score, but not all are equal. This year, investment choices,
tools and smartphone app received the greatest weight, 20% each. Research accounted for 15% of the final score, advisory
services and user experience, 10%, and fees, 5%.
THE RANKINGS
*Schwab and TD Ameritrade were reviewed as one offering in the advisory services category.

October 2023 25
Fidelity had an edge, too, thanks
to its direct indexing product, a
managed account that seeks to repli-
cate a stock index by holding indi-
vidual stocks, while taking advan-
tage of tax-loss harvesting (which
involves selling a security at a net
loss to reduce or offset capital gains
taxes owed from selling profitable
investments). Fidelity’s Managed
FidFolios has a low, $5,000 mini-
mum and charges 0.40% or 0.70%
a year, depending on the strategy se-
lected. E*Trade, Interactive Brokers
and Schwab have direct indexing
programs, too, but you must work
with an adviser to access them.
Interactive Brokers’ robo-advisory
service is different from that of the
other firms. Rather than a traditional
automated investment plan geared to
your age and risk tolerance, it offers
access to more than 70 digitally
managed portfolios, run by outside
investment firms and financial com-
panies, that invest in either ETFs
or a mix of stocks and bonds. Many
invest with a theme—ESG Growth
or Technology, for example. Others
focus on an asset class—Global or
Small Cap Broad Market, to name
two. These portfolios vary by invest-
ment minimum—most require $100,
though a few require upward of
$10,000—and by annual fees, which
range between 0.08% and 0.75%.
USER EXPERIENCE
How easy is it to get help—by phone,
online chat or e-mail—when you
need it? Is the website easy to navi-
gate? Can you readily find a stock re-
search report on the mobile app? Is it
easy to figure out how to update your
beneficiaries on the website? These
are some of the functions we assessed
in this category, which accounted for
10% of the final score. Merrill Edge
emerged victorious. But J.P. Morgan
Self-Directed Investing, another top
finisher in this category, performed
best in our tests to measure ease of
use for each of the firms’ mobile
apps and their dot-com websites.
(E*Trade came in second on those
particular assessments, but fourth
overall in the category.) The test-
runs accounted for nearly two-thirds
of the overall user-experience score.
Merrill Edge’s platforms per-
formed above average on our test-
runs. But the firm got a leg up for
other criteria, including its 3,900
U.S. brick-and-mortar branches
(only J.P. Morgan, with 4,700, has
more); Merrill Edge’s affiliation with
Bank of America helped. Merrill also
reported the fastest stock-trade exe-
cution speed of all the firms—0.006
second—well above the average of
0.08 second for the group. It won
points, too, for having a live person
on its chat service online. Schwab
and Interactive Brokers also have a
live person responding to instant-
message queries on their websites.
Ally and Interactive Brokers lagged
in this category, in part because nei-
ther firm did well in our test-drive
of its website and mobile app. Ally’s
website is neat and uncluttered, but
it’s not as easy to navigate as the sites
of some of the other firms we sur-
veyed. And its CD screener, we found,
was not very intuitive. (Ally suffered,
too, because it’s an online-only busi-
ness—it doesn’t have any branches.)
As for Interactive, its smartphone
app has impressive functionality, but
first-timers may find it difficult to
navigate. To be fair, a chunk of Inter-
active’s clients opt to download the
firm’s desktop platform, Trader
Workstation, aimed at active traders.
We didn’t review active-trader desk-
top applications, which must be
downloaded onto your computer.
FEES
The competition to charge the low-
est fees is so fierce among brokers
that the scores in this category var-
ied by thin margins. We awarded
points to firms with the lowest price
to trade options, send a wire, buy on
margin and get a broker to help with
a stock trade, among other things.
Fidelity and J.P. Morgan Self-Di-
rected came out on top—the differ-
ence in their scores was 0.02 point.
Close behind J.P. Morgan were
Merrill Edge (by 0.52 point) and
E*Trade (by 0.55 point). This is why,
though low fees matter, the category
counts for just 5% of the final score.
Firms that lagged got tripped up
on whether there was a fee to buy
Investing
ʾ
E*Trade has an enhanced tier
of service that allows customers
to talk to a human being if
necessary—in many cases,
a certified financial planner.
GETTY
IMAGES

ʾBest robo. If you’re just
starting out and want a
modicum of help with in-
vestment advice, consider
Fidelity Go. It has a low,
$10 minimum to get
started and zero annual
fees for balances below
$25,000 in assets. (For
accounts with $25,000 or
more in assets, it charges
0.35% a year.) Schwab’s
Intelligent Portfolios gets
a nod, too, because the
annual fee is $0 no matter
how big the balance, but
it requires $5,000 to get
started.
ʾBest for bond inves-
tors. E*Trade's platform
has the biggest roster
of unique issues for
secondary-market cor-
porate debt and muni-
cipal bonds—more than
100,000 each, which
in some cases beats its
peers by nearly twofold.
E*Trade also has tools
to help you build a ladder
of bonds or certificates
of deposit (a ladder is a
portfolio of investments
that mature on different
dates). Fidelity, Schwab
and TD Ameritrade also
offer tools that help build
bond and CD ladders.
ʾBest for investors
who want access to
initial public offerings.
Based on past offerings,
the best choice is Fidelity,
which provided its cus-
tomers access to 22 new
offerings between the
start of 2022 and May
2023; E*Trade came in
second, with 11.
ʾBest for high-quality
research and market
commentary. E*Trade
customers get unfettered
access to Morgan Stanley
reports. If you’re reading
a recent report on, say,
Apple and it cites a previ-
ous report—whether it
was specifically about the
company or why growth in
India might fuel revenue
gains at Apple—you can
click on an embedded
link and the report will
pop open for you to read.
ʾ Best for options trad-
ers. Firstrade doesn't
charge to trade options
contracts. Every other
broker has a fee.
ʾBest for customers
who want a bank-broker-
age relationship. Con-
necting your bank to your
brokerage firm is easy—all
brokers allow you to set
up an ACH or electronic
funds transfer with an ex-
ternal bank, most of them
with just a few clicks on-
line. But it’s another thing
to have your banking and
brokerage relationship at
one firm. At Merrill Edge,
if you have a Bank of
America account, you can
transfer funds instantly
between your bank and
investment accounts. The
higher your combined
average daily balance
between the two firms,
the bigger the perks, too.
This includes discounts
on annual fees for Merrill
Edge’s robo adviser (called
Merrill Guided Investing),
no fees on certain banking
services, and an interest-
rate boost on a Bank of
America Advantage sav-
ings account.
ʾBest for investing
newbies. Fidelity wins
for its robust fractional-
share trading. Customers
can buy and sell partial
shares of nearly all U.S.
exchange-listed stocks
and exchange-traded
funds for as little as $1
per trade. Interactive
Brokers comes next, but
its website and mobile
app aren’t especially
friendly for beginners.
Schwab offers fractional-
share stock trading on any
SP 500 member for as
little as $5 per trade, but
no partial ETF shares are
available.
and sell U.S. Treasury securities (yes
at Ally, Firstrade and Interactive; no
everywhere else). Another differen-
tiator was payment for order flow.
Payment for order flow can pose a
conflict of interest because it means
brokers are compensated for funnel-
ing trades to certain firms, called
market makers, to fill orders. Fidel-
ity, J.P. Morgan, Merrill Edge and
WellsTrade don’t accept payment for
order flow; the others do. Interactive
Brokers got half credit here. Trades
on its Pro platform, where customers
fork over a small commission for
stock trades but pay lower interest
rates to trade on margin, don’t accept
payment for order flow. But trades
on the firm’s Lite platform do.
A couple of developments are
worth noting. E*Trade eliminated
commissions and transaction fees
on mutual funds; it even waives the
front-end load for load funds avail-
able at the firm. Before the change
in late 2022, the firm charged $19.95
to buy and sell shares in a mutual
fund, unless it was a member of
its no-transaction-fee network.
And Ally customers can finally buy
shares in no-load funds for free. The
firm eliminated its $9.95 charge to
buy and sell shares in no-load funds
in February. Customers will still pay
a sales charge to buy shares in load
funds on its broker platform.
You can contact the author at
Nellie_Huang@kiplinger.com.
THE BEST MATCH
Which Broker Is Right for You?
Investing

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likely keep economic growth
modest. But the government’s
long effort to strengthen the
economy and stanch deflation
appears to finally be working.
Prices and wages in Japan have
started rising. The country’s
gross domestic product is on
pace to increase 1.4% this year.
Efforts to broaden global supply
chains beyond China are spark-
ing new foreign investment in
Japan. And many Japanese com-
panies are finally responding to
pressure from investors and stock
exchange overseers to return
more profits to shareholders.
Unlocking the cash. Schwab
estimates that, in a country
where 10-year bonds are paying
less than 0.6% and the yield on
two-year bonds is slightly nega-
tive, companies are sitting on
T
HE last time the Japa-
nese stock market truly
sizzled, you could buy a
U.S. postage stamp for 25 cents
(less than half the cost now) and
George Bush (the first one) was
in the White House. The Nikkei
Stock Average fell more than 75%
from its December 1989 peak
through September 2012 and still
trades below its 34-year-old high.
But many experienced inves-
tors, including Warren Buffett,
are returning to the market, an
indication that it might be time
for U.S. investors to rediscover
what is, after all, the world’s
second-largest stock market
and third-largest economy. Es-
pecially now, “Japan should be
part of your portfolio,” says Matt
Lamphier, director of research
for First Eagle Investments, an
investment management firm.
The brave souls who bought
in a decade ago have profited
handsomely. The 225 stocks in
the Nikkei have returned more
than 11% annualized, on average,
about double the return of the
MSCI EAFE index of companies
based in developed nations out-
side the U.S. And since the begin-
ning of this year, the Nikkei’s
28.3% total return is handily
beating the SP 500’s 20.7%
(Prices, returns and other data
are as of July 31, unless other-
wise noted.)
The momentum should con-
tinue, says Jeffrey Kleintop, chief
global investment strategist at
Charles Schwab. It’s true that
Japan’s aging demographics will
$2.5 trillion in cash. Low stock
prices and big cash hoards mean
that many Japanese companies—
more than 40% of them, says
Schwab—are trading at prices
that add up to less than the book
value of the business. (Book
value measures a company’s tan-
gible assets and represents the
value shareholders would re-
ceive if the company were to be
liquidated. Stocks in the SP 500
trade at an average price of four
times their book value.)
In January, the Tokyo Stock
Exchange announced it would
ask companies trading below
book value to develop a strategy
to improve their capital manage-
ment. As a result, “there is a new
commitment to returning more
value to shareholders,” Kleintop
says. “This is the main driver
lifting Japan’s stocks this year.”
Rediscovering Japan
INTERNATIONAL FUNDS BY KIM CLARK
Investing
New shareholder-friendly policies should boost the country’s stocks.
GETTY
IMAGES

October 2023 29
Many firms have reinstated or
raised dividends, and share buy-
backs hit a new record in the first
quarter of 2023, Kleintop notes.
How should investors find
their way back to Japan? Care-
fully. Although Japanese stock
prices are, on average, still a bar-
gain when judged against several
U.S. stock price measures, the
recent run-up has brought the
average Japanese stock price
close to the country’s historic
average price-earnings multiple
of 15.5 times expected earnings.
Watch for dips or buy in over
time to take advantage of volatil-
ity. And, says Kleintop, “this is
a time to be broadly diversified.”
You may have some exposure
to Japan already. Japanese stocks
make up 22% of the MSCI EAFE
index, for example, a popular
benchmark for global and in-
ternational index funds. But
because of Japanese stocks’ his-
tory of underperformance, many
managed international funds
have minimized their invest-
ments in Japan. If you are in-
terested in adding some Japan-
specific funds to your portfolio,
consider these four.
WISDOMTREE JAPAN
HEDGED EQUITY
Overall, the lowest-cost and
simplest way to invest in a diver-
a result, WisdomTree’s currency-
hedged fund has dramatically
outperformed its unhedged com-
petitors, ranking in the top 1%
of its category (Japanese stock
funds) for 2021, 2022 and so
far in 2023, according to re-
search firm Morningstar. It has
returned an average of 11.8%
over the past five years—more
than triple the category average.
Of course, currency hedges
could dampen returns relative
to unhedged funds if the dollar
starts to fall against the yen. But
hedging allows investors to take
currency swings out of the equa-
tion and focus just on the poten-
tial for stock returns.
WISDOMTREE JAPAN
HEDGED SMALLCAP
EQUITY
Japan’s small-company shares
are attractive to foreign investors
because of comparatively low
valuations, high dividend yields
and steady returns, says Jeff
Weniger, WisdomTree’s head
of equity strategy. “Everybody
assumes investing overseas is
riskier. That hasn’t been borne
out.” Historically, he says, the
volatility of Japanese small-cap
stocks has been lower than the
volatility of U.S. small caps. This
ETF’s holdings are trading at
an average of just 80% of book
value—many with cash hoards
that bode well for coming divi-
dends or buybacks, Weniger says.
Japan Hedged SmallCap
Equity is one of the broadest
small-cap offerings available
Investing
sified basket of Japanese stocks
is through a fund that tracks an
index of Japanese stocks. The
best-performing Japan-focused
fund over the past several years
has been WisdomTree Japan
Hedged Equity. This exchange-
traded fund has $2.7 billion in
assets and charges an expense
ratio of 0.48%. WisdomTree uses
a proprietary index that focuses
on factors such as dividend pay-
outs and export revenues rather
than company size. As a result,
the portfolio has a 19% stake
in small and midsize firms.
The fund is also notable for
hedging currency swings, pro-
tecting U.S. investors against
losses when the value of the yen
drops against the dollar. Because
the Federal Reserve has been
raising U.S. interest rates, and the
Bank of Japan has been keeping
its interest rates low to stimulate
inflation and economic activity,
the value of the yen has plunged
from about 1 cent in mid 2020 to
about 0.7 cent in midsummer. As
Since the start of 2023, the Nikkei’s 28% total
return is handily beating the SP 500’s 21%.
Many
Japanese
companies
are finally
responding to
pressure from
investors
and stock
exchange
overseers to
return more
profits to
shareholders.

to individual investors. It consists
of 739 stocks with positive earn-
ings and market values ranging
from about $100 million to more
than $4 billion. The fund has an
expense ratio of 0.58% and has
returned more than 27% in the
first seven months of 2023, put-
ting it in the top 18% of similar
funds, according to Morningstar.
It ranks in the top 20% over the
past one, three, five and 10 years.
FIDELITY JAPAN
One of the best-performing ac-
tively managed, Japan-focused
mutual funds (available to indi-
vidual investors) over the past
three- and five-year periods is
Fidelity Japan. Portfolio man-
ager Kirk Neureiter’s heavy
investment in tech companies
(23% of assets) has benefited
from the tech industry’s search
for suppliers based outside of
China. Yet, Japanese tech firms
are generally trading at lower
price-earnings multiples than
similar tech companies in the
U.S., he notes. For example, semi-
conductor company Renesas
Electronics is one of the fund’s
top five holdings. The stock
also trades in the U.S. as an
American depositary receipt
(symbol RNECY). The ADR has
doubled in the past 12 months
but trades at about 19 times ex-
pected earnings, compared with
an average 31 times for stocks in
the SP Semiconductor index.
Neureiter says he is engaging
with executives to advocate for
more shareholder-friendly poli-
cies. For most of the past 25
years, executives would defend
cash hoards by saying it was nec-
essary to plan for emergencies.
“They would say, ‘You never
know when Mt. Fuji is going to
erupt,’ ” recalls Neureiter. “But
executives are now taking on the
message” about returning more
cash to investors. “We are very
excited” about the potential for
added returns, he says.
The Fidelity fund has ranked
in the top half of its category for
four of the past five full years. It
has returned an average of 4.3%
annually over the past five years,
putting it in the top 21% of simi-
lar funds. It charges an expense
ratio of 1.13%.
T. ROWE PRICE JAPAN
This mutual fund has lagged its
competitors since 2021 in part
because of its focus on growth-
oriented companies at a time
when value-priced fare has
tended to outperform. Manager
Archibald Ciganer keeps about
70% of the portfolio in stocks he
thinks have healthy earnings-
per-share growth prospects. The
fund’s top holding is Keyence,
which provides automation to
factories. Analysts expect earn-
ings per share to increase at an
annualized rate of 8% over the
next three to five years. Though
the fund holds Japanese shares,
the stock trades in the U.S. as an
ADR (KYCCF) and has returned
nearly 16% over the past year.
The rest of the portfolio, about
30%, is invested in companies
whose stocks are poised to bene-
fit from changes in corporate
governance policies to return
more profits to shareholders,
says Dan Hurley, a spokesman
for the fund. Top-10 holding
Hitachi, a diversified conglom-
erate with $8.7 billion in cash,
raised its dividend by 20% in
May. The ADR (HTHIY) has re-
turned more than 18% over the
past three months. The possibility
of cash bonanzas “creates a lot
of excitement,” Hurley says.
The fund charges 1.02% in
expenses. It has returned 7.0%
over the past year—a little less
than half of the category average.
But the fund is worth consider-
ing for patient investors.
Kim.Clark@futurenet.com.
Investing
BULLISH ON JAPAN
COMEBACK STORY
Stocks are rising thanks to recent economic and corporate reforms.
As of July 31. Source: Morningstar Direct
Name Symbol Price
Expense
ratio
Assets
(millions)
Annualized total return
1 year 5 years
Fidelity Japan FJPNX $17 1.13% $739 12.4% 4.3%
T. Rowe Price Japan PRJPX 12 1.02 497 7.0 –0.2
WisdomTree Japan Hedged Equity DXJ 85 0.48 2,692 37.0 11.8
WisdomTree Japan Hedged
SmallCap Equity
DXJS 55 0.58 49 28.5 7.1
Nikkei Stock Average 21.5% 9.8%
Efforts to
broaden
global supply
chains
beyond China
are sparking
new foreign
investment
in Japan.
GETTY
IMAGES

October 2023 31
Investing
ÂȴƲΐ¶ɯɇʠʠЃΐʾʠΐ¶̒ɇʠɄǺͣ
STOCKS BY ANNE KATES SMITH
A
NYONE who has
watched Better Call
Saul or Frasier is famil-
iar with the spin-off concept, in
which characters from an exist-
ing series branch off in a new
show with a different story line.
It works sort of the same way in
corporate America, when firms
split off a part of their business
into a new, publicly traded com-
pany, usually via a tax-free distri-
bution of the stock to sharehold-
ers of the original firm. The idea:
Capitalize on a sum-of-the parts
strategy, in which an underval-
ued business unlocks value un-
der a new, simplified structure.
Stock spin-offs had a strong
2022, although momentum has
slowed some this year. Last year,
U.S. companies announced 44
spin-offs and completed 20, to-
taling $61 billion in market value,
according to Goldman Sachs. So
far this year, through mid July,
nine U.S. spin-offs have been
completed, according to financial
information provider Dealogic.
In theory, spin-offs should be
rewarding. Managers of the new
company are unfettered by the
old organizational chart and are
often motivated by performance
incentives in a way that was im-
possible in a bigger company.
And the market may assign a
higher valuation to businesses
that are less complex and easier
to understand, whereas con-
glomerates can be penalized.
In truth, performance is mixed.
GE HealthCare Technologies is
up 39% since it began trading on
January 4. But ZimVie, a dental
and spinal treatment offshoot of
medical-devices giant Zimmer
Biomet, has lost 64% of its stock
value since March 2022. “Spin-
offs are not a sure bet,” says Jim
Osman, founder and chief execu-
tive of The Edge Group, a firm
specializing in fundamental anal-
ysis of spin-offs and other special
situations.
Yet, he says, because spin-offs
are smaller firms that are under-
followed by analysts, investors
have more chances to uncover
index-beating returns. And spin-
offs can be bargains. In a spin-off
distribution to parent-company
shareholders, “investors gain
these shares by default and sell
them in the open market pretty
much immediately, often making
them cheap companies that no
one is looking at,” says Osman.
“It’s at this point where X marks
the spot and you should start
digging.”
A number of high-profile spin-
offs are expected later this year.
Osman likes the chances for
a few and suggests buying the
parent company, pre-spin-off.
Among them are 3M (symbol
MMM, $112), which will spin
off its health care division. The
new company will be focused
on wound care, health care IT,
oral care and filtration products
used in the biopharma industry.
Danaher (DHR, $255) is shifting
toward becoming a pure health
care player, so it is spinning off
its Environmental and Applied
Solutions division, with busi-
nesses aimed at protecting re-
sources, including global food
and water supplies. Kellogg
(K, $67) will split in two, sepa-
rating its snack and plant-based
food business (including Cheez-
It and MorningStar Farms) from
its North American cereal unit
(Frosted Flakes, Special K).
For a diverse portfolio of com-
panies that have already been
spun off, consider exchange-
traded fund Invesco SP Spin-
Off (CSD, $60), with an expense
ratio of 0.65%. The portfolio
adds spin-offs with at least
$1 billion in market value and
holds them for four years. It uses
a modified market-cap weight-
ing, which skews the portfolio a
bit toward larger holdings with-
out allowing assets to concen-
trate in only the biggest names.
The fund’s one-year gain of
10.6% ranks it within the top
21% of mid-cap blend funds.
Anne_Smith@kiplinger.com.
In theory, corporate spin-offs should reward investors, but performance is mixed.
COURTESY
OF
3M
3M will spin off
its health care
division. The
new company
will be focused
on wound care,
health care IT,
oral care
and filtration
products
used in the
biopharma
industry.

Investing
ԔǐǐǐǐǐǐǐǐǐǐǐǐǏ0.26%
ԔǐǐǐǐǐǐǐǐǐǐǐǐǏ0.26%
ԓǐǐǐǐǐǐǐǐǐǐǐǐǏ0.25%
ԒǐǐǐǐǐǐǐǐǐǐǐǐǐǏ0.24%
ԒǐǐǐǐǐǐǐǐǐǐǐǐǐǏ0.24%
Sector
Breakdown
As of July 31. *Market-cap weighted. Sources: Yahoo Finance, Invesco, Morningstar Direct.
Spread Your
Bets Evenly
ETF SPOTLIGHT BY ANNE KATES SMITH
O
VER June and July, the SP 500 gained
more than 10%, with the top 10 issues by
market value contributing more than 34%
of the return. That’s actually a broader advance
than earlier in the year, when excluding the top
seven companies from the index would have re-
sulted in negative returns. So market gains are
spreading. Still, tech stocks continue to dominate,
contributing roughly one-fourth of the popular
benchmark’s return for the two-month period.
Index investors looking for value as well as a
broader representation of the overall market might
consider an equal-weight index, constructed so
that no one stock, or
a handful of behe-
moths, can dominate.
Invesco SP 500
Equal Weight ETF
lets you spread your
bets evenly among the
stocks in the SP 500,
limiting concentra-
tion in mega-cap
names and boosting
exposure to smaller
firms. Over time, such
a strategy has paid
off. From the end of 2003 (the year the exchange-
traded fund debuted) through June 30, the largest
50 stocks in the SP 500 returned roughly 9% per
year, on average, according to Invesco; the smallest
50 returned an average of 14%.
Small-company stocks typically take off in new
bull markets but may have been held back this time
by the Federal Reserve’s still-hawkish monetary
policy. With the Fed likely having ended its rate-
tightening program in July, “mid- and small-cap
stocks, as well as the equal-weight 500, will once
again take a leadership role,” says Sam Stovall,
chief investment strategist at CFRA Research.
You can contact the author at Anne_Smith@
kiplinger.com.
INVESCO SP 500 EQUAL WEIGHT ETF
Symbol Price
Expense
ratio
Assets
(millions)
Annualized
total return
1 yr. 3 yr.
Invesco SP 500
Equal Weight RSP $155 0.20% $44,014 8.1% 15.1%
iShares MSCI USA
Equal Weighted EUSA 82 0.09 537.2 8.7 12.6
Goldman Sachs Eq
Wght US Lg Cp Eq GSEW 65 0.09 479.2 8.7 11.5
Invesco SP 100
Equal Weight EQWL 84 0.25 298.4 12.9 15.5
First Trust Dow 30
Equal Weight EDOW 31 0.50 234.1 10.0 11.5
SP 500 Index* 13.0% 13.7%
Invesco SP 500
Equal Weight ETF
Key Facts
SYMBOL: RSP
RECENT PRICE: $155
ASSETS: $44 BILLION
START DATE:
APRIL 24, 2003
STOCK HOLDINGS: 503
AVG. PRICE-EARNINGS
RATIO: 16
AVG. MARKET VALUE:
$35.6 BILLION
Performance Since Inception
Weekly closing prices (April 30, 2003–July 31, 2023)
$200
150
100
50
0
APR.
2003
MARCH
2007
JULY
2011
NOV.
2015
MARCH
2019
JULY
2023
0.20%
$20 annually on a
$10,000 investment
Annual
Expense Ratio
Top Five Holdings
CARNIVAL (CCL)
OLD DOMINION FREIGHT LINE (ODFL)
DOMINO’S PIZZA (DPZ)
NEWELL BRANDS (NWL)
CARRIER GLOBAL (CARR)
Select Large-Cap Equal Weight ETFs
Ranked by assets
Consumer
non-essentials: 11.8% Health Care 13.0%
Financials:
13.4%
Consumer
staples:
7.3%
Real
Estate:
6.0%
Utilities:
5.8%
Energy: 4.8%
Materials: 4.4%
Communication
services: 3.9% Technology: 15.1%
Industrials
14.5%

October 2023 33
dation, KB Home (KBH, $54), is up
31%. I still like all three as long-term
investments, but they are no longer
the bargains they were. (Stocks I like
are in bold; returns are as of July 31.)
Commercial real estate has been
hit by a double whammy: higher
interest rates combined with new
patterns of work and shopping as a
result of COVID. For many businesses
with little public contact, a schedule
of three days in the office and two
at home is becoming the norm.
Whether remote work will persist is
unknown, but I am a skeptic. Mean-
while, brick-and-mortar retailers are
staging an impressive comeback. My
guess is that America will continue
to revert to the pre-COVID mean.
Investors and analysts who soured
on commercial real estate over the
past two years may have gone over-
board in their negativity. Vornado
Realty (VNO, $22), for one, which
owns 20 million square feet of office
properties, concentrated mainly
in New York, jumped 66% over the
past two months. New York has
been left for dead many times, but
it keeps resurrecting. Los Angeles–
based Kilroy Realty (KRC, $36),
which puts heavy emphasis on being
environmentally friendly, rose 34%.
Although shares of commercial de-
velopers have risen, prices remain
far below pre-COVID highs, thus
offering good value. Vornado is
down two-thirds from its 2020 peak;
Boston Properties (BXP, $67) and
Kilroy are down more than half.
Challenges remain. There’s no
doubt that many of these companies
are having problems. In April, Vor-
nado announced it was suspending
its dividend through the end of 2023.
But it also said it would buy back
$200 million in shares. Boston Prop-
erties—the largest publicly traded
developer, owner and manager of
U.S. workspace—has been suffering
lower earnings but is maintaining
its payout, for a yield of 5.9%.
Vacancy rates are high nation-
ally—an average of 16.1%, compared
with 11.5% three years ago. But there
are haves and have-nots. A powerful
trend is that large tenants are mov-
ing from less-attractive buildings to
newer, Class A properties when their
leases are up. Beneficiaries are real
estate companies with better office
space or access to the capital needed
for major renovations or new con-
struction. A good example is At-
lanta-based Cousins Properties
(CUZ, $24), which owns mostly
Class A buildings in Sun Belt cities
and has a dividend yield of 5.3%.
Shares are up more than 20% in
the past two months but remain far
below their pre-COVID high.
HE lifeblood of
real estate is debt,
and the Federal
Reserve has made
borrowing a lot
more expensive
by raising interest rates five full
percentage points between March
2022 and July 2023. Households owe
$12 trillion on their mortgages, and
businesses owe $5 trillion in com-
mercial real estate loans. Both sectors
are being affected by higher rates
and by fallout from COVID. Lately,
shares have rallied, but in many
cases I find prices attractively low.
First, consider residential prop-
erty. It’s no surprise that existing
home sales are expected to fall 16%
this year. What’s surprising is that
new-home sales have held up well,
as have prices, which are up about
4%, on average, over the past year.
The economy has continued to perk
along despite higher rates, with un-
employment near record lows. And
the COVID experience gave buyers
an incentive to own larger homes,
with space for offices and recreation.
After sharp declines at the begin-
ning of the COVID pandemic,
home-building stocks have rallied.
Meritage Homes (symbol MTH,
$149) and NVR (NVR, $6,306),
which I recommended previously
(“Homebuilders Get a Pandemic
Boost,” Feb. 2022), have since hit
all-time highs. My third recommen-
Commentary Investing
Real Estate: Down, but Not Out
STREET SMART BY JAMES K. GLASSMAN
PHOTO
BY
NOAH
WILLMAN
Although shares of commercial real estate
developers have risen, prices remain far
below pre-COVID highs.

Kiplinger's Personal Finance - October 2023

Kiplinger's Personal Finance - October 2023

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